Cowboys and web customers

Today on Lunch with an Entrepreneur we’re talking to Simon van Wyk who is the 50-year-old director of HotHouse, one of Australia’s largest independent strategic web companies, based in Sydney.

HotHouse helped Microsoft build their first Australian website in 1995 and has since delivered almost 600 online projects for some of Australia’s biggest brands.

He tells Amanda Gome what’s new in web development and search, how the industry is changing, how to deal with cowboys and why web development is like marriage.

Hi Amanda.

Hi Simon. So what niche did you see in 1994? How did you get started?

We were doing some CD-ROM development work for Microsoft and they wanted to migrate from being CD-ROMs to being the Microsoft Network and we did that. And as quickly as the Microsoft Network came, it went, and the internet arrived and it was obvious that we had to transfer it over. Although for those of us who came from CD-ROM we were really unimpressed with the internet because you couldn’t deliver video on it.

You went through the difficult dotcom era and then you’ve just had to restructure through this last downturn. Tell us about that. What did you learn from the dotcom and what was different this time?

Just around about the time of the dotcom crash we had a board meeting and we all decided to cut our overheads to half of our worst month because if we did it then we would be okay regardless of what happened. If we had a few tough months we’d still be okay.

We got rid of eight people literally in a day but that actually allowed us to go into that whole dotcom crash in really good shape. We actually did really well through that period because we had ongoing clients. We’d always focussed the business on long-term relationships with clients and because the clients weren’t necessarily affected by the dotcom crash and we’d cut our overheads, we sailed through that period really well and we were lucky.

And did you do that again this time around?

Yes, a little bit. Again we’ve had long-term relationships with ongoing clients and our refocusing of the business was more around the fact that in that sort of boom period we’d put on a lot of staff and we were doing a lot of things that were just sub optimal. We ended up with 90 staff, we had to say yes to every job that came past the front door. And we just ended up with a lot of things that we really shouldn’t have been doing.

So how many staff did you get rid of and how did you change that strategy?

Well, we focussed more on the projects and the clients and the jobs we had than the project, clients and jobs we wanted and we trimmed around the edges.

We’d gone into a period where we were doing every possible flavour of development. We were implementing three or four CMSs, Java work, .Net work and we just cut back on doing every kind of CMS that came along or doing every kind of job that came along. It was way less dramatic than the dotcom things. But we just got more focussed around what we really wanted to do.

A recent report from Forrester Report looked at a number of interactive marketing agencies and you came out as one of the leaders along with Hyro and Amnesia, with strong performers Reactive and Next Digital. What’s the market looking like here? A few competitors have been bought up by larger companies – describe the marketplace.

What I thought was interesting about the survey was all of those companies included in the wave are companies that started as independents and interactive web development/interactive marketing companies. None of those are traditional agencies, digital departments or any of those things. All of those companies are around about 10 years old so what it said to me was that the industry has grown up a little bit and that there’s a core of companies that have grown up in the internet era and it’s a more mature business now than it was five years ago.

There are still some cowboys in it. We get a number of emails from people complaining about things that haven’t been delivered and done particularly around web development and design.

I don’t think this is a joke: I think there are more web developers in Sydney than there are milk bars. I’m sure Microsoft did a survey and actually found that that was true. There are a lot of cowboys in the industry. It’s an industry that continues to move exceptionally quickly. It’s very, very hard to get anybody with long-term experience and a deep level of experience.

It’s way harder than it looks because if you look at the last five years for any business owner in this space, they’ve had to fight for competent staff because the industry has been growing very quickly and there’s been an enormous number of new web developers coming onboard fighting for talent.

The actual pace of technology changes has been absolutely phenomenal with the whole rise of Web 2.0 and the open source stuff and then now the whole social media space. Just the need to keep up-to-date with what’s going on has been fast and furious. So it is a difficult industry and at the same time there’s low barriers to entry. You can set up a web developer tomorrow and all you need is an office in Surry Hills it seems.

One of the issues that I hear about is the need for specialisation. For example, we’re in publishing and so we have a lot of needs that are specific to an industry that were not met. Do you think as there is more expertise there will be more specialisation?

I think the Americans definitely went down that track. I remember in the early days every American that came out wanted to know what our vertical was and I kept having to say listen you have no idea: the market here is not big enough to support a vertical.

It might be growing now and getting a little bit more, there may be room for a vertical and there are probably a few vertical players. But you’re right, I mean one of the traps for the average company choosing a web developer is that not all web development is the same and there are really specific issues around some industries that you need to understand or you land yourself in trouble.

What advice have you got for people who are in trouble with their web developer, you know the cowboys who just aren’t delivering? Do they have to pay the rest of the contract or is there anyone they can complain to instead of emailing us?

I’m pretty sure there’s no one to complain to. Web development is a little bit like marriage, when it doesn’t work generally there are two people involved in the fact that it doesn’t work.

A lot of times companies get themselves and their web developer into trouble because they don’t start these things off the right way. They don’t start with a clear sense of what they’re going to do. They don’t make sensible decisions about the technology and they’re not deliberate about it and then they change scope, change their mind, move off somewhere else and these things run into trouble.

I’m not saying there are not a lot of cowboys out there, but also a lot of the time these things run into trouble because there are two lots of people involved and they’re just not communicating effectively. And I think that’s the starting point, when they go off the rails. I’ve seen one recently where the client would have been so much better off if they’d just stopped.