As CTO of CloudBees, and the founder of the Jenkins project, I often take a podium in front of a room full of senior technology leaders and make a pitch that software is eating the world and that every business will have to transform into a software business, or they get eaten by those who transformed.
When I talk about this, I have companies like Uber, Netflix, Amazon, and Google in mind. They all seem to be disrupting some established industries by fundamentally being a technology company. Google is my favorite example of all, because I used to think their core competency is a killer search engine, but itâ€™s actually their software design, engineering, & operation practice.
But I started thinking lately that maybe this is a naive view, biased by highly visible supernovas and their effective engineering branding campaign. Hear me out.
First, think about Sabre. This is originally American Airlinesâ€™ booking system (the thing that connects passengers and airplanes.) Then they spin it off to a separate company, and now itâ€™s used by half the airlines around the world. The other half runs on Amadeus, which came from Air France & Lufthansa. So here is the industry where most business seem to have outsourced the heart of their technology to 3rd party provider, instead of transforming themselves to the technology business like Iâ€™ve been claiming. And they seem be doing fine.
And it makes sense. If you are a â€œsmallâ€ national airline, like, say Japan Airlines (JAL), they seem to be making a choice that being a part of Sabre and pooling the development cost with other airlines get them better technology cheaper than â€œtransforming themselves into software business.â€ Presumably JAL wonâ€™t be able to offer unique, killer customer experience that technology enables, in ways that UBer can, Â but you also wonâ€™t get left behind too badly, and that lets you choose something else as a differentiator. And what choice do you really have? Itâ€™s going to cost prohibitively to build air booking system from scratch. And the risk it involves!
Next, think about core banking. Thatâ€™s the part of banking where they safeguard consumersâ€™ money and help us receive paychecks and handle payment to buy groceries. There are ~4000 banks in the US alone, and clearly most of them canâ€™t afford to â€œtransform themselves into software business,â€ so instead many seem to run software like Flexcube.
And again, it makes sense. It’s a commodity that you have to have as a bank, but it’s not a differentiator. You’d rather pay somebody else to run it for you than you run it.
And the last week, the last data point happened in the hallway of Linux Foundation Open-source Leadership Summit. I randomly sat next to a CTO of Allianz spin off where he said insurance companies are getting together to spin off what they consider â€œthe commodity part of their businessâ€ into a common open-source platform, so that the industry can pool the cost of developing and maintaining the necessary evil, and divert the resource to what matters, such as providing a great customer experience when they have car accidents. (Notice how car insurance commercials often start with a scene of accident where somebody is making a frantic phone call that gets answered by a calm, Â assuring agent? Thatâ€™s the differentiator!)
I feel like thereâ€™s a common trend that connects these. The role that technology plays in any business is going up (aka â€œsoftware is eating the worldâ€), but there are more and more services like Sabre, Amadeus, Flexcube, and million others in every domain, then not to mention cross-cutting services like LivePersonÂ or Finicity. Collectively they are the turtles growing under every business that raises them higher. Itâ€™s like how software development has shifted more toward â€œjust integrating servicesâ€ so to speak at our level, albeit at a wholly different abstraction altitude.
So itâ€™s not inconceivable for me to imagine a future where more and more software that business relies on come as services from startups, vendors, and industry consortiums, and all thatâ€™s left to do is some glueing and wiring, ala â€œjust hook up webhooks from here to that service over there.â€ Maybe with a bit of serverless thrown in here & there.
That is the world where most business is not software business.
(This is obviously just a combination of guessing, speculating, and over-simplifying based on a small anecdotal experience. But for me, it was an eye-opening thought. Iâ€™d love to hear from people who are actually in these worlds on how Iâ€™m wrong!)
2 Comments Add yours
Itâ€™s going to cost prohibitively to build air booking system from scratch. And the risk it involves!
I don’t think Sabre is a good example. I know technical folks who have worked there and that thing is a house of cards waiting to collapse. Airlines would be well advised to migrate to a better, more reliable and modern system.