In the last two years, two of the Australian app development industry’s biggest players have collapsed into liquidation, leaving customers with unfinished apps and the industry with some serious trust issues to contend with.
In 2017 it was Buzinga, a promising young dev house with a swathe of awards under its belt and a skyward trajectory. Now, as we round out 2018, the same misfortune has befallen Appster, one of the industry’s biggest names and most talked about success stories.
So how did it happen? How did two of the highest profile app development companies go under so suddenly and in such short succession? Everyone in the industry has their theories. This is mine.
I had the benefit of seeing the inner workings at Buzinga firsthand before it went under. The problems I saw there were simple to identify but not so simple to fix: an offshore development model which relied on what was essentially a ‘virtual’ workforce thousands of kilometres away; a rapid growth ethos that favoured inflated sales targets over the delivery of quality apps; and an over-reliance on custom from the volatile startup market.
These three issues and the ever-compounding problems that come with them seem to be the very same issues that brought Appster to its knees late last week.
Offshore is an enticing proposition. Low wages and a virtually unlimited talent pool should make it a no-brainer for agencies. Unfortunately, the reality is far less rosy. Time zone differences, communication issues, code quality inconsistencies, a lack of transparency and accountability and the risks of competing agendas all make it a messy business to be in.
I personally learnt the pitfalls of offshore app outsourcing very early in my career, wasting a great deal of time and money before eventually deciding to build the DreamWalk team locally here in Melbourne.
For some agencies though, the beacon of low wages and high profit margins still burns strong and I predict it’ll take more casualties before the rest of the industry catches up.
Appster’s aggressive sales strategy was reflective of their rapid growth ethos. Over the course of eight years, they reportedly grew their team to 400 staff across four offices, targeting mainly startups. We now know this growth wasn’t sustainable.
Startups make easy targets for slick app sales staff that know the app lingo but they aren’t the most stable target market. Startups are unpredictable by nature and the startup market is highly seasonal and strongly influenced by the economic environment.
I work with app startups on a daily basis and find it very rewarding, but I also understand the importance of maintaining a balance in our client base. SMEs and corporate clients add stability to an app agency’s cashflow and reduce the impact of market fluctuations.
While startups are easy targets for app development agencies, they are also the hardest hit when things go south. A family who invests their life savings in developing an app, only to have their developer go into liquidation mid-development is, unfortunately, a very real scenario. Appster’s collapse has likely resulted in many of these scenarios.
When Buzinga went under in 2017, Appster quickly stepped in with Google ads targeting those affected, hoping to cash in on their competitor’s demise. Now, in the wake of Appster’s collapse, a trove of fledgling young dev houses have sprung up, targeting customers who have been ‘Appstered’. This could be seen as an amusing serve of poetic justice to Appster if it wasn’t such a tragedy for those who have lost everything.
Many in the industry will see Appster’s collapse as an opportunity. To me, it just adds to the erosion of trust in an industry already on notice.
Will the industry survive the fall of these giants? Of course it will. Mobile-first business strategies are gaining popularity and apps are now a business necessity rather than the novelty they once were.
The real question is how will the industry adapt to accommodate an increasingly sceptical customer base.
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