[Editors Note: Yash Gadhiya, one of our regular readers and occasional writer on this blog has been running a IT services company for 5 years and announced on his blog today that he will be shutting down his IT services unit and will concentrate on building products. His reasoning for closing down will probably resonate with thousands of Entrepreneurs out there who run similar shops. I speak to these entrepreneurs frequently, and everyone has similar stories to tell. ]
Bidding adieu to IT services…
I started Uconomix in 2005. The intention was to build a company. A large company over a period of time. It’s been six years and I have seen lots of ups and downs. I started the company from a spare room in my house and moved into a proper office with a team of 8 at one point. Now I am scaling down. On May 31st I have stopped working on the IT services. All the people are gone except one.
What exactly is IT services?
In simple language, IT services is creating computer software for clients as per the requirements and maintaining it on a daily basis – fixing bugs, adding new features etc.
Why am I getting out of IT services?
It’s a bread and butter business
Providing IT services is not much different than working as a daily labourer. Difference being we work from an Air Conditioned Office and get paid more. But only if you are an employee. If you are an employer, it’s an earn-from-clients-and-pay-employees game for you. Revenue is directly proportional to the number of programmers you have.
Running a small IT services shop is a challenging task. Your playing field is way too small. The real juice and money lies in big mega contracts. Small companies only get small projects, small clients and small profits. Just enough to pay salaries of the team and the owner. And there is no inherent value of your business if you don’t have recurring income clients. And that is no different than a job.
It’s also a restless job. Yes it’s a job. 24×7. You will get a call from client at mid-night, on a weekend, on a vacation. And they expect you to take care of the problem immediately. Because they know you are a programmer and you have the means and capability to provide an instant solution.
IT services business is all about people. Employees want more cause larger players are paying more. If you can’t pay to that level good people will leave. You cannot really afford to pay that kind of salary because your client does not pay you what an Infosys’ client pays. Cause if client could afford to pay more why would he come to me in the first place? He would rather go to Infosys. So it’s a catch 22 situation.
Lack of passion amongst programmers is another reason. Nobody likes fixing bugs in code someone else has written. The best projects that pay well are also the lowest quality! You don’t get anything new to learn. That’s why they are most profitable because there are no challenging tasks, less chances of bugs, and overshooting the estimates. Really smart programmers will never work on such projects for long. They will move on no matter what you pay them.
And most of the new guys just get in the industry to make a quick buck. Nobody really cares about developing a solution for client’s problem. Everyone just thinks of it as writing code as per requirements.
Projects that go on forever
Software is funny thing. It’s too damn subjective. And there are One thousand dependencies. You take care of them all and your code will break on the issue number one thousand one! It will go on back and forth, forever. No matter how well you have defined the scope of the project, some items will never be agreed upon. Requirements will change constantly because clients are humans and humans are full of ideas. If people on the team change, new people will bring new ideas. Projects that are stretched beyond a limit start costing money to both sides and after a while the software becomes a nightmare for everyone. Seemingly simple tasks take so many iterations.
Client will say I need a registration form. You say it’s a couple of hours job. And you do have the form ready in couple of hours you show it to the client on your server. Now the game begins. Client will ask for changes in copy, font, colors, thank you message. Hey can you also capture the IP, the date of birth, the date of separation, number of cats, number of puppies your dog has, count of people killed by Rambo in all movies?! If you say no, client has the ultimate weapon, I won’t pay until this is added – its a small job. Yes its a small job but lots of small changes make it a big job!
Then you move it on client’s server. No one has the FTP info. It takes three days to get FTP info from client’s host then the email is not working. You spend your time figuring it out on client’s server why email is not working. And there you are. A simple registration form took you a week! Then client will say I will test this for a week and then pay you for the couple of hours!
It’s a small incident, but the story for larger projects is no different. Projects are stretched, you don’t get paid but you still have to pay the salary to your programmers.
Tired of begging money
It reminds me a dialogue from the movie Coolie starring Amitabh Bachhan. Bachhan works as a coolie and he says “Majdoor ka pasina sukhne se pehle use apni majdoori mil jani chahiye”. A labourer should get his wage before his sweat disappears. I wish it was true for IT industry as well.
Clients will never pay on time. Especially the Indian clients and especially the large Indian clients. One Indian client of ours paid after 1.5 years! A large fortune 500 company! That is ridiculous. They won’t pay any advance, they won’t pay in phases. And they won’t pay your usual rate. Why do you work for such clients then? To get the dues of the last project cleared you have to accept more projects!
As a businessman you are constantly thinking of meeting your costs for the month. A programmer working on a project is better than the one sitting idle. So you get sucked into the vicious circle. You start thinking in the terms of – Ok this project covers 3 programmers’ salary for a month. Take it. And you get taken! And once the project is done you virtually have to beg for your money from the mighty client! And client won’t pay till the nth grammatical error is fixed for the 835th time.
No clear direction
Seriously I was just running day by day. I had no goal whatsoever of where I want to take my business in one year, two years or five years. Business is good and you tend to just play along. And I spent six years doing just that. One day I woke up and said to myself. WTF am I doing? I was doing a job! I was going to office, communicating with clients, working with my programmers and coming back home. Taking a vacation a year and the life was a drab routine! This is definitely not what I had in mind when I started the company.
May be I was never into IT services. I never really wanted to become next Infosys or Wipro. IT services was meant to be the bread and butter that will find the development of the real thing. Products! But that never really happened. Way back in 2006 I had created uMark – my first product and at one point I was selling 100 licenses a month! Life was so good. But the IT services side was so better then because of its seemingly larger cash flow that I virtually neglected the product for next 5 years! Biggest blunder of my life!
But better late then never.
So what’s next?
I am back to products. I have let everyone on my team go except one guy named Arokkia. And we have just launched a new version of uMark. I have many more products ideas in mind and soon I will decide upon the next product.
I am lucky that I already have a super star product in uMark with more than 3000 customers. As I write this post, my existing customers are upgrading to the latest version of uMark and I don’t have to beg for the money! And I know that my software is making some difference to their lives.
Bye bye IT services. I will not miss you.