IT buyers calling it quits with Silicon Valley

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IT buyers calling it quits with Silicon Valley

By Matt Asay November 12, 2014, 3:17 PM PST //

As enterprises discover the need to build their own software, they're ending the romance with Silicon Valley vendors.

Once upon a time, vendors developed and sold software and enterprises bought it. Companies like Oracle and Microsoft grew up in such halcyon days and minted billions of dollars in profits for their troubles.

That was then, this is now.

Today's enterprise is increasingly assertive, building their own software and, in a small but growing trend, releasing it as open source and inviting others to contribute. Just ask the CEO of Under Armour.

"We are a software company"

Entrepreneur and investor Marc Andreessen was rightto declare that "software is eating the world." In a nutshell, Andreessen argued that technology was no longer something external to a business; it was core, not complement. As such, every company had to be in the business of developing innovative technology.

Under Armour CEO Kevin Plank got the memo.

In an interview with Businessweek, Plank insists that he has no plans to outsource technological innovation to Silicon Valley:

"I'll be damned if I'm going to cede anything to Silicon Valley or any other technology company, because I believe we are a technology company. And if the phone is going to get integrated into the shirt, should that be a technology company making apparel or the apparel company starting to make technology? I choose the latter, and that's exactly where I'm pushing my company."

He's not alone.

For example, while we like to talk about Hortonworks filing its S-1 to go public on the back of market adoption for Hadoop and other big data technologies, the more interesting news is "Barclays Bank...work[ing] with Commonwealth Bank of Australia on the development of open-source tools for analysing large data sets." When banks or other IT buyers stop buying and start sharing between themselves, cutting out the vendor middleman, that's a big market shift.

So big, in fact, that the impact of open source and other trends like cloud are dramatically changing how "software vendors" define their businesses.

As Redmonk analyst Stephen O'Grady notes:

"Vendors... will continue to point to 'software' as their primary revenue source. But the reality is that when successful companies say 'software,' they will actually mean software plus some combination of public cloud infrastructure, hardware/appliance, automated management/monitoring capabilities, hosted micro-services, and data enabled analytics. The majority of which is software, of course. Just not strictly software as we have been conditioned to think of it."

Yes, there will always be a need for software vendors, because it simply won't make sense for enterprises to build some software themselves. While it will differ from company to company, there will always be functionality that doesn't generate competitive advantage for a company, making it ripe for outsourcing to a vendor.

However, far more software will need to be written in-house.

Increasing competition for developers

All of this means that the competition for developers is about to get even worse. Silicon Valley has been on a hiring binge for engineers for years, and that same trend is about to hit the rest of the world.

Asked about recruiting, Plank was candid about his quest to assemble a developer army:

"I'll say this, sporting goods has not always had very intelligent people. We have not attracted the best and the brightest. They've gone to Silicon Valley. They've gone to Wall Street. Now, we've got a pretty powerful ecosystem that we can tap into, especially with the acquisition of MapMyFitness. I have 100 engineers, and a year ago, I had zero. I have nine Ph.D.s, and a year ago, I had zero.

"I hear people say, 'I want to go work at Google,' and I think 'What are you going to do at Google? It's a search engine.' The ability to touch people and literally change lives is incredibly relevant in a consumer-products company."

The good news implicit in Plank's statement is that developers won't need to leave the Midwest or Far East or wherever they happen to live. Increasingly, they'll be able to build interesting software right where they are, without the headache commutes up 101 or the crushing mortgages of Los Altos.

In fact, as I've previously written, "The older the industry, the more profound the change big data [and a great developer] can make."

Breaking down barriers

There has never been a better time to work in technology and, let's face it, who isn't in the technology business these days? Or rather, who shouldn't be? Forward-looking companies like Netflix are already chest-deep in technology, laying waste to more laggardly competitors like Blockbuster. Going forward, companies that embrace technology as central to who they are will win, and everyone else will evaporate into Chapter 11 obsolescence.

That's the good and bad news. It won't be pleasant for companies ill-prepared to embrace technology. But for developers, this news is only positive. With companies as diverse as Google, Under Armour, and John Deere competing for their services, developers can write their own ticket while taking home a fat paycheck.