How Software Companies Can Potentially Make Profits: By Getting These Things Right

Original

Chinese software companies generally struggle to make profits, and the root cause lies in their predicament of "doing non-standardized work in a non-standardized market". The key to breaking this deadlock is to shift towards a standardized market and raise the level of standardization in the company's software management. Today, we will focus on this topic from a practical perspective, discussing specific actions that can truly help Chinese software companies achieve profitability.

Strictly Control the Company Size

When it comes to profitable software companies, many people think of giants like Microsoft and Oracle. Relying on decades of technological accumulation and dominant market positions, these companies earn premiums from their brands and market monopolies, and expanding their scale can further consolidate their advantages. However, this path is not applicable to the vast majority of Chinese software companies. Over the past decade or so, the investment boom in China's to B sector has led many software companies into the misunderstanding that "scale expansion equals revenue growth". In reality, the growth in labor costs and management costs brought about by the expansion of personnel scale far exceeds the corresponding growth in revenue. Eventually, these companies fall into the "middle-scale death zone": they lack the flexibility and efficiency of small companies, nor do they possess the brand and monopoly advantages of large companies. Naturally, profitability becomes out of the question.

Therefore, for Chinese software companies, "controlling scale" is not a passive contraction, but an active choice: rather than relying on hiring more people to cope with business growth, it is better to tap into efficiency potential through process optimization, tool upgrades, enhancing employee capabilities, external cooperation, and other means. Instead of blindly recruiting employees, a company should introduce ZenTao (a project management software), whose WBS (Work Breakdown Structure) task decomposition function splits projects into actionable small tasks. Combined with its working hour statistics module to analyze staff workload and optimize task flow, this in turn helps improve the team’s per capita efficiency. The introduction of ZenTao not only avoids the cost of adding new personnel, but also enables the company to undertake more projects through rational resource allocation, directly boosting net profits. It is evident that the core of scale control lies in "replacing labor with efficiency". Tools like ZenTao can help companies accurately identify efficiency loopholes, avoid blind recruitment, control costs from the source, and lay the foundation for profitability.

Control the Company’s Management Hierarchy

A greater number of corporate management hierarchies leads to higher management costs, lower communication efficiency, and slower market responsiveness—an issue common to all enterprises. This is particularly fatal in the software industry, as the iteration speed of software products and the response speed to customer needs directly determine a company’s competitiveness. Regrettably, while many Chinese software companies are far smaller in scale than Microsoft or Oracle, their management hierarchies "emulate the giants", ranging from department directors and project managers to team leaders and executive specialists. Each additional layer brings more impressive job titles but more cumbersome communication. When a customer requests a requirement change, the request must be reported from frontline execution staff to team leaders, then to project managers, and finally to department directors for approval. By the time feedback reaches the customer, competitors may have already launched the corresponding feature. More critically, excessive hierarchies erode a large portion of profit margins: management positions carry higher salary costs, and information loss between layers further increases expenses.

Therefore, "flat management" is not a slogan, but a mandatory choice for software companies. My suggestion is: do not add management layers unless necessary, and at the same time improve efficiency through physical space design and tool collaboration. For example, adopt an open office layout to place management and employees in close proximity, reducing communication barriers; complement this with tools that enable real-time information synchronization to minimize the "reporting costs" between hierarchies. After adopting ZenTao, the task status of all projects, bug progress, and customer requirements are updated in real time in the system. Management can view the full project overview by simply opening ZenTao, eliminating the need for multi-level reporting. When employees encounter problems, they can directly connect with the relevant person in charge (whether a project manager or department manager) under the corresponding task in ZenTao, ensuring that all parties can respond promptly.

For software companies, a flat hierarchy combined with transparent tools (such as ZenTao) facilitates smoother information flow and faster decision-making, and this in itself is a profitability driver that "reduces costs and enhances efficiency".

Processes Should Be Appropriately Balanced

Many people have misunderstandings about "processes": some believe small teams do not need processes and can collaborate through meetings, casual conversations, and scattered documents; others think large teams must rely on strict processes to "control risks," only to end up trapped in formalism. Both extremes are detrimental to profitability.

If processes are too loose or even non-existent, collaboration will be entirely dependent on "people": requirement details are communicated verbally, which easily leads to misunderstandings; project progress is synchronized through meetings, wasting a great deal of time; when problems arise, responsibility is traced through "memory," making it impossible to accumulate experience. On the other hand, if processes are overly strict and "control" is treated as the core goal, bureaucracy will thrive: from the proposal to the development of a requirement, 5 forms need to be filled out and 3 rounds of approval completed, resulting in more process documents than code; even for information that can be synchronized online, physical printing and signatures are required merely for "record-keeping"; the cost of processes far exceeds development costs, ultimately leading to low team morale and the departure of core employees.

A truly effective process is "finding a balance between flexibility and control," and tools can help companies accurately grasp this "balance." The process management module of ZenTao follows this logic: for small teams with fewer than 10 people, the preset "simplified process" can be used directly, retaining only 4 core stages: "requirement, development, testing, and launch." The person in charge and deliverables for each stage are clearly defined in the system, eliminating the need for additional meetings to synchronize information. Changes to requirements can also be updated in the system in real time to avoid information deviations. For large teams with more than 50 people, control stages such as "requirement review" and "launch review" can be added through customization, without redundant approval steps. When problems occur in a project, the specific link can be quickly traced through ZenTao’s process logs, and experience can be accumulated into process templates for reuse in subsequent projects.

The essence of a process is "to serve collaboration." Customizable and lightweight tools like ZenTao can keep processes neither disorganized nor rigid, truly making them a boost to profitability.

Sufficient Emphasis Should Be Placed on Engineering Practices

For software companies, all efforts ultimately culminate in "code". Whether code serves as an asset or a liability directly determines a company's survival. If engineering practices are not valued, code will gradually become uncommented and structurally disorganized. Developing new features will require a great deal of time to understand old code first; bugs will emerge endlessly, with fixing one bug triggering three new ones; version iterations will slow down increasingly. Eventually, the team will be dragged down by old code and have to abandon the original product to start over. In contrast, companies that value engineering practices will turn code into "appreciable assets" through refactoring, code reviews, automated testing, and other methods. This approach not only reduces maintenance costs but also enables rapid iteration of new features, thereby forming a competitive advantage.

Here, tool support is crucial, and ZenTao can provide full-process guarantees for engineering practices. In terms of code management, ZenTao can integrate with code repositories such as Git and SVN. When developers submit code, it can be automatically linked to development tasks in ZenTao, and code review comments are filled in directly within the platform to prevent reviews from becoming a mere formality. In test management, testers can write test cases in ZenTao, and results from automated testing tools (such as Selenium and JMeter) can be synchronized to the system. After a bug is submitted, it is automatically assigned to the corresponding developer, with real-time updates on the repair progress. In code quality control, ZenTao's bug statistics module allows for regular analysis of high-frequency bug types (such as interface errors and logical vulnerabilities), facilitating targeted code refactoring.

Tools like ZenTao can help companies consolidate their foundations, transforming code from a "liability" into a "competitive advantage" and providing core support for long-term profitability.

The Corporate Culture Should Be Open and Team-Respecting

Many companies treat culture as "slogans on the wall"—such as "innovation," "collaboration," and "customer first"—but when facing practical problems, it is still the boss who has the final say, and employees can only obey. Such "culture" is meaningless. True culture is "a decision-making principle engraved in the team’s mindset": when there are differences regarding product iteration, is the decision made based on the boss’s arbitrary judgment or on data and team consensus? When employees put forward suggestions, are they ignored or valued? These details directly affect product quality and innovation, and ultimately determine a company’s profitability.

China’s software industry is not short of outstanding talents, and most of those who can persist are people with passion. An open and respectful culture can maximize the value of these talents. Meanwhile, tools can turn culture from "slogans" into "actions," and ZenTao’s collaboration features play exactly this role: ZenTao’s "lightweight customization module" can not only meet the needs of some customers but also control development costs. A culture based on data and respect for the team enhances employees’ sense of belonging, which in turn significantly improves product innovation.

Culture is not intangible; it can affect profitability through product quality and employee efficiency. Tools like ZenTao can provide a "carrier" for an open and respectful culture, truly integrating culture into daily work and making it an "invisible engine" for profitability.

The overall environment of China’s domestic software industry is indeed complex. The non-standardized market and fierce competition make profitability more difficult. However, this does not mean there are no opportunities: by strictly controlling scale, streamlining hierarchies, optimizing processes, emphasizing engineering practices, building an open culture, and matching these efforts with practical tools like ZenTao, Chinese software companies can find a way to break through the predicament.