Are you selling your hours, or licenses?

Joel on software sums up nicely the issue of custom software development vs shrink wrapped software development. Personally, I've never seen a software shop that didn't struggle with this issue. Maybe because I've never worked in a software company big enough to be well insulated from customers via a big pile of cash. Or maybe because software is so "soft" it only makes sense that the sales people should promise something you're not tooled up to deliver.. In my experience, both as a consultant and as a vendor of commercial software, two things people said to me stick:

In the context of custom software: "Do you really want to sell your hours for the rest of your life?" Meaning, you need to get some people working for you if you're going to make a good living in that market.

In the context of commercial software: "We make money by selling licenses, not software." Enough said. Shrink wrapped software product strategy needs to be brutally honest about what you're selling--because the money's to be made stamping out identical CD's and selling a document with a license number on it.

they're important high level principles to keep in mind, regardless of your business model.