Moving from Consulting to Products

I had lunch with a friend today that is working on shifting his company from being a consulting business to being a products business. No, it isn’t the same entrepreneur that I mentioned before, so there must a theme here: when the economy goes south, consultants think the grass is greener for recurring revenue software-as-a-service companies.

Here’s the advice I gave him:

• Cost of customer acquisition is going to be your number one challenge
• Plan for the software process to take twice as long and cost four times as much as you think
• Several employees that like the consulting business will be alienated by the software business — it is hard to shift the corporate culture to support the new way of thinking
• Build metrics about everything that goes on from day one — Salesforce.com, or something similar, makes it easy to track many of these

It’s going to be a challenging transition but well worth the effort.