by Lindsey Wilkinson – CIO Dive
As more companies modernize technology, leaders are reevaluating old solutions and charting the path forward.
Many businesses might turn to vertical software companies to provide industry-specific solutions, especially as the market soars. The vertical software industry is expected to reach a combined market cap of $650 billion by 2023, according to a Forrester report.
“If you look under the hood of a large company in any vertical, you will find dozens of customized on-premise applications from legacy providers or home-grown applications,” said Himank Joshi, researcher at Forrester, in an email. “Vertical software companies have the opportunity of replacing these [custom-built] systems with modern cloud applications.”
Vertical software companies have infiltrated most industries, providing solutions from point-of-sale software to more complex, specialized applications. As vendors compete to fill holes left behind by legacy systems, businesses must decide whether to build in-house solutions or outsource from vertical software vendors.
Build vs. buy
Executives deciding whether to plug in a vendor or build tech themselves must grapple with issues of scale, staffing and technical know-how.
There are cases where vendors can only do so much. Intuit leans on AWS for most of its needs, but when it comes to solving customer problems, it made sense for the tech teams to build custom solutions.
Ashok Srivastava, SVP and chief data officer at Intuit, said he has found that vendors can be helpful but only up to a certain point.
To combat the disconnect between users and tax experts during sessions, Intuit’s natural language processing team built an application which can listen to the conversation, analyze it and provide a summary, according to Srivastava.
Language models had to be adapted to contextualize financial codes and jargon in a way that normal transcription services would not understand. The custom-build application is one example of an in-house solution that translates specific industry needs into end-user benefit.
The decision to build in-house or to outsource is complex. Businesses that want to build must deal with economywide retention issues, which means tech teams have less experience and knowledge of business processes. In August of this year, companies added 21,000 tech hires.
Robert Fayle, research director of enterprise applications at Info-Tech Research Group, advises his clients to remember they are not in the software business and, because of the breadth and capabilities of the marketplace, it’s almost always better to buy than to build applications from scratch.
“To bring a new developer in, [it] takes six to 12 months to bring them up to where they can actually, truly be productive,” said Fayle.
Once a business decides an outside provider is more beneficial than building, it must choose a vendor. For CIOs scouring for the best provider, there are many aspects to consider.
Scale is one of the highest impact factors in picking the right vendor. For large corporations, a small vendor will not be able to keep up with volume. However, small businesses will benefit more from a reasonably priced small vendor rather than going with a big name competitor.
Big name providers will put their most senior technicians on large corporation projects, leaving less experienced workers to smaller projects, according to Fayle.