Back to Basics : Software Firm Educates Clients

In the 12 years since he founded Interactive Arts, a multimedia software company in Santa Monica, Peter Bloch has seen his industry change dramatically. He has learned to make sure his customers know what to expect from a cutting-edge product and to be wary of media hype. Bloch was interviewed by Karen Kaplan.

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We’re in an evolving art form here, and it’s still the very early days. When you are developing something new, clients always underestimate how much time and money is required. It’s up to us as software developers to educate them. That makes our clients feel more secure, and it makes for a better working relationship.

Some of our clients get into these projects without really understanding what is involved. So we describe the entire process, from the day we start until the time 10 months later when we finish.

When we make a contract with a client, we spell out all of the steps that are involved in creating a product, like a CD-ROM. We specify that if we are using new software and it doesn’t work, the client has to cover the costs of trouble-shooting. We make sure they understand that if they change their minds about the script partway through, it will cost them money. They have to know what the impact of their decisions will be.

Many times a client comes in and they just want to talk about gee-whiz technology. They get blinded by all the technological bells and whistles, and sometimes the underlying content--which is necessary to create a successful product--is not very well developed. People can get seduced by the latest glitz and ask for things that they don’t really want. But the content is actually the most important part of the product, and that’s where we need them to focus.

This multimedia explosion over the past five years has been fueled by a lot of private investors and venture capitalists. A lot of the companies weren’t taking a risk because they were using somebody else’s money. We haven’t had outside investors, and that has made us more narrowly focused.

Whenever we take on a new product, the client has to cover the costs of any technical development. We make it clear upfront that some research and development is required, and we put that in the budget. But we also make a point of using technology that we know is available today rather than waiting for something that is supposed to come out in six months.

The hype has also hurt us with prospective investors and partners. In many cases they are driven by what they’ve heard in the media. They figure this industry looks hot, so they want to invest. But once they really learn about the industry, they change their minds, and it often turns out to be a waste of my time.

Now I qualify prospective investors right away and find out if they are serious about getting into this business before I spend a lot of time educating them. I look to see what other investments they have made and what other companies they are involved with. I also check to see whether their expectations are reasonable. If they are looking for a 30% return on investment, I say forget it.

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AT A GLANCE

Owner: Peter Bloch

Nature of business: Multimedia software developer

Location: Santa Monica

Founded: 1984

Employees: 25

Annual sales: $1.5 million to $2 million