Friday, January 16, 2004
Interview with Lee Shaeffer, Software Council of Southern California
As most of my regular readers know, I try to include interviews with local entrepreneurs, executives, and other influential people in the Southern California high tech community on a regular basis. Today, I thought it would be interesting to get some perspective on the state of the Southern California software industry from Lee Shaeffer, the incoming Executive Director of the Software Council of Southern California (www.scsc.org">http://www.scsc.org">www.scsc.org).
BK: For those readers who aren't familiar with the Software Council, what do you do, and what is the purpose of the council?
LS: The Software Council of Southern California is an association of executives and other key decision makers that provides a forum for the exchange of mission critical business information, the formation of alliances and access to funding. We serve traditional software companies, software service companies and, as of recently, information technology departments within non-software companies. Our overall purpose is to make our members more successful - which typically means helping each company reach the next stage in its growth - and to provide a community for the industry.
BK: Tell me a bit about where the Software Council is these days--what are you up to, and what changes do you have in store?
LS: In addition to rebuilding a bit after the downturn of the past several years, we are looking to take the Software Council to the next level in order to better meet our purpose and mission. Our core offerings continue to be our ongoing events; we hold approximately 50 events each year that address topics of interest to the software community. In addition, we have two flagship events consisting of the Software Industry Awards, which are taking place on February 5 and VentureNet, which takes place in early September. For 2004, the Software Council is planning to add a resource center, implement a mentoring program, expand our training initiatives and integrate more fully into the overall Southern California business community, including the press and Universities. We are also planning to start an advisory board to increase the involvement of the area's larger software companies in the Software Council.
BK: What are the top concerns of software companies in Southern California nowadays?
LS: Big concerns for software companies today are when, and how much, should they invest in order to capitalize on the recovery going forward. Most of our members are recovering from the downturn, and their resources are currently lean. If they invest too much to soon, before business begins taking off, they risk becoming depleted. If they continue to be conservative, they risk losing market share to more aggressive competitors when the upturn does occur. It becomes a question of accurately predicting the timing, and the rate, of the recovery.
Another concern continues to be the protection of the intellectual property that is inherent in software. Illegal copying of software has always been a problem, but it was manageable in the domestic market. Many of today's high potential markets have a different attitude toward protection of intellectual property -- that it has no value if it is intangible, so protection is much more difficult. Another issue is that software is now increasingly embedded in hardware, rather than sold as standalone, which puts the developer at a negotiating disadvantage versus their OEM customer, who is typically much larger.
BK: With the trend towards offshore outsourcing, is there a future for software companies here in the area?
LS: Outsourcing works best when requirements are well defined, but is not well suited for development of brand new applications. For example, a company wanting to add features to its 20-year old mainframe application might find it attractive to outsource the development offshore, since the application is mature and the incremental additions can be rigorously specified. On the other hand, a startup developing a new type of business intelligence application should have its development team working closely with early adopter customers, and should be located within its facilities if possible. Development of new applications requires tight coupling between the customer and the development team, which is hard, if not impossible, to achieve when the development team is thousands of miles, and many time zones, away. Fortunately for our constituency, Southern California has a diversified business economy so an early adapter customer/development partner is usually within proximity.
BK: What do you think is the biggest challenge for your members in 2004?
LS: The biggest challenge continues to emanate from the software ecosystem in southern California. The area is geographically dispersed, which makes it hard to achieve a critical mass of talent in any particular location. The industry is under-recognized since it lives in the shadow of the entertainment industry locally and that of Silicon Valley at the state and national level, which makes it harder to recruit talent and investment to the area. The University feeder system (i.e., the flow of technology from the Universities to the commercial sector) is not as well developed as it is in the Silicon Valley or New England, although this is fixable since we are blessed with several world-class institutions.
BK: Finally, what in your opinion is the future of software here in Southern California?
LS: In spite of the challenges, I see a very healthy future! Our members are telling me that the traditional software industry, composed of companies who sell or license software as their primary business, is rebounding. Software companies were within the top five investment categories for venture capital in Southern California during 4Q2003, a sign that the industry is being revitalized. As entertainment and software converge, software companies are moving major operations or even headquarters to Southern California to take advantage of the entertainment talent pool. Software, in the form of applications and embedded code, is becoming a bigger portion of the value of many products and solutions, including those manufactured in Southern California that are not thought of as software products per se. This trend will help increase the number of software jobs in Southern California which, in turn, will help build the ecosystem.