mouldy.org

There are a few broad choices to be made: products vs. services company, and hardware vs. software company.

My formal training is in software. Nonetheless, I've picked up more than enough hardware knowledge in my spare time to be useful doing some hardware work at my day job. Hardware is what interests me in my spare time, too. I find it far more rewarding to work on a physical product than I do to type stuff on a screen all day.

Of course, modern hardware is often largely software development anyway.

Personal reasons aside, there are some pros and cons to each.

Products vs. Services

Well, I'm going for a products company. No doubt about it. One of the major reasons that I want to start a company is so that I can keep earning without having to work. I don't remember whose blog it was, but someone recently commented that "if you can earn money while you sleep, you know you've made it".

The contract work that I'm doing on occasion could be considered services income. Obviously, I have to work for that.

Selling a product is infinitely automatable; if you sell online, you can deliver online with no interaction needed. If you sell a physical product, you can hire people to handle manufacturing and shipping. This is a good way to ensure that a product is profitable; just keep in mind that your time has value, too. If you can only make a profit on a product if you perform some of the manufacturing or logistics work yourself, then the product is underpriced, because you're being underpaid for your time. No matter what the product is, you can arrange to have it sold, produced and shipped with no personal intervention.

"The Business of Software" by Michael Cusumano talks extensively about products vs. services. In fact, if I was going to give a two sentence book review, it would go something like "The Business of Software by Michael Cusumano discusses whether your software company should sell products or services, and concludes that you should do both. It also talks a lot about IBM." That was pretty much the whole book, unfortunately.

Hardware vs. Software

This is a much more interesting decision. Unlike most of the MicroISV crowd, I'm not restricted to just selling software. I can do hardware, too.

Hardware is what I'm interested in in my spare time. Software is what I'm trained and experienced in. Given the choice, I'd rather be doing hardware right now - but there are business considerations, too. In favour of software:

• There's no geographic disadvantage. I live in Australia. The market for technology products here is tiny compared with the US. We import pretty much everything. With a software product, this is mostly eliminated. I can sell and support it online. If I produce a hardware product, it takes extra time and money to ship it overseas. I'm used to those sort of penalties, but US customers probably aren't.
• I have limited experience in logistics and manufacturing, making a hardware product less attractive.
• Software is what I know best. I've done a lot of software work and am familiar with the usual pitfalls and obstacles that come along in the course of a project.
• I can produce software for free; there's no monetary investment in parts, tools or prototypes.
• There's no ongoing cost - it's far easier to reach a state where you 'earn money while you sleep'. Hardware products always require human intervention at some point, and that intervention has to be paid for by someone.
• There's no inventory, logistics or manufacturing. There's no need to invest money in stock that may never be sold. There's very little reason to invest money at all, in fact.

Hardware has its advantages, too:

• Every man and his dog writes software. There are a lot less unexploited ideas; there's a greater threat of being copied and outdone; there's a lot more competition for marketing space. Hardware is far more relaxed; there aren't that many people doing it, and it's a lot easier to find market gaps.
• The monetisation path is obvious: make a product, and charge for it. People expect to get software for free, and if they don't, they'll find a way to make it free. No-one expects to be sent a physical product without first paying some cash.