Category Archives: guest posts

The joys and challenges of running a nomadic software company

la digue island,seychellesIn theory an Internet based software business isn’t tied to any particular geographical location and can be run from a laptop anywhere there is an Internet connection. So why not travel the world, financed by your business? Trygve & Karen Inda are doing just that. They kindly agreed to write this guest post discussing the practicalities of running a nomadic software company.

The freedom to wander aimlessly around the planet, visiting whichever countries you want, is something many people dream about. We have actually achieved it through our microISV. For the past six years, we have been living and working in numerous countries, with nothing more than our Mac laptops, backpacks, assorted cables and adaptors and an insatiable thirst for adventure.

We were thirty years old, with no kids and no debt, working steady jobs in Reno, Nevada, and had a small microISV on the side. It was a “nights and weekends” business that earned us dining out money, or even covered the rent in a good month. After September 11th, my husband Trygve’s day-job slowly went away, giving him more time to devote to our microISV. By March 2002, when we first released EarthDesk, the microISV had become his full-time job.

The response to EarthDesk was phenomenal and we soon realized that we could move overseas, bringing our microISV with us. Within several months, we had sold the bulk of our possessions, moved out of our apartment in Reno and purchased one-way tickets to Tbilisi, Republic of Georgia.

The experiment begins

For six months, we tried to manage our software business while teaching English and doing odd jobs for NGOs, newspapers and radio stations. We had brought with us two Mac laptops (a PowerBook G4 and an iBook G3), which were both maxed out as far as hard drive and memory were concerned, an extra battery for the G4, an external keyboard, a digital camera, and various cables and worldwide plug adaptors. We had also brought a CD case full of original software discs.

Tbilisi home office

In the end, the multiple infrastructure problems that plague the Republic of Georgia (mostly a serious lack of electricity) proved too much for us to bear. We escaped to Germany, carrying 170 pounds of stuff, including our two laptops, a UPS we had purchased in Tbilisi and a Persian carpet we had bargained for while on Christmas holiday in Dubai.

After a few weeks recovering in Germany, we spent a few months in Prague, Czech Republic. When the cold weather arrived, we flew south and spent eight months travelling around the Indian Ocean, South East Asia and Oceania. Shortly thereafter, we landed a software development contract in Dubai and relocated there, but regularly escape to Prague during the blistering summer months. We currently own a flat in central Prague and have considered buying a flat in Dubai.

Kampala, Uganda

By keeping a small base in one or two countries, we can have a “home”, a decent place to work and a life, while still taking long trips with the backpacks. Running the business from an apartment in the developed world is fairly straightforward. What’s challenging is running the business from a backpack while spending several months on the road.

The essentials

Everyone wants to sit on a beach and work only four hours a day, but the reality is a little different. If you are actually running your business, you’ll spend as much time working on the beach as you would in a cubicle. It’s certainly possible to work only an hour a day for a few weeks, but to develop and grow your business, you will need to spend time actually working, rather than sightseeing. It’s not a permanent holiday, but rather an opportunity for frequent changes of scenery.

As a practical matter, you can only travel with what you can carry and a good backpack with detachable day-pack is the only serious option. Since you are carrying a few thousand dollars worth of equipment, security becomes an issue, especially in poorly developed parts of the world. We generally stay in the least expensive hotels we can find that have adequate security and cleanliness, while occasionally splurging on something nicer to maintain our sanity. It is very important to budget properly for long trips. For some people this may be as much as $200/day, and for others it may be only $50/day, but managing expenditures is even more important when on the road. Of course you’ll soon realize that for the same money spent during 4 days in London, you could spend weeks in South East Asia or poorer parts of the Middle East.

On journeys of a month or more, we generally bring two up-to-date Mac laptops (currently 15″ and 17″ MacBook Pros), worldwide plug adaptors, software CDs, two iPods (one for backing up data), a digital camera and two unlocked 4-band GSM mobile phones. For longer-term backup we burn a data DVD about once per month and post it home.

Essential software includes Excel, Entourage, Filemaker Pro, Skype, iChat and, of course, the Apple Xcode Developer Tools. Speed Download saved us in Tbilisi because of its ability to resume downloads after our dial-up internet connection dropped the line, which it did every four minutes!

Surprisingly, the best Internet we have found in the developing world was in Phnom Penh. WiFi can often be found at big hotels, but it is more common to connect via Ethernet in a cafe, where a basic knowledge of Windows networking will allow you to configure your laptop to match the existing settings of the cafe’s PC. In the least developed countries, modems are still the norm.

Kigali, Rwanda

One important consideration, especially in countries where censorship is common, is that many places require you to use their SMTP server for outgoing mail. This may not work with your domain as a return address. To get around this, it’s useful to have a VPN, such as witopia.net, and an SMTP server at your domain.

Visas, taxes and other nasty stuff

If you have a western passport, visas usually only become an issue when you want to stay somewhere more than three months. Often, it is possible to do a “visa run,” in which you briefly leave the country and immediately return for another three months. Many countries make it easy to set up a local company, which can allow you to obtain longer-term residency visas, but there is a lot of paperwork involved with this. Staying more than six months as a “tourist” anywhere can be a problem as you’ll almost certainly have to deal with immigration issues.

Hong Kong

Although Dubai has straightforward immigration procedures and is a fabulous place to spend winters, the UAE Government blocks more websites than just about any other country on Earth. Even Skype is blocked because the local telecommunications company doesn’t want any competition. Unless you are able to find a way around the blocks (wink, wink), running any kind of internet business from Dubai will be fraught with difficulty.

Even if you are living in a tax haven, if you are a US Citizen, you can never fully avoid US taxes, although you can take advantage of the Foreign Exclusion. Local taxes aren’t really an issue if you’re just a “tourist” spending a few weeks in a country, but they can become an issue for long-term stays. If you are planning to stay somewhere for more than a couple months, and “settle”, you’ll need to research tax ramifications.

Sana, Yemen

Since we left the US, our taxes have become much more complicated. Fortunately, we found an American tax attorney to handle our annual filings. He lives abroad and therefore understands the Foreign Exclusion and other tax laws regarding expats. For our microISV, payment is handled online by two providers (always have a backup!), and ends up in a company account in America. We use a payroll service to pay our salaries into personal accounts, which we can access by ATM. We also have established a managed office in Nevada to act as our company headquarters and handle mail, voicemail and legal services.

We have no regrets about having left the US for our big adventure. We have truly lived our dream of being able to travel indefinitely, but sometimes it is wearying not knowing which country we will be living in just a few months into the future. Our ultimate goal is to own two properties on two continents so that we can travel between them with just a laptop.

by Karen Inda

photographs by Trygve and Karen Inda

Trygve & Karen Inda are the owners of Xeric Design. Their products include EarthDesk, a screensaver with a difference for Windows and Mac. They were last spotted in Prague.

Selling your software in retail stores (all that glitters is not gold)

Selling your software in retail storesDevelopers often ask in forums how they can get their software into retail. I think a more relevant question is – would you want to? Seeing your software for sale on the shelves of your local store must be a great ego boost. But the realities of selling your software through retail are very different to selling online. In the early days of Perfect Table Plan I talked to some department stores and a publisher about selling through retail. I was quite shocked by how low the margins were, especially compared with the huge margin for online sales. I didn’t think I was going to make enough money to even cover a decent level of support. So I walked away at an early stage of negotiations.

The more I have found out about retail since, the worse it sounds. Running a chain of shops is an expensive business and they are going to want take a very large slice of your cake. The various middlemen are also going to take big slices. Because they can. By the time they have all had their slices there won’t be much left of your original cake. That may be OK if the cake (sales volume) is large enough. But it is certainly not something to enter into lightly. Obviously some companies make very good money selling through retail, but I think these are mostly large companies with large budgets and high volume products. Retail is a lot less attractive for small independents and microISVs such as myself.

But software retail isn’t an area I claim to be knowledgeable about. I just know enough to know that it isn’t for me, at least not for the foreseeable future (never say never). So when I spotted a great post on the ASP forums about selling through retail, I asked the author, Al Harberg, if I could republish it here. I thought it was too useful to be hidden away on a private forum. He graciously agreed. If you decide to pursue retail I hope it will help you to go into it with your eyes open. Over to Al.

In the 24 years that I’ve been writing press releases and sending them to the editors, more than 90 percent of my customers have been offering software applications on a try-before-you-buy basis. In addition, quite a few of them have ventured into the traditional retail distribution channel, boxed their software, and offered it for sale in stores. This is a summary of their retail store experiences.

While the numbers vary greatly, a software arrangement would have revenues split roughly:

  • Retail store – 50 percent
  • Distributor – 10 percent
  • Publisher – 30 to 35 percent
  • Developer – 5 to 10 percent

Retail stores don’t buy software from developers or from publishers. They only buy from distributors.

The developer would be paid by the publisher. In the developer’s contract, the developer’s percentage would be stated as a percentage of the price that the publisher sells the software to the distributor, and not as a percentage of the retail store’s price.

The publishers take most of the risks. They pay the $30,000(US) or so that it currently takes to get a product into the channel. This includes the price of printing and boxing the product, and the price of launching an initial marketing campaign that would convince the other parties that you’re serious about selling your app.

If your software doesn’t sell, the retail stores ship the boxes back to the distributor. The distributor will try to move the boxes to other dealers or value-added resellers (VARs). But if they can’t sell the product, the distributors ship the cartons back to the publisher.

While stores and distributors place their time at risk, they never risk many of their dollars. They don’t pay the publisher a penny until the software is sold to consumers (and, depending upon the stores’ return policies, until the product is permanently sold to consumers – you don’t make any money on software that is returned to the store, even though the box has been opened, and is not in good enough condition to sell again).

The developer gets paid two or three months after the consumer makes the retail purchase. Sometimes longer. Sometimes never. If you’re dealing with a reputable publisher, and they’re dealing with a major distributor, you’ll probably be treated fairly. But most boilerplate contracts have “after expenses” clauses that protect the other guys. You need to hire an attorney to negotiate the contract, or you’re not going to be happy with the results. And your contract should include an up-front payment that covers the publisher’s projection of several months’ income, because this up-front payment might well be the only money that you’re going to ever see from this arrangement.

Retail stores’ greatest asset is their shelf space. They won’t stock a product unless there is demand for it. You can tell them the most convincing story in the world about how your software will set a new paradigm, and be a runaway bestseller. But if the store doesn’t have customers asking for the app, they’re not going to clutter their most precious asset with an unknown program.

It’s a tough market. It’s all about sales. And if there is no demand for your software, you’re not going to get either a distributor or a store interested in stocking your application. These folks are not interested in theoretical demand. They’re interested in the number of people who come into a retail store and ask for the product.

To convince these folks that you’re serious, the software publisher has to show a potential distributor that they have a significant advertising campaign in place that will attract prospects and create demand, and that they have a press release campaign planned that will generate buzz in the computer press.

Many small software developers have found that the retail experience didn’t work for them. They’re back to selling exclusively online. Some have contracted with publishers who sell software primarily or exclusively online. Despite all of the uncertainties of selling software online, wrestling with the retail channel has even more unknowns.

Al Harberg

Al Harberg has been helping software developers write press releases and send them to the editors since 1984. You can visit his website at www.dpdirectory.com.

Credit card fraud

mount seftonFraud can be a very big problem for online software vendors. Fraudsters can easily use throwaway email addresses that can’t be traced back to them (e.g. Hotmail) and IP addresses aren’t difficult to hide. Not only does the vendor lose the payment when the fraud is reported, they also often get hit with a chargeback fee. This is pretty outrageous when you think about it – the credit card companies are charging vendors for the fraudulent transactions that they themselves have failed to detect.

Thankfully I have had relatively few fraudulent transactions in the last 3 years of running my own business. However some more mainstream B2C businesses aren’t as lucky. Below are the experiences of one software vendor I have corresponded with [1]. It makes for scary reading. The vendor wishes to remain anonymous for understandable reasons.

I tracked one of our recent chargeback emails to a forum were they had been openly selling stolen credit card information for $2 each. If you do have a popular product that may be prone to chargebacks then it is a small nightmare unless you have a fraud system in place as there are 1000s of credit card info out there with full contact details. There is not a day goes by that we don’t get at least 3 stolen credit card purchase attempts.

We use WorldPay and they have a quick check on cv2 code and if the country, postal address and postcode match. But almost all of these purchases pass the simple fraud checks. You cannot even rely on IP checking as the fraudsters are pretty smart and use proxies, or even hijack PCs to make purchases from the same country the credit card is issued. PayPal is not quite as serious, but we do still receive quite a few hijacked account purchases also.

WorldPay fraud checking is next to useless. Even the ones they warn on are usually legitimate. They have recently released a new backend, but they have made the problem worse as they seem to warn if the IP address isn’t from the same country. The problem with that is we get a lot of sales that don’t match, from military based in different countries. Our whitelist used to let them go through automatically, but now we have to manually capture the payment.

The number of fraudulent purchases changes depending if you make a new release etc or if your software is hard to find an easy crack. It can be from 1% to 15% depending, as you may have a single user trying to hit you on certain days.

We were forced to make our own fraud checking system. At least we had all the information at hand as we make users sign up to our site before making a purchase and we log all activity from a user, but to get that information we had to lose many thousands of pounds in fees. Since implementing our own fraud check (as fraudsters do tend to use amazingly similar criteria each time) we have reduced it to on average 1-2 a week, which are almost impossible to catch.

I think the level of fraud has to do with the type of users we sell software to. They are the sort of people that know exactly where to find cracks/keygens. Our software does have pretty good protection and online activation, so it is not so easy to get an easy “working” crack/keygen for it. We also have large volume sales over the past few years, so we have more information than most developers would see.

The credit card companies can’t really lose, especially with “no card holder signature” sales. Chargebacks cost on average 15 Euros. I have even contacted the likes of PayPal telling them that sales are fraudulent, and quite a lot of times they do not care.

We get to see all our sales, I would hate to think what is happening at these merchant services like Regsoft etc. How many sales are being refused that may be legitimate? I tried paying a programmer once who accepted payments using Regnow from my PayPal account and they refused it. My account was verified and had been in good standing for many years. It wouldn’t have been so bad but the person I was paying did not have a clue it was refused.

So, if you have a successful consumer product that fraudsters might be interested in, be prepared to expend a significant amount of money and effort dealing with online fraud. And don’t expect the payment processors and credit card companies to give you much help. I guess the credit card companies don’t have much incentive to reduce fraud. As long as they can keep pushing the cost of fraud onto the vendors and the fraudsters don’t bring the whole system down, the credit card companies seem quite happy. Why wouldn’t they be?

[1] I have spliced together the contents of several emails and edited it for continuity and brevity.