Professional

Practices

HS-410

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 Week 4 Topic: Anatomy of
Software House
 Introduction
 The Company (Software House)
 Structure of Company
 Management of Staff
 Producing the budget
 Monitoring Financial Performance
 Long term Planning
 Conclusions

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 Introduction (The Company)
 A Hypothetical company
 Syniad Software Ltd was founded some ten years ago
by four friends.
 All four are members of the Board of Directors, along
with two others who were recruited later.
 The company specializes in the production of bespoke
(customized) software for clients who demand work of
high quality.
 Syniad’s head office is in London. Other offices are in
Manchester, Delft, Netherland.

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 Company
Structure
Chairman > Managing Director >
- Financial
- Operations > Groups , Personnel
- Sales & Marketing
- Technical
- Overseas

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 Operations Director
 The Operations Director is responsible for all the
revenue earning operations of the company.
 It is his job to ensure that all projects are
completed satisfactorily, and resources are
available to carry out the projects that the
company wins;
 The personnel reports to him.

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 Technical Director

The Technical Director is responsible for:

Quality management;

Research and development;

Marketing at a technical level (e.g. arranging for staff

to give papers at conferences); for advertisement
purposes
Technical training (as opposed to training in, say,
project management or presentational skills, which are
the responsibility of the personnel function).
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 Syniad’s Organizational Structure
Type
 shows elements of all three of the types of
organizational structure.
1. Functional division of responsibilities; Director and Team
2. Geographical element (represented by the director
responsible for overseas operations)
3. Centralization and decentralization has little meaning
(Centralized policies and procedures are widely used but
they have usually been developed within one part of the
company and have been adopted by general consent.

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 Centralized vs. Decentralized
 In theory, staff have a sense of belonging to a group and regard
their group manager as the manager who is permanently
responsible for their career in the company.
 In practice, because projects often require expertise from more
than one group, staff often find themselves working on projects
for groups other than the one to which they belong. ;(shortfall of
human resource, time)
 In a company of the size of Syniad, the distinction between
centralization and decentralization has little meaning.
Centralized policies and procedures are widely used but they
have usually been developed within one part of the company
and have been adopted by general consent.
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 Management of staff
 New employees vs. Old employees…. OUTSIDER
Staff Appraisals:
 Employees’ achievements and contributions to the company
were properly recorded;
 Staff knew what was expected of them and what they
needed to achieve to gain promotion;
 Proper plans for training and career development were made
and regularly reviewed;
 Employees were aware of the company’s opinion of their
performance.

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 Producing the Budget

 Staff in the company are broadly divided into

1. Technical or Revenue earning staff ;(Developers)

2. Nonrevenue earning staff; (Managerial /

Accounts etc.)
 Both require different capital to work; (Training
sessions, Resource allocation -requires cost)

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 Monitoring Financial Performance
 Monitoring Syniad’s performance against the budget
should, in principle, be straightforward ;(Budget allocation /
deployment)
 Each month, the income and expenditure under the various
heads are compared and, if significant deviations are
observed, corrective action is taken ;(for different section’s
heads)
 In practice, this simple procedure presents many difficulties
;(performance may rise or fall, fluctuation)
 To monitor financial performance, company focuses on;
1. Cost & Revenue 3- Sales
2. Project Costing
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 1. Costs and revenue

 A major problem is caused by random fluctuations,

themselves the product of many individual factors, for
example:
1. Annual Budget : Staff hiring (increased by 30
supposed)
2. Large projects cause deviation in Budget (payment
delayed, technical issue)
3. Fixed Price Project Estimation: (Revenue is accrued
based on the increase in the value of work in progress)

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 2. Project costing
 Because of these difficulties in monitoring the overall
performance of the company, Syniad also tries to monitor
the financial performance of individual projects, through a
project costing system.
 The costs and revenue of each project are calculated each
month and the cumulative gross margin (i.e., the difference
between total costs and total revenue to date on the
project) calculated as a percentage of the total revenue.
 Project managers are set a target of 60 per cent for the
gross margin on their projects. In practice, this system does
not work well.

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 3. Sales
 The budgeted increase in revenue derives partly from
increased charge rates, partly from better staff
utilization and partly from an increased number of
staff. ;(utilized for best outcome)
 All these factors are influenced by the forward sales
position i.e. by the staff required and the rates earned
on the work to which the company is committed in the
coming months.
 Two reports are used for assessing and monitoring the
sales position.
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 (Continued…)

1. The confirmed sales report shows, for each

grade, the number of staff in that grade who are
committed to contracts in each of the following
twelve months and the total expected revenue
from that grade in each month.

2. The sales prospects report shows, for each

sales prospect, the potential value of the sale, its
likelihood and the likely start date.
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 Long Term Planning
 Strategic Planning for future ;(where they will stand, what
they will achieve)
 The ability to plan strategically and to achieve strategic
objectives is the hallmark (symbol) of well run, successful
companies.
 Strategic planning in Syniad has two related aspects.

1. The first is to identify appropriate long-term goals

2. Second is to identify and formulate plans to overcome

those problems which are inhibiting it from attaining
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 Long Term Planning involves
i. Expansion Plans: Expansion on the scale desired
depends on the ability to recruit and retain suitable staff
and on the ability to raise the necessary funding. It will
also require the ability to run a much larger and
multinational organization.
ii. Company Image (fame of quality production)
iii. Product mix (Fee based revenue vs. Package Software;
huge investment needed, once set-up, producing
multiple versions)
iv. Finance (under-capitalization; under funding; a common
problem , need fund generation sources)

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 Conclusions

 Syniad, despite its problems, is a successful and well-

managed company, however, they need to go
multinational.
 Directors do not have the expertise to manage this
transition or to run the resulting company(agreements
for collaboration with comparable companies).
 Syniad has now reached a point where it can no longer
flourish as a private company and its future must,
certainly, be very different from its past. ;(due to under
capitalization, shorter funds)
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Thank you!

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