[MUD-Dev] The Business Side of Software Development [was R& D]

Ron Gabbard rgabbard at swbell.net
Thu Jun 6 13:10:19 New Zealand Standard Time 2002

From: "Brian Bilek" <brian at darkalley.net>
> Matt Mihaly wrote:
>> On Mon, 3 Jun 2002, Brian Bilek wrote:

>>> Why aren't more of the business executives in the industry more
>>> knowledgeable, passionate, or otherwise have a better
>>> understanding of games and gaming in general?  Is it that hard
>>> to find someone with a business background who likes games?

There are plenty of people with business backgrounds who enjoy
games.  It's getting them to take a pay cut to enter the game
industry that's the hard part.  There are so many industries that
are much more stable that are willing to pay as much or more for the
use of their business skills.

Secondly, the game industry hasn't matured to the point where it has
started developing its own business talent.  Most game companies
(with the possible exception of the MS/Sony/EAs of the world), don't
have a career path for business people.

>> Games are a product/service developed through certain processes,
>> and I don't really see why directing the business behind them
>> necessarily requires a passion for games. A passion for the
>> business of games, definitely.

> Fair enough, point made - the executive in charge of a game
> company needs no passion for the games themselves.  However, I
> think the point is still salient - if we make an assumption
> (granted, a rather large one) that the gentleman who originally
> stated that gaming executives and marketing types lack an
> understanding of games and gamers was correct in a general sense,
> does that not hurt their ability to bring successful products to
> market?  I would think that the successful marketing manager or
> product manager has an in-depth understanding of their products
> and customers.

It depends on the size of the company and the role the CEO is to
play.  The CEO is the most significant sales person in the
organization.  If they aren't doing 'dog and pony shows' for VCs,
they're selling their company (and products) to shareholders,
strategic partners, customers, and even their own employees.  Nobody
has more 'clout' than the CEO when they make a public statement.  If
a game company puts out 1 or 2 titles a year, or is hanging their
hat on one MUD, that CEO better have a passion for those games, the
industry, and the market they serve.

That being said, I would bet that there are more CEO's in the game
industry that have a passion for their game(s), industry, and market
than there are game company CEO's with the skill set needed to
actually run a company.  This is attested to by the graveyard of
MMORPG projects that started up with a lot of fanfare, a development
of an online fan community, then died an ignonomous death due to
lack of funding.  This is in an economy where the stock market
sucks, interest rates are low, and online gaming is a growth
market... getting money SHOULD be relatively easy given the lack of
other investment options.  Being 'President' or 'CEO' of a game
development company goes WAY beyond just being a title printed on
the business card.

This isn't meant to be disrespectful to those designer/developers
that started their own game company to just have it not work out for
one reason or another.  It's just an acknowledgement that there is a
certain business skill set that significantly increases the
probability of making a game company successful just as there is a
technical skill set required to develop the game.

> The strategic direction of business has to involve a core
> understanding of the market - if the executives and the marketers
> only understand revenue streams, expenses, and so on...in other
> words, are solely focused on the financial aspect of the business,
> I would argue that the business will not be truly successful.

It's hard to argue with that.  Although, calling a person that
doesn't understand the core drivers of their target market a
'marketer' is like calling someone who can't write code a
'developer'.  Understanding the target market for a product is the
primary responsibility of the marketer.

Every business plan I've ever written (and most good business plans
in general) starts off with a goal that says what is going to be
provided for whom.  Everything else is built off that goal and
supports and justifies that goal.  You take out the 'for whom' and
you no longer have a goal you have an activity... and not even
non-profit activities get funded without a 'whom'.

>> In the end, games are a product or service with certain costs,
>> risks, processes, potential, and so on, and from that
>> perspective, isn't fundamentally different from running other
>> businesses.

True and not true.  Many of the business principles are the same but
there are some huge differences.  First, there are two huge
fundamental differences between running a software company and
running any other type of company... cost control and project
management.  Software development is an inexact science and the
variances from the original project plan are much larger than any
other industry I've experienced or read about.  Secondly, the
technological environment changes much more rapidly in the software
industry than the 'beer' or 'toothpaste' industries.  Thirdly,
accountability in software companies is harder because of

Technical Guy: We can't do that because <insert technical phrase
here>.  Management Guy: OK (Not understanding one word of what was
being said).

It's not always that bad.  But, management is often in no position
to argue with the technical SME (subject matter expert) on many
specific technical issues even though <insert technical phrase> may
mean "it's doable but would require a complete rewrite of a certain
section of code and nobody wants to put in that kind of overtime."

Finally, the primary production input in software development is
more volatile than in any other industry... the developer.  You
never know when one of your critical team members is going to get a
call from a headhunter with an 'offer they just couldn't refuse.'
There is also an attitude that some (and I emphasize 'some')
developers get because of this supply/demand situation that makes
them turn into prima donnas and become difficult to work with.

Personal side note: I'd ship a bulk of my development work over to
India (or bring in Indian contractors) if I was a CEO.  I directed a
team of contracted Indian developers based in New Dehli and they did
better work, faster work, and better documented work than our
American developers... at less than a third of the hourly cost.

In short, the business of running a software company is
significantly different than most any other industry in many ways.
If the manager doesn't account for these differences, many many bad
things can happen to cause the death of that company.

(BTW, the speed with which the gang at Mythic got DAoC out the door
with so few technical issues was hugely impressive. Kudos.)

I've been in software marketing/product management for the past 5
years.  Lemme tell ya.  I'd have MUCH more hair left on my head if I
had gone to work for Boeing, Anheuser-Busch, or Anderson Consulting
(even post-Enron) like most of my b-school classmates.  You really
do have to have a certain amount of passion for your product,
customers, and the industry to be effective in the business side of
software.  There are just so many other industries where you can
make as much/more money with your business skills with significantly
fewer hassles and greater stability that sometimes 'passion' is the
only reason you put up with them.



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