The Cost of Prioritizing Profit Over People in the IT Industry

As I write this from Katherine, NT, where I'm currently implementing a new council onto our software, I've been chatting with friends in the IT industry and I've realized that a common issue has kept coming up for a pretty long time now: the constant loss of good staff. Surprisingly, when I explain this to my non-IT friends, they’re often taken aback when they learn that the issue from my point of view isn't primarily about salaries. Instead, it often stems from the influence of investor money.

Let me explain.

Several times a week, we receive inquiries from investors interested in providing third-party funding. While I understand why some companies accept these offers, I can confidently say that CouncilWise will continue to self-fund our endeavours for the foreseeable future. Why? Because I've heard countless firsthand accounts from friends about their experiences with investors, and these stories are alarmingly similar.

The story often goes like this:

Investors inject money into a company and naturally (and understandably) expect a return on their investment. This often leads to rapid growth plans and new leadership aimed at securing that return. This growth usually involves significant advertising and sales efforts, often at the expense of product quality. Over-promising and under-delivering become common, with contracts signed under unrealistic expectations, only for the customer to face exorbitant overrun costs later.

As resources focus on generating more revenue, the product itself often loses focus. This might not happen immediately, but it appears to be almost inevitable as attention shifts away from the core product that initially drove success. Companies then start to implement harsh KPIs for developers (if they don't have them already) because they want to maximize output. However, asking developers to produce better code or more output, even with financial incentives, has the same logic as asking an artist to paint better pictures for more money. Creativity and quality can't be forced or quantified so easily, and developers are creative people, even though most people don't see it that way.

Moreover, staff suggestions to improve user experience are frequently met with scepticism, as management questions how these changes will generate direct revenue. Where we see value in enhancements that make users happy and lead to positive word-of-mouth, new management might dismiss such ideas for lack of immediate financial return. Personally, I think that short-sighted approach stifles innovation and creates a rift within the company. Talent becomes discouraged, thinking, "Why even try if it'll only get shot down?" and eventually leaves. Then, instead of addressing the root cause of why they left, companies streamline processes and distribute the workload among the remaining staff, further exacerbating the issue as everyone else feels "punished" with extra workload and no reward.

All the while, they still need more money coming in to fuel the investors' understandable desire for ROI. With a developer gone, freeing up funds, they can now get more sales and marketing people on board to sell, sell, sell because people who have been brought who often don't understand the industry apparently only see things as, more sales = more money. But what some people forget is that those people off selling etc still cost money themselves and also have KPIs, so they start making sales no matter what. Does the product even do what the salesperson is selling to the customer? Who knows and who cares? Just say it'll do it and worry about it later. The sale is made, and staff working on the product are told that it now needs to do X, usually with no understanding of how difficult X will be to do. But sales don’t care; they are off looking for the next lot of revenue as making it do what they promised is not their problem, and they need to keep money coming through the door to meet their own wages and ROI for the investor.

From the outside, most people are not aware of these very common inner workings of investor-funded software companies, so it might appear that the company is still focused on the product as they are out there knocking on doors and sponsoring events. However, I disagree. The product is only as good as the people working on it. If your talent leaves, you're losing much more than just some hands on a keyboard. Focusing solely on making sales, promising the world, and delivering a fraction of it, while letting your so-called "expendable" staff walk out the door because you think they can be easily replaced, is very short-sighted.

I would be quite wealthy if I had a dollar for every time someone suggested, "Oh, why don't you just get your development done overseas for far less cost?" So why don't I do that? Because it would harm the product. Sure, I could do it, but I would need to spend a significant amount of time explaining to those developers what our industry (local government) does, how they do it, and why.

Handing a developer a specific spec sheet and saying "Here is your job, develop this" will result in them creating exactly what I've asked for, to the letter. But, very importantly, they'll do it without understanding why it's doing what it's doing, and they miss the opportunity to think creatively and suggest improvements. This lack of industry insight often leads to new code rolling out with issues, resulting in a worse product and user experience. The necessary knowledge and experience about the industry come from working with team members who already have that expertise. It's far better to retain experienced staff and keep that knowledge within the team than to start the process all over again with someone new.

At CouncilWise, we make council ERP software—complex and unique in its own right. Finding developers with local government experience is challenging, so we take our time to find the right candidates who fit our team and understand our product. This focus on the product, rather than appeasing investors, is what defines us.

We aren't claiming to be right while others are wrong. If investor-driven growth works for other companies, kudos to them. But we believe in maintaining our independence and focusing on what makes us, well, us. In our niche market, we've seen that even small players like us can compete effectively by prioritizing product quality and customer relationships over rapid profit generation.

I'm proud that we are self-funded. It's a huge risk to compete with companies much larger and wealthier than us, but it's incredibly rewarding. Hearing from clients how quickly we've solved issues that took our competitors much longer to address reaffirms our approach. We're small, but by focusing on our product, staff, and relationships, we ensure that we continue to deliver the best possible solutions.

This approach may not be for everyone, and that's okay. As we always say, "We're not for everyone." But for us, staying true to our values and our product is the only way forward.