Apps: Do you outsource one of your business’ most valuable assets?

Applications are increasingly outsourced, but if they are fast becoming a brand’s most important asset, should IT restructure to bring development in-house?

“IT is feeling proud,” says Denis Herriau, product sales director at CA Technologies. The French executive has worked with large businesses across Europe to improve their products’ time to market, including France’s energy firm EDF, bank BPCE and Dutch banking group ING.

“The asset – your application - is now much more important than before.”

With customers’ increasing appetite for good applications and customer service, Herriau forecasts the return of in-house development.

“Infrastructure could be outsourced, companies could go to nice communities, probably like Amazon, and buy some infrastructure.

"But the application side is going to be re-internalised systematically,” he says.

Herriau explains that applications are now as important as the product a company is selling. He uses carmakers as an example.

“In the past, you were really focused on building a car. Now you also need to bring in software. Nobody wants the control to go by outsourcing the building of the car as it is their own business. Applications are becoming the same.”

‘Software is the business’

During the CA World conference in Las Vegas, CEO Mike Gregoire highlighted the importance of customer-facing applications to brand reputation.

He said: “We now live in a world where customers are no longer just loyal to the brand or a product or service. Instead, they are loyal to the complete experience a brand delivers. And that experience is delivered by software. Software is the business.”

Herriau remembers working with France's second-largest bank BPCE. Its CIO, Richard Valenti said that at least 70 percent of the bank should be dedicated to digital within two years.

“You have two years to make your bank a digital bank – but the IT staff are quite happy because for the first time, they are in the centre of the strategy of the bank…there is a very positive reaction from the IT team because they feel very proud – they know they are a part of this,” Herriau says, quoting Valenti.

French rail company SNCF, the equivalent of National Rail in the UK, is an example of this trend, he adds.

“They have got one of the biggest mobile apps in France. They used to outsource the development of this application but now they have built a factory to develop the web app and re-internalised every single development to make sure they are in control of the process and the creation of the product.”

Argument for outsourcing app development

However, businesses have also been advised to outsource their application development. Opening APIs so that developers outside of the business can create ‘outside-the-box’ applications ultimately frees up time for smaller IT teams.

Further, IT is increasingly supporting apps that are developed in different parts of the business, like marketing.

Organisations that deploy the most effective apps and web-based products are more likely to use external developers, a study by API management platform provider Apigee found recently.

Discussing the findings, Bryan Kirschner, director of the vendor’s institute said: “Traditional IT is no longer viable for the new world of apps. IT as we know it has been heavily conditioned by the legacy of a control-oriented approach used to build and manage the systems of record of the past.”

He adds that “this approach is incompatible with the new business imperative to deliver systems of engagement at the pace the market demands. We’ve found that those who are succeeding in app deployment have a strikingly different approach to their IT departments. They recognise the strategic value of leveraging external expertise to maximize their agility and adaptability.”

One other company that famously keep everything in house is Tesla, which operates on a lean, bespoke infrastructure developed entirely in-house.

Speaking at Gartner’s symposium in Barcelona this week, Tesla’s CIO Jay Vijayan said: “Tesla owns and manages every stage of its core business. Because of that we had to do everything internally to keep things under control - and for agility and flexibility that we weren't getting with other projects on the market.”

While budgets and team size may play a part in the decision to outsource, CA’s Herriau says he is convinced that C-suite decision-makers will begin to see the importance of bringing brand-focused applications back in.

“Perhaps a little part of infrastructure and testing will be contracted out, on the basic layer, but the application development is coming back and I’m quite sure of that.”

Image credit: Jonathan Velasquez

Copyright © 2014 IDG Communications, Inc.

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