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Over the past 3 decades business related information technology has experienced three key era’s of growth. While the first two era’s are somewhat related, in that they both focused on productivity gains, the third era is quite a bit different.

Evolution of the Enterprise v02 MA 22Dec2015Below are what I consider the 5 key differentiator’s between the era of “the collaborative enterprise”, and the eras of “the productive employee” and “the productive enterprise”:

  • Focus on B2C vs. B2B: Social and mobile have an impact on both B2B and B2C, however arguably the greater impact is on how organizations engage with external constituents (i.e., customers or citizens) vs. internal constituents (i.e., partners or employees).
  • The agile enterprise: Build. Measure. Learn. When you are building a product for the consumer, its best to build lean and iterate vs. to build bulky and pray.
  • Centrality of UX: If you cannot impress a consumer in the first 30-60 seconds of interaction with a new mobile app, then you might have lost them forever. In this new world, UX is king.
  • Decentralized creativity: Ideas for new and interesting products and services, and suggestions for improvement, can come from internal or external constituents, not just top level management.
  • Driving top line growth: The primary focus of enhancing personal or organization productivity is cost minimization. While effective customer engagement can no doubt reduce cost, its biggest pull lies in driving new revenue.

Each of the above differences warrants a deeper look, and we will do so in future blog posts, but the bottom line is this – the productivity-related eras are giving way to a much more collaborative era.

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After spending the best part of the last few years talking to companies of various shapes and sizes about their hiring preferences, I developed a simple framework to help answer the question “when do I hire full time developers internally vs. outsourcing development?”

Outsourcing Framework

Tech company building a core product:  If you are an tech company building what you consider to be a core product or service, then you should absolutely look at putting together an internal team, since chances are you will need to iterate rapidly, produce bug-fixes, provide customer support etc related to the product or service. Doing all of this in an outsourced, but yet effective manner becomes cost-prohibitive if the product in question is your companies core product. Perhaps even more critically, if your company is not building product, what exactly is it doing?

Tech or non-tech company building a non-core product: If you are a tech, or a non-tech company, building a non-core product, then you first preference should always be to outsource. This is for two reasons:

  • A company that specializes in building what you consider “non-core”, is more likely going to be better at it than anyone you hire internally
  • Even if you can hire the best, you will need a consistent and interesting enough pipeline of work to keep the best engaged – remember, very rarely do the best at anything make a decision purely based on the money offered to them

Non-tech company building a core product: This is the most interesting combination, and one that companies are increasingly finding difficult to answer. Why is this? This is because as more and more legacy companies start to build digital products and services, they are increasingly looking to transform themselves into tech-companies. However even if a legacy company considers itself a tech company, it should really think hard about whether the digital product it is building is truly core. Lets try and explain this via two (somewhat) hypothetical examples below:

  • NCR Corporation building a competitor to Square Wallet: Here both NCR and Square are in the business of retail checkouts. If Square starts offering a service via. Square Wallet that offers a significantly superior retail checkout experience, than NCR, then all else being equal Square will out-muscle NCR, and win the retail check-out and digital wallet war. In this scenario NCR’s existence depends on building check-out related products and services that match that of Square’s, and like their digitally native competition, do rapid and continuous product development, which generally requires an internal team.
  • American Airlines building the most elegant check-in application in industry: Lets assume American Airline’s mobile check-in app is so far superior to its competitors, that its starts winning awards at UX and industry conferences, and gets rave reviews from its customer base. Additionally check-in’s are a part of any airlines core business process, so it can be considered a core part of an end-user facing service that American Airlines provides. However, the truth is regardless of how elegant and simple to use the app is, the check-in process is only a part of the overall customer experience (CX) that American Airlines provides to its customers, and in isolation, will in all-likelihood not make a significant difference to a customers decision to fly American vs. United.

In summary, unless you are an tech company building your core product, outsourcing development should always be a serious option on the table.

Note: We realize this framework does not take into account supply and demand imbalances that a company might be operating under. Today macro factors in the technology space, have led to a clear imbalance in favor of supply, and hence even if it makes sense for a company to hire full-time, that choice might not represent a realistic option.

This is in response to an article on Forbes by John Mancini. John’s basic premise is that Enterprise IT is too slow, too bloated and generally unable to keep pace with the changes brought about by Social, Mobile and the Cloud. While there is some truth to his argument, that large Enterprise IT departments are reluctant to cede control, the truth is a lot more complex than that.

Most IT organization today are focussed on keeping systems up and running, through various integration touch points, and a myriad of custom and packaged enterprise applications. Large organizations have upwards of a 1000 enterprise apps, integration touch points and their corresponding infrastructure to support. It’s easy to suggest that IT doesn’t get it, however remember that business professionals are not the only ones that use social media, mobile and cloud, in terms of personal use IT professionals are probably the earlier adopters of these technologies. However someone has to worry about keeping the monster running, and that thankless job falls on IT.

All this being said, the points being made in the article are still valid, i.e. IT needs to evolve from worrying about systems integration, to worrying about data (the “information” part of IT) and adding business value through the wealth of data and information processing capabilities being made available through social, mobile and the cloud. But the road to this, particularly for large organizations is littered with vested interests, legacy apps, band-aids put together to keep apps up and running, and over a decade spent by most companies chasing wage arbitrage opportunities in IT.

I have been thinking a lot recently about some of the reasons why enterprise IT seems so antiquated in comparison to consumer IT. One of the key’s has to be the differences between the talent involved in both sectors. Enterprise IT dwarfs consumer IT in terms of global spend, but their approaches to talent acquisition cannot be more different.

In consumer IT you are constantly looking for the best resources possible to create a better product or service. Whatever your producing is your core product, and hence you want the best talent available to help you create it. Your product is your differentiator, your revenue generator.

Enterprise IT is largely a cost center, and like with any cost center the incentive inherently is towards minimization of spend. Hence while consumer IT chases talent, the key focus of enterprise IT over the last decade or so has been to take advantage of global wage arbitrage opportunities.

Now, while this difference would have been a purely theoretical observation even half a decade ago, the consumerization of IT has changed all that. For enterprise IT to even remain relevant it has to start looking at it’s approach to talent acquisition and more critically start to make a shift from being a cost center to being a clear revenue driver. Wether this means turning to big data, or creating innovative consumer-centric services enabled by IT, they have to do it fast, if not the end game will be hard fought, but the winner is clear.