Software houses, i.e. companies that develop various types of customised software for clients, are constantly on the increase. This is not surprising. The demand for mobile and web applications, business software, shops and online platforms is huge and constantly growing, and with it the earnings of software developers. How do you set up a software house that will make money for yourself? Where to start and what to keep in mind? Check out our guide!
Where to start setting up a software house?
The first step on the way to setting up a software house should be an agreement, referred to as a founders agreement. It can be compared to the initial stage of cooperation between partners, when the business idea is already germinating but has not yet been formalised. Such an agreement between founders is intended to organise work, introduce rules for the resolution of disputes, but also to include provisions that would complicate the partnership agreement itself quite unnecessarily. You can read more about the founders agreement in this article.
Selection of an organisational and legal form for the software house
The next stage should be the selection of an organisational and legal form for the business. The Polish legislator gives a lot of room for manoeuvre, but some solutions are chosen more often than others. Which ones and why?
Limited liability company
The main advantages of a limited liability company include first and foremost low initial capital and limited liability of shareholders – only members of the management board are subsidiarily liable for the company’s obligations. The advantage of this limited liability company is also the ease of changing the composition of the company and the high flexibility of operation.
Simple joint-stock company
An equally attractive choice is the simple joint-stock company. In this case, the advantages include a symbolic share capital (PLN 1), the possibility to make non-cash contributions or the rules for convening general meetings, which are simplified in relation to joint-stock companies.
Other possibilities
Of course, these are not the only possibilities available. Those planning to establish a software house should always analyse the legal, financial and tax aspects of a given type of activity. Beginning programmers can always choose a classic JDG with a favourable flat rate. If an investor is found, a limited partnership or a limited joint-stock partnership can also be a good solution. It is important to remember that any type of company can be transformed to suit changing realities.
How do you manage employees in a software house?
A key factor in the operation of a software house is the people who bring commitment and know-how to the company. Often, however, the challenge facing companies is not to find specialists, but to create a cohesive and well-functioning team. What do you need to keep in mind?
First and foremost, efficient recruitment and onboarding. The employer should remember to keep the recruitment process compliant with RODO and to implement an organisational culture that makes specialists feel at home in the company.
Different types of contracts can be signed with programmers – employment contracts, B2B, freelance. It is important to know how each of these structures works. It is also important to remember not to try to turn an employment contract into self-employment by force, as this can have unpleasant consequences.
Remote working is very popular in the IT industry. A software house with a distributed structure should properly regulate the rules of remote working, including the entrustment of property to the employee.
Employee and colleague motivation and training programmes
It has not been known for a long time that a good employee is a motivated employee. A software house can take care of the development of the commitment of its team members in many ways and it does not always have to be a high salary (in the case of small start-ups, this would even be impossible). An excellent solution is to introduce a share option programme in the company, which provides the right for an employee to acquire shares in the company once certain conditions are met. In this way, professionals can feel part of the company.
Another way to increase engagement is to invest in IT training and competence development. In the technology industry, this is particularly important as new developments are constantly emerging and you need to keep up with them in order to stay ahead of the competition.
How do you work with subcontractors?
Many software houses rely not only on a permanent team, but also on cooperation with subcontractors – both freelance programmers and external companies. It turns out to be essential to prepare good contract templates that duly safeguard the interests of both parties and make the cooperation work well and for a long time.
However, managing a dispersed team is a major challenge that requires excellent organisation, discipline and the ability to enforce what is necessary at any given time from colleagues. Working out the optimal business model often takes time, but with the help of a law firm it can be done relatively quickly and ‘painlessly’.
How to protect the interests of a software house?
The huge competition on the IT services market means that a software house that wants to grow has to take care of securing its backing formally, through appropriate provisions in contracts with clients, contractors and collaborators. What should be kept in mind above all?
Securing the company’s know-how
Protection of company secrets can take various forms – from managing an IP portfolio to actively pursuing protection of one’s rights in court. Forms of know-how protection include keeping documentation in an inaccessible place, controlling access to systems and premises, as well as simple warnings attached to e-mail correspondence.
Non-competition clauses
A non-compete clause is intended to prevent a software developer from entering into a partnership with another software developer. When drafting such a clause, however, it is important to remember to include key elements such as the duration of the prohibition, its material and personal scope and the sanction in favour of a breach of the non-compete. Such a provision will look different in the case of an employment contract and civil law contracts.
Confidentiality policy
Another strategy to protect company resources are NDA agreements signed with co-workers and contractors. In this way, the software house protects business-critical information. As with non-compete agreements, NDAs should also be built according to a certain scheme that safeguards the employer’s interests.
Acquisition and maintenance of customers at the software house
A software house that wants to steadily increase revenue has to find ways to acquire and retain customers. Comprehensive CRM systems that make it easier to establish and develop relationships with a contractor come to the rescue. It is worth investing in a programme that allows the setting of sales targets, marketing automation, sales analytics and so-called prospecting, i.e. the process of searching for and identifying potential customers interested in purchasing a product or service. With the help of CRM, contract management becomes less time-consuming and produces much better results.
Finding a customer is not the end of the tasks awaiting the sales department. It becomes necessary to negotiate favourable contract terms. Which IT contracts are most often concluded by software houses? Among the top ones are:
- implementation contract;
- SLA agreement;
- software services framework agreement.
Of course, these are only selected examples of IT contracts. More and more software houses are taking on contracts in the fields of AI, industrial automation, system security or biometrics. Each contract should be prepared carefully, taking into account the key provisions. What elements of a software house contract are particularly important?
Key clauses in IT contracts
First and foremost, the parties to the contract, the subject matter of the contract, together with the deadline for the work and the timetable, must be correctly identified. In this way, the ordering party will know what it can expect from the contractor.
When working out the principles of cooperation between the parties to the contract, it should be described in a precise manner:
- how the contracting authority and the contractor are to cooperate;
- on what principles personnel will be selected for the project and how it will be managed;
- whether the contractor may use the services of subcontractors;
- the procedure for testing and acceptance of the application;
- whether and to what extent the contractor is responsible for the development and maintenance of the completed system.
The remuneration in favour of the work performed should not be forgotten. This usually takes the form of a lump sum, cost remuneration or yet another. Each of these solutions will work in specific circumstances.
It is important to realise that the contract also acts as a disciplinary tool to ensure that both parties perform their obligations correctly. It is therefore advisable to include issues relating to rescission (as well as termination), warranties, guarantees and the extent of the contractor’s liability.
The parties should agree on how to resolve disputes, setting out both the court and the law applicable to the contract. To further strengthen the sanctioning aspect, various types of performance security, such as contractual penalty, substitute performance or deposit, can be introduced in the contract. There are many possibilities for securing the performance of the contract, and choosing the right means will not always be easy. A software house can further protect its interests by including an NDA clause in the contract obliging the other party to maintain confidentiality.
Two basic contract models are used in the IT industry: the work contract model and the service contract model. Each of these models provides for different consequences and places different obligations on the parties.
How do you protect intellectual property in a software house?
In the IT area, thoughtful copyright management is crucial for the amount of revenue and the protection of the software house’s position. This is due to the fact that a computer program, as well as its individual components, constitute works within the meaning of the Copyright and Related Rights Act. How do you dispose of copyright?
First of all, by concluding licence agreements and agreements on the transfer of economic copyrights. Precise specification of fields of exploitation or the moment of transfer of rights are only some of the clauses necessary in such contracts. In this way, the software house gains control over who can dispose of the software and to what extent.
How do you implement GDPR in a software house?
When designing bespoke software, it is important to remember to take GDPR regulations into account. By implementing sufficiently strong security measures, data security, as well as data integrity, can be maintained. This is very important from the point of view of the data controller, who will be able to invoke the principle of accountability in favour of the data in case the information gets out.
Remember to take out a third party insurance policy for a software house
In order to be effective, a third-party liability insurance policy should protect you against risks that are typical for the day-to-day operations of a software house. I have created a separate article on this topic, which I heartily recommend to you from here!
Compliance in a software house – why should it be implemented?
A compliance system refers to the compliance of a company’s operations with applicable laws, ethical and business standards. Its scope is very broad and usually goes beyond the code minimum. Thanks to the implementation of compliance, the company functions efficiently and safely, which is important not only from the point of view of the management and their potential liability, but also from the point of view of contractors, who perceive the company as a reliable partner. The concept of compliance can be seen on several levels. Which ones?
How can a software house achieve market success?
There is no doubt that more and more players will enter the IT services market in the coming years. A software house that wants to succeed should keep in mind, above all, responsible personnel management, proactive search for customers and conscious protection of its interests.
Potential challenges certainly include the ongoing development of the industry. The need to keep up with changing trends, nurture the competence of employees and keep them engaged are keys to maintaining a competitive edge. However, all of this requires taking care of your business on the formal side.
Is it then worth setting up your own software house? It is worth reading a report on the prospects for the IT industry published in cooperation with the Polish Agency for Enterprise Development (PARP). The study shows that although the Polish IT market has had better and worse years, in the long term it shows dynamic growth and this trend will continue for years to come. Similar perspectives are visible on global markets with the difference that more and more Eastern European countries are looking for highly qualified IT specialists in the centre of Europe, including Poland.
Do you want to set up a software house, but don’t know where to start? Feel free to contact us! Step by step, we will guide you through the intricacies of the Polish legal system and help you increase your effectiveness on the market.