Business is changing as a result of technology, new economic pressures and changes in society. That makes some form of transformation non-negotiable and it often requires new software, leading to build or buy decisions.
Off-the-shelf or packaged software has grown to dominate corporate information technology over the last thirty years. Cloud services are taking vendor capability to the next level. While it is usually clear-cut that it is better to leverage a third party’s product or solution, it is important not to lose sight of what makes each business unique.
The Renaissance genius, Michelangelo, is claimed to have said “The sculpture is already complete within the marble block, before I start my work. It is already there, I just have to chisel away the superfluous material.” Perhaps the same can be said of packaged software, you just have to remove the superfluous functionality and what you’re left with is your business need.
But in the twenty-first century, “every business is a software business” (as perfectly summed-up by software engineering guru Watts Humphrey). What Humphrey was really arguing was that the intellectual property (IP) of a company, where its value really sits, is increasingly codified in software.
In the past, too many business executives assumed software strategy was only a problem for their Chief Information Officer. The best CIOs, though, have been educating their executive peers and the last year or more has seen an awareness that the long-predicted shift of the fourth industrial revolution, or Industry 4.0, is well underway.
The fourth industrial revolution is a collection of technologies that have emerged to blend the physical and digital worlds. Ranging from autonomous vehicles through to the rise of artificial intelligence, there is a revolution that is changing everything all over again.
Rather than supporting the business, these technologies are codifying, automating and extending the business. Great examples are found across logistics, call centres, risk management, finance, advanced manufacturing and just about every other specialised aspect of business and government. They are realised through algorithms and data embedded in software.
Despite the opportunity, business has struggled to unlock the value. Market analysis and studies, such as Deloitte’s annual fourth industrial revolution business survey, show that there is still a way to go before business is ready. Ultimately, we are not yet seeing the digital dividends that we should.
What this means, is that the decision on whether to implement a software package, extend the capability of a vender or invest in an entirely bespoke solution requires more than a knowledge of technology. Maintaining success as an information-driven business requires something unique that is disruptive and proprietary.
To illustrate, you could argue that digital retail services such as Shopify, BigCommerce and a number of others exemplify and simplify online retailing. It wouldn’t, however, make sense for Amazon to abandon their proprietary software, despite the huge cost of maintaining it, and migrate to a third part service. Too much of Amazon’s differentiated retail IP is tied-up in the software they’ve built over many years including the patents they hold.
More controversially, perhaps the decline of Yahoo as a world-leading search engine could be traced back to the point where they decided to use third parties like Google and Microsoft for some of their searches rather than doubling down on their own unique IP.
When it was being developed, the build of the Commonwealth Bank of Australia’s “CommSee” customer relationship management system was one of the largest bespoke projects of its type in the world. It was a hugely courageous decision to build rather than buy but the bank clearly believed that the way they dealt with their customers was part of their unique IP.
For every genuinely different and valuable business capability there are a hundred processes which just need to be best practice. Increasingly the providers of packaged solutions are seeking to be the source of those best practices and offering, as far as possible, to provide their own bespoke coding platforms to build unique IP.
As the fourth industrial revolution encodes ever more business and government capability in software, the boundaries between the physical and virtual continue to recede. It is more important than ever to know what you have that is unique and to make sure your technology decisions don’t lead you to underestimate your IP.