We had a great time in New Orleans for the 25th Anniversary celebration. A few employees asked me where we were going for the 30th. Given the way I’m wired this question reminded me that this is a great time to talk about the future.
It would be crazy for me to discuss where SEP will be 25 years from now because at some point the topic becomes SEP: The Next Generation.
Talking about the next 10 years and the heading we are on right now IS something I can address. One of the keys to long-term success is sensing trends and adapting to ride them. The last major direction change was in 2003. We presented a plan to all employees and followed it up in 2005 with an update. We are largely still working under this plan that called for us to intentionally retarget SEP into new markets and “get wider” in our offerings. Both of these moves were intended at the time to reduce and avoid commoditization at a time when offshoring was a new and real threat.
We moved from a heavy dependence on the automotive industry to a growing medical device market that has served us well. We also moved into technology areas that were more immune to offshoring. We called this “moving up”.
SEP is at the beginning of another move.
This one will require a bit more of a stretch. SEP needs to add a business model. Our business has largely been “work for hire”. We provide a service and get paid for it. This is slightly different than the product revenue models our clients have. They build something and get paid for it over and over again. We largely have to work more hours and raise our rates to build additional revenue.
Why the need to adjust?
Salaries are growing every year while at the same time we see increased pressure on our rates. At the same time benefit costs are also going up very quickly.
There is also the product ownership aspect of this. If we truly could build great products if “allowed to” wouldn’t it be great to do it?
SEP has to stay true to its software engineering core and we will. However, we do not have to keep using our standard business model. We intend to begin building out a new one, tentatively called the Leased Application Model (LAM), as this covers much of the foreseen activity.
We already have a highly successful partnership with a client that is LAM. We have been running it for several years now. We also see some of the work done through SEP Labs as learning experiments into such a model.
**So, what’s the plan then? And I’ve heard you talk about this before, so what is taking so long? **
I’ll answer the first question last as these two are tied. You probably know the answer. This is moving slowly because we haven’t committed the resources to it. We need to put some funding towards this and get someone to head it up.
SEP has set aside a “Future Fund” to provide seed capital for these ventures. We have also repurposed the Frontega name to be used as the brand for these activities. Currently, I am leading the activities for Frontega including conversations with potential partners. I have had six meetings in the last 60 days. The results of these meetings have shown me there is demand for LAM services.
I wrote an informal plan for the Board that outlines the potential. Our primary target is initially development partnerships with our existing clients. We may find opportunities with other organizations but our focus starting off will be with current clients.
Where are we going at our 30-year anniversary? I would like to see us doing at least one-fourth of our revenue in the LAM recurring revenue model. As for our 50th, I can see a time where SEP does the majority and perhaps all of its services this way. If this happens we might all be rich.