Are you a digital, IT or tech company?

In the hiring internally vs. outsourcing development post, we pointed out that knowing if you are an IT company or not is one of the keys to understanding whether a company should outsource development or build products internally. As we thought about this further, we realized that using the phrase "IT company" is somewhat limiting. Over the years, IT has developed a very specific connotation. In particular, in the context of most medium and large enterprises, IT generally refers to the department that keeps your computing infrastructure up and running and not the department that builds your enterprises' most innovative products and services.

So what are some of the other terms that you can use - excluding IT - to ask yourself the same question - "are you an X company?" A few terms immediately come to mind, in particular digital and tech. Let's looks at the relative merits of each of these terms.

Are you a digital company?  Digital technology has been around for over 50 years, with the move towards digital accelerating in the last three decades as computing power has increased. Today almost everything that companies produce, share, and store are in digital format. While this hold true for all companies, the change has been particularly dramatic for companies that produced products that were once in analog format that are now being converted to the digital format. Publishing companies are a perfect example of where this change has been felt most in the dramatic fashion.

Are you a tech company? Until recently the word "tech" was used to described companies that were either software, computer hardware, or Internet companies. However, as the size of computer hardware components continue to shrink and as software becomes ubiquitous, companies that were not traditionally considered tech companies, are today being referred to as tech companies. This applies to companies in sectors ranging from big box retail to sports and fitness.

So what is our preferred terminology? Honestly, our pick would still be "IT company". The reason for this is that it best describes the type of technology that we are referring to - information technology. However, given the connotation that has increasingly been attached to IT, it is not a term that is widely accepted and hence can confuse people.

Digital, is our least favorite term. Describing a company as a digital company because the primary method by which a company produces, shares and stores information is digital, is akin to calling a company an electric company because electricity is used to keep the companies factories and offices running. 

Tech on the other hand is a term that we can live with. Tech is increasingly being used to describe both traditional IT companies, as well not traditional companies that are increasingly building tech-centric products and services. It is not as descriptive as the words IT, but its not as amorphous as the word digital either.

Enterprise Sponsored Consumer Apps - Development Options

Over the years, the word outsourcing has developed a very negative connotation. However, the reality is that in many scenarios companies do have to consider outsourcing product development. In this blog we examine the various development options available to companies when building consumer facing mobile products. You can use this as a guide to help you think through options that you should consider when developing a new product.

Consumer facing apps within an enterprise are generally sponsored by one of three entities - product or digital, sales and marketing, or customer service. In the table below we look at the type of apps produced by each of these entities, and some examples for each type of app.

 

Sponsoring Entity Description Examples
Product  Core product or service being offered is  digital  Bloomberg for iPadPayPal HereNike+
Sales and Marketing  Application helps drive marketing  campaigns, or maximize sales Iron Man 3 - The Official Game ,Ikea CatalogCoca-Cola Freestyle
Customer Service  Application helps improve customer service  and experience SQ Mobile, Hilton HHonors

I next combined this with the hiring internally vs. outsourcing development framework that I put forth all the way back in our second blog post

Screen Shot 2013-09-29 at 3.51.27 PM.png

The key idea put forth there was that unless you are an information technology company and building your core product, outsourcing development should always be on the table. Based on this I looked at the app examples above, and at the options one should have considered when developing these apps.

Example Company Type Product Type Optimal Strategy
Bloomberg for iPad Finance/Tech Core Develop In--house
PayPal Here Finance/Tech Core Develop In-house
Nike+ Fashion/Apparel & Accesories Core It depends
Iron Man 3 - The Official Game Media & Entertainment/Various Non-Core Outsource
Ikea Catalog Retail/Furniture Non-Core Outsource
Coca-Cola Freestyle CPG/Food & Beverage Non-Core Outsource
SQ Mobile Transportation/Airline Core It depends
Hilton HHonors Accommodation/Hotel & Lodging Core It depends

However, outsourcing is a very broad term, and there are a plethora options to consider when looking to outsource. Below are the primary and secondary options available for the examples mentioned above in scenarios where outsourcing should have been in play.

Example Full Service SI*/Consulting Full Service
Agency
Boutique Consulting/Industry Boutique Consulting/Mobile Licensed
Development
Nike+      
Iron Man 3      
Ikea Catalog      
Coca-Cola Freestyle      
SQ Mobile      
Hilton HHonors      
* = Systems Integrator;  - Primary Option;  ✔ = Secondary Option

Lets consider the rationale for each of the selections above: 

  •  Nike+: Here the product is part of a core product or service that company is providing, hence if the company has the ability to develop it in-house then the company should. That said, the development of the app itself could be outsourced to a team that specializes in mobile product development. Alternately, a full service agency can be used, however the company might or might not require the additional services that a full service agency offers, and hence might end up paying a higher margin than is required.
  • Iron Man 3 - The Official Game: The general industry norm here is to license out game development to external entities, which is what Marvel did here, and it remains the recommended strategy. Outside of this, engaging with a company that specializes in game development for media companies can also be a potential option. 
  • Ikea Catalog: A catalog is probably something that the company releases on a periodic (quarterly, semi-annual or annual) basis, and hence the company should have standard templates and forms that it can use to develop the digital collateral internally, however in the case of this particular app, Ikea was rolling out an augmented reality feature. They could have considered a full-service marketing agency for this, but given the degree of specialization required, a mobile development team that specializes in augmented reality should have been the primary option. 
  • Coca-Cola Freestyle: This app was primarily built to support the discovery of Coke's new freestyle machines. Releasing this app should have been part of a wider product marketing campaign, and hence should have been managed by the full service agency responsible for the campaign. This full-service agency would then have the option of developing the application internally, or outsourcing it to a specialized mobile product development team.
  •  SQ Mobile and HIlton HHonors: In both these case the apps have some very deep integration into the back end systems, including hotel and airline reservation systems, real-time flight scheduling systems, CRM systems, and ERP systems. This type of work is best handled internally or by a full-service Systems Integrator (SI), or a boutique consulting firm that specializes in that particular industry. The development of the front end of the mobile app itself could very well have then been outsourced to a mobile product development team to maximize the UX/UI and development expertise offered by the specialized mobile product development team.

In conclusion, while the decision to build internally vs. to outsource is an important one, it is equally as important to consider the options available when outsourcing and to choose the option that makes most sense for a given scenario.