Does a business that is serious about its online strategy need an in house development team?

Question

It seems to me that any truly successful online business (or traditional business with a successful online presence) needs to have an in house development team.

This seems obvious to me, but can anyone give some solid bullet points that back this view up?

Alternatively, outsourcing of your online development smacks of treating software development as a commodity, and I would assume everyone here would agree it is not.

Is anyone aware of a successful online business that has successfully outsourced development? (success business-wise, not just technically)

Or has anyone got any outsourcing horror stories, where the outsourcing itself has led to business failure?

Edit: Clarification as requested - I mean more than just an online shop. I mean some sort of online presence that can not easily be delivered by off the shelf software, needs bespoke development, and requires on-going development. Like StackOverflow for example.

Answer 1

Amazon is a highly successful on-line business, maybe investigating what they do can provide you with empirical proof, one way or the other.

With a case study like that you avoid being subjective.

Answer 2

The answer comes down to skills and operational requirements. If your online strategy is important to your business then this might reasonably be regarded as a core competency.

1. Any business that has a significant online strategy needs (at least) to maintain someone in-house who is capable of designing that strategy.

2. If that strategy includes an online application portfolio of non-trivial complexity then they need someone in-house who is capable of designing or at least specifying that application portfolio.

3. If the application needs to evolve responsively (i.e. in 'Internet Time') then the business needs a process that allows these changes to be specified, implemented, tested and deployed quickly.

For static content, a good content management system might be sufficient for this. If you have an application portfolio you may find that outsourcing the development significantly impedes your ability to manage quick evolution. This implies that outsourcing the development process is likely to compromise your ability to fulfil point (3).

The chances are that you will only be able to find the skills to fulfil the requirements in point (2) in someone with significant current internet application development and architecture experience. This implies the presence of a development team that is (at the very least) capable of developing prototypes.

Finally, maintaining an e-business strategy without a technical backing is a very risky proposition. An online strategy designed by someone without technical skill is at risk of failing due to unanticipated technical considerations or even fundamental design flaws. Thus, in order to fulfil the requirements of point (1) the online strategy design process must have input from someone who is technically literate. This could be outsourced to a consultancy if points (2) and (3) are not key operational requirements of your online strategy. Otherwise this technical expertise should be available in-house, which implies the existence of a development team with at least the capabilities to fulfil the requirements implied by point (2).

This development team could consist of a mixture of in-house people, contractors or people working on secondment from a consultancy. The make-up of this could vary based on the consistency of the work, requirements for specialised skills (e.g. predictive analytics) and work volumes.

Rick Chapman's 'In Search of Stupidity' chronicles software marketing and management disasters made by non-technical management. His thesis is that a technology company run by non-technical management is at a serious risk of management making a catastrophically poor decision through lack of understanding of the technology. It might be argued that this principle extends to any significant technology related aspect of business strategy including strategic online presence.

Answer 3

I completely disagree with the notion that "a traditional business with a successful online presence needs to have an in house development team", any more than a traditional business with a successful marketing campaign needs to have an in-house advertising team, or a traditional business with a successful design needs to have an in-house graphic design team.

What's clear to me is that you want your core business functions in house, and you want to outsource to qualified professionals those things they can do more effectively and efficiently than you can.

The real question then becomes: is software development part of your core business? That's a question for the Board of Directors.

Answer 4

I think the answer depends on what percentage of your revenue stream is obtained online. I work in a business where 80% of our revenue comes in online, the rest is via mobile handsets or phone calls. We have just pulled all our development in house because we have better control over the design and quality of the solutions we recieve.

If you are accepting solutions from an external supplier I would insist that they deliver the raw source code that is then compilled onsite. This allows you to have full visibility on the changes made as well as complete understanding of the integration and compilation process. This means you can change supplier (including moving in house) with a minimum of fuss.

We have just moved two projects in house and both have suffered because we didn't have the complete source code and even when we did weren't able to recreate the solution ourselves. This meant the suppliers got a nice little golden handshake as we had to pay them consultancy to help setup the dev environment and CI process.