
Companies outside the tech industry are spinning off internal software - metaphysics
https://www.wsj.com/articles/our-it-is-so-good-lets-sell-it-firms-say-11562664603?mod=rsswn
======
pytester
I worked at a company that tried to do this - Willis Towers Watson. It went
pretty badly for a number of reasons:

* The internal software was built up over a number of years as a series of hacks that rarely if ever got unwound. The people running the business were blind to the necessity of this and a lot of the engineers were not motivated to fix it because they were experts on the rabbit hole and were angling for job security.

* The internal software's infrastructure aged badly and we were stuck in a perpetual upgrade hell. This was again because the people running the business did not really understand the accretion of technical debt. Their abilities centered more around, say, pricing insurance and regulatory issues.

* They didn't know how to hire engineers and they instituted corporate processes that ensured that the engineers were both pissed off and unable to properly do their work and they were in a geographical area where it was hard to hire. Good engineers largely left, bad engineers stayed behind and continued building rabbit holes.

* They outsourced critical functions to cheap overseas labor and got crap as a result.

* Their response to slowed development and deadlines was to throw more engineers at the problem.

* They're also the only client I've had to sue for nonpayment of an invoice.

~~~
NikolaNovak
Let me ask an unpopular question: in which sense did it "go badly"?

You indicated a large amount of technical debt and issues, which the techie in
me 101% empathizes with and shares your pain. You also indicated morale and
hiring practices issue, which the person in me empathises with.

What you didn't indicate however was the business outcomes: Were there unhappy
clients that left? Did the costs rise? Business fold?

Everything you mentioned, _unfortunately_ , is also the case for some wildly
profitable/successful businesses.... :-<

~~~
pytester
They had one large customer lined up. I didn't really follow what happened
with them after I left but I don't think that customer was particularly happy
and calls with this customer were fraught and somewhat terrifying.

It certainly wasn't the case that this project was wildly profitable. Not sure
if it will ever make money at all in fact.

I have worked for profitable businesses who have behaved like this too and
it's usually the case that they have some kind of inbuilt unfair advantage
(legal, governmental, monopoly/size/clout, etc.) that compensated for sucking
at tech.

------
huffmsa
> _While the basic strategy isn’t new— Amazon.com Inc. was an online bookstore
> long before it became a tech industry powerhouse_

25 years in and still not getting it.

Amazon has always been and will always be in the business of cheap, scalable
logistics. Not selling books. Not selling the cloud. Selling access to low
cost scale.

~~~
snowwrestler
This is hindsight. When Amazon started, it was a pure e-commerce play. It
later evolved into the company you describe.

For example, they signed a bunch of exclusive supplier agreements for their
store. Then, when they launched Marketplace, they got sued by some of those
suppliers for breaking exclusivity.

E-commerce success created the cashflow and in-house expertise that allowed
Bezos to explore other markets. Some succeeded, like Marketplace and AWS. Some
did not, like the A9 search engine and Fire phone.

------
chrisseaton
In what sense can Celestica, a company which produces 'Communications,
Enterprise and Cloud Solutions, Industrial, Aerospace and Defense, Renewable
Energy, HealthTech and Capital Equipment', be considered 'outside the tech
industry'?

~~~
tapland
In the sense that they weren't doing all of those things before they started
doing them.

The cloud, communications and enterprise solutions are new fields for this
_hardware manufacturer_.

~~~
vonmoltke
"Tech" is not a synonym for "software". Companies that design electronics are
tech companies.

~~~
dredmorbius
While I agree, strongly, with you, software (or more pointedly, Web-and-mobile
information technology) is what the general awareness of "tech" seems to be.

The reality is vastly broader.

------
beastcoast
It’s worth noting that nothing Amazon built internally was ever directly sold
through AWS. Rather, Amazon built something similar internally then used its
engineer expertise to build a completely new product for AWS. Selling your big
ball of mud directly is a recipe for disaster.

~~~
dehrmann
That, but I also have a theory about Version 2. By the time something hits v2,
it's popular enough to justify the work to get to v2, and the lessons that
were learned from v1 can be applied, even if that leads to breaking changes.

~~~
cat199
sometimes, but also [https://en.wikipedia.org/wiki/Second-
system_effect](https://en.wikipedia.org/wiki/Second-system_effect)

------
kfk
Not sure I understand the negativity. Yes non tech companies might produce
horrible programs, but at least this is a breath of fresh air vs the standard
“vendors only” IT approach. There are plenty of horror stories of companies
trusting “enterprise” vendors to avoid doing their own programming. For
instance I have yet to see a salesforce implementation that works well and is
adopted by salespeople, meanwhile something a bit more custom will most likely
have automatic adoption. Anyway, I think extremes are always bad so I welcome
companies moving away from the “standard vendor products” mantra.

------
namdnay
> Other companies to spin out businesses from internal tech efforts include
> Choice Hotels International Inc., which offers a cloud-based reservation
> system for hotelier

As if travel companies spinning off CRS systems is something new... every
single train/airline/hotel reservation system out there is a direct or
indirect spinoff from an internal company product

------
rosser
Having worked for a few shops where the internally developed software I helped
write was seen as an expense, and a tool to facilitate the company's _real_
work, I'm skeptical this will work all that well in the general case.

My data points, though limited in number, indicate a strong tendency on the
part of these kinds of shops to build solutions that are over-fit to their
particular workflows, and to under-resource their development. I was, in one
of these environments, explicitly told that version control and separate
development/test/production — or even just dev and prod — environments were a
silly extravagance.

I'm sure there exist shops that don't do it that badly. I'm more sure,
however, that they're not the norm.

~~~
joejerryronnie
Collapsing dev, test, and prod into one environment sounds like a 300%
increase in efficiency - now that’s a number management can really get behind!

------
baybal2
I think US companies are just now realising just how much of their business
activity can fit into few lines of code.

The thing happened in China over last 5 years:

\- Restaurants run ordering APIs for food delivery companies

\- Restaurants run ordering APIs for online menu companies

\- Laundries run restocking, and order ready notification APIs

\- Logistic companies pretty much became a few layers deep API business with
most companies having 0 user facing "frontend"

\- Hotels - some will deny you booking if you don't checkin online. Some went
even further, and check in you remotely

\- Construction companies - now run with client facing construction site
management software, and run joint CAD projects with clients

\- All kind of odd job service aggregators now do what is called o2o: dog
walkers, handymen, porters, cleaners etc

\- Many business service companies simply went out of business because their
entire businesses were turned into free apps. You can file your taxes with a
free app that scans QR code or electronic invoices for example

\- All kind of retail store interact with wholesale suppliers only through
some EDI stockkeeping or a more advanced API

\- And for commerce, things are all self explanatory: JD and Alibaba

~~~
kodz4
You make it sound as if the Chinese are more imaginative than Americans.
That's not the case. They just have more people. If I am sitting in NYC and
need 10 programmers overnight for a boring IT project... no problem. But if I
am sitting anywhere else in the US it's going to take more time. Not the case
in China. Or India. The quantum of activity is directly proportional to how
much labor you have access too especially in "unsexy" IT work.

And kids in the US rightly focus on the sexy stuff because when you compare
just Apple to the entire Indian IT sector revenues are 3x more. Why would you
want to go work on laundromat or construction company APIs when you have a
shot at getting into Apple or Google.

~~~
asdfman123
I don't think China is more imaginative, but they are far more nimble. For
instance, if a city is growing, they just plop down a ton of apartment
buildings, throw in 8 new subway lines, connect a bullet train and they're
done.

The US spends about that length of time discussing on whether or not to build
a new tower in a historic neighborhood.

I don't know why this is the case, but I think it has something to do with a
rapidly growing economy versus an already grown economy. If someone could
explain to me why that's the case, I'm all ears.

My off-the-cuff guess: if a country is growing, the easiest way to make money
is hop into a growing industry and building as fast as you can. If a country
is grown, the easiest way to make money is to siphon it from somewhere else.
So in developed economies you have stagnation and inefficiency because the
elites are more interested in redistributing the wealth (to them), instead of
creating new wealth.

~~~
entropicdrifter
The other big factor is the government can make unilateral decisions because
they're not a democracy and their human rights are a joke. If they want to
tear down your building to build a new one they'll buy you off or if you
refuse that kick you out by force, historical value be damned.

The citizens in the US and their political power are the source of most of the
inertia.

~~~
gowld
> If they want to tear down your building to build a new one they'll buy you
> off or if you refuse that kick you out by force, historical value be damned.

[https://en.wikipedia.org/wiki/Eminent_domain_in_the_United_S...](https://en.wikipedia.org/wiki/Eminent_domain_in_the_United_States)

~~~
EADGBE
My old college is doing this to an old employer/business owner/friend. If
anyone feels passionate about Eminent Domain being theft; check out their
petition.

[https://www.change.org/p/eminent-domain-is-theft-save-new-
yo...](https://www.change.org/p/eminent-domain-is-theft-save-new-york-sub-hub-
and-others)

------
basch
This is somewhat a sequel to WSJ's "Why Do the Biggest Companies Keep Getting
Bigger? It’s How They Spend on Tech"

[https://www.wsj.com/articles/why-do-the-biggest-companies-
ke...](https://www.wsj.com/articles/why-do-the-biggest-companies-keep-getting-
bigger-its-how-they-spend-on-tech-1532610001)

------
duxup
Certainly there are lots of internal IT teams developing solutions that could
be useful elsewhere.

But man having an IT team or just tacking on sales, account management,
support, legal, customization, billing ... and doing it well is a big lift.
Some of those things are "soft of" like what folks do internally, but man with
another company it can be WAY different. Let alone problems like a company who
hasn't done those things fighting its own momentum to do it right....

I'm reminded of a story from Amazon someone mentioned on HN (or linked it)
where they were working on early AWS like stuff and supposedly Bezos shows up
for a meeting / retreat late. He asks what everyone is talking about. They
were talking about "more cooperation" between the folks working on early AWS
stuff and their own storefront people and the challenges the storefront folks
had using this early form of AWS. Lots of cooperation talk.

Jeff didn't like it and said something about how he didn't like this
cooperation idea (more harshly than I said it IIRC). I'll get this next part
wrong to some extent but I think I've got the spirit of his next actions
right: He then setup a system where the back end AWS folks and the storefront
IT folks were actually discouraged from communicating directly. Rather the AWS
folks were required to write documentation to reduce the number of
interactions directly with the the people running the Amazon storefront. If
the storefront folks couldn't figure out how to do something and opened a
support ticket (no more direct calls) it counted against the AWS team.

The general idea here was to establish the same systems / practices you would
need to deal with outside customers who would one day use AWS... and hopefully
keep using it.

It's also a good example about how working on internal applications and
external are way way different.

~~~
ngomez
That story sounds similar to Bezos' mandate in Steve Yegge's Google platform
rant:
[https://gist.github.com/chitchcock/1281611](https://gist.github.com/chitchcock/1281611)

~~~
duxup
That sounds very similar.

I wouldn't be surprised if there were MANY versions of the same story as a lot
of people would have been impacted by the change in approach to everything,
but they would have seen the implementation and results in different ways.

------
Apocryphon
Not the same thing, but I still find it amazing that Django was created by the
Lawrence Journal-World.

------
perlgeek
If it works, it's great. There are a lot of companies doing similar things
that duplicate lots of effort building similar applications.

However, in my experience, internal software development is often tailored
very tightly to specific environments and other tools that are used in this
particular situation, and the pressure from higher-ups is to build something
faster rather than generic (and even if it's built to be generic, that usually
doesn't work well unless there are real use cases exercising it).

What I'd really like to see is several municipalities joining their forces and
writing common open source software that works for their use cases. Would be
soooo much cheaper in the long run than each procuring on their own.

------
brookhaven_dude
Many airlines could very well be tech companies at this point. Same for some
other "old school" stalwarts like UPS and Fedex.

------
pkaye
I worked for a company 15 years ago that had build a nice collaboration
website like Confluence/Jira for internal use. It was built by an internal
team of 5 engineers. Very nicely done UI. The company had a lot of things
going for it but it missed a few strategy opportunities and was bought for a
song and split up. In hindsight, I feel like that collaboration software could
have been a business of its own but nobody recognized it. Maybe 10 years too
early.

------
peterwwillis
One of the things I'm most sick of in technology is home-grown software. I've
been re-writing and re-implementing the same solutions for 15 years, because
apparently nothing anyone creates is good enough. It's like we're in the
business of selling door to door, but to do that we make our own cheap shoes
that fall apart after a few years and have to be re-built again.

------
jillesvangurp
Most companies can't afford a proper IT department and that just rules out a
whole range of things they can do. IT is expensive; good IT is much more
expensive. If it's not mission critical, SAAS is a great solution. Once you go
SAAS, you can outsource some of the people using those solutions as well. You
can outsource IT, HR, accounting, etc. Even sales, marketing, and support
functions can be outsourced.

A lot of legacy business remains of course and this seems big business for the
likes of IBM and Oracle. But I don't know of any young companies signing
contracts with either and would recommend to actively avoid that kind of thing
to anyone.

------
phkahler
But but but... what about focusing on their core business? What about
outsourcing everything else? Not only that, this would require management to
recognize value in something else. Were not in a Dilbert book here.

~~~
gumby
It's the other way around: if my business is making furniture and the company
made a scheduling program I'm better off spinning it out to someone who will
focus on it, and just continue to use the product. So instead of it being just
a cost center the company gets a bit of possible financial upside and
hopefully the product becomes better via market exposure.

Of course Coase would say that's a risky bet (the spun out business could fail
for ordinary business reasons and then you'd have nothing).

~~~
simonh
>Of course Coase would say that's a risky bet (the spun out business could
fail for ordinary business reasons and then you'd have nothing).

But if you've spun it off, and especially if you got in outside investors,
you've both partly cashed in and largely hedged yourself against that risk.
Now you can just treat them as an external vendor and if they fail, buy
elsewhere.

~~~
peteradio
If they could buy elsewhere why did they build the software to begin with?

~~~
0815test
If you _can 't_ buy elsewhere, _and_ don't care about keeping the software
internal as your unique selling point, arguably the right thing to do is to
open source it. That way you make sure it stays around, _and_ attract third
parties to support it. But there's also a lot of internal software around that
wouldn't yield any benefit from either spinning off a profit-seeking business
to commercialize it, or open sourcing.

~~~
analognoise
The right thing to do is whatever makes the most of your investment. Don't
give it away - charge for it.

~~~
0815test
> The right thing to do is whatever makes the most of your investment.

Right. And if there are no alternatives on the market already, that tells you
that charging for it is not going to be viable. The way to make the most of
that investment is to keep it alive, even if this means giving stuff away!

~~~
analognoise
Releasing things usually comes with overhead - you have to verify that
everything you're releasing doesn't have anything proprietary, that all other
code is following a license that allows for release, etc.

Or you could spend $0 and let the bits just rot if they're not in use - no
lawyers reviewing licenses, no code reviews, nothing. Or you could send it
through engineering to make sure there's no secret sauce, then through
corporate legal (at $250/hour), then through business development...

It's almost always better to just smother the code with a pillow than it is to
give it away, because giving it away actually costs money, and will bring you
no profit. Screw that, if it's important enough, let someone else spend the
time and money writing it.

~~~
0815test
> ...It's almost always better to just smother the code with a pillow than it
> is to give it away

Sure, but the underlying play is that clearing the code for release will at
least allow you to share support costs with other actors in the same or
closely-related industries. In many ways, it's a marginal choice that sits
awkwardly inbetween "smother it with a pillow" and "make it a full-blown
proprietary product that can actually bring sizeable revenue". That doesn't
mean it _cannot_ work in some cases.

------
whalesalad
Samsung started as a grocery store.

