Many large US retailers have begun to develop software themselves instead of sourcing it from third-party providers. E-commerce companies say that in-house development gives them the speed vital to stay competitive in the hotly-contested marketplace.
American retailers Lowe’s and Target Corp are moving software development in-house, reported The Wall Street Journal, citing comments from the companies’ executives at this week’s National Retail Federation conference.
Lowe’s has just geared up to expand its internal technology teams, but Target already sees results. Considering the report, many of them are sending out third party contractors who developed software on their premises.
Around four years ago, the engineering team at Target was made up of 10,000 professionals, with most of them belonging to third party providers. Today, Target is developing most of its software on its own, and its engineering team has now been reduced to 3,500 members, according to the Journal.
Building all applications in-house will be too expensive for retailers in this fast-changing technology environment, say some analysts.
Some years ago, McKinsey Digital, an American consultancy firm, cited an example of an unnamed retailer that went bankrupt after starting to develop software on its own. That was because the cost spiraled out of control, leaving the company with little or no cash to fund other activities.
However, at the retailers’ conference, Microsoft CEO Satya Nadella urged retailers to stop relying on third-party providers.
“You cannot be pulled by association with a tech vendor. You have to be pulled on your own,” he said. “You have to really take pride in the digital capability you have to build,” he added. The Indian-born CEO was the key-note speaker at the conference.