As I hope I explained clearly in my previous blog (Reasons to Buy), it is preferable to buy an Industry Add In (that is, to join an industry platform) than to try and build your own custom solution on Microsoft Dynamics 365. Especially since this is Microsoft’s statement of direction.
What if, however, there is no fit for purpose Add In for your industry?
Aircraft Leasing, I’m looking at you….
Then, there is one excellent reason to build your own vertical solution: the opportunity to create an industry platform on Microsoft’s technology.
Why are platforms so important?
Platforms have become one of the most important business models of the 21st century. They are driving Digital Transformation.
It’s hard – when you’ve been working in IT for as long as I have – not to roll your eyes when you hear marketing buzzwords like Digital Transformation….
And yet, I now see that like other terms I did not understand clearly when I first heard them articulated way back in 1994 (eCommerce) or in 2002 (Cloud Computing), the term Digital Transformation which I first heard in 2016 is not hype. Digital Transformation is a trend becoming so ubiquitous I’m sure we’ll look back in 10 years and say like we say now isn’t everything eCommerce or isn’t everything Cloud because everything really can be and probably will be Digital (even people!)
At a simple level, this is the promise of the Internet of Things (which I’ll discuss in depth later). We can now make dumb things digital. Think, for example, of all the dumb components that make up a €50 million aircraft (the fuselage, the landing gear, the rudders, etc.) and just because they’re dumb, don’t think they’re cheap!
Now, imagine a reality where these dumb things are digital: they can talk to us – they can tell us how they’re feeling, they can explain exactly why that last trip was a little bumpier at 50,000 feet and they can even predict into the future when they’re going to need a check-up. Does this sound like fantasy? It isn’t because dumb things are transformed into digital things when they can collect data (which has been happening for years) but more importantly and more influentially when they can share, communicate and possibly react to that data in almost real time (this innovation is the Internet of Things).
This is why digital transformation is a trend for the long-term. Particularly because the second half of the world’s population is only accessing the internet now!
Think about the disruption this will wield, the changes, the innovations, the new ways of doing things…. Whatever your business – whether you manufacture, distribute or provide a service – you’re going to have to be able to handle data and lots of it. This is why Salesforce just bought Tableau and Google just bought Looker and Microsoft is pumping so much money into Power BI. It’s not enough to process data, you have to visualise it to understand it! (Because there’s so much of it)
This is why Digital Transformation means all businesses – big and small – need IT platforms.
What is a platform?
Platforms connect people or organisations for a common purpose or to share a common resource. Powered by online technologies, a digital platform is an ecosystem designed in this hyper-connected world for end-to-end business. We all know the big consumer platforms (and the industries they disrupt): AirBnB (hotels), Uber (taxis), Spotify (music), Netflix (entertainment). The list goes on and on.
But industry platforms focussed on specific niches are the next wave. Why? Because they’re profitable. This recent study has done the math – “platforms generate the same level of annual revenues … as their non-platform counterparts, but use half the number of employees. They also have twice the operating profits and much higher market values and growth rates.”
Not only are platforms profitable, they are also highly innovative because they encourage non-linear increases in utility and value. Traditionally business has been linear: a supplier sells a product to a customer. Platforms encourage non-linear interactions and these “network effects” provide a feedback loop for innovation that the whole industry interacting on that platform benefits from.
Effective platforms are:
These four conditions strike at the heart of what a true industry platform is, but I argue we need to take the definition one step further – the heart of every industry platform should be Finance and Operations.
There are only a few technology platforms to choose from (that battle has, I think, been fought and won) but there are still significant differences between them. Some technology platforms are better than others, and in my opinion, Microsoft’s is the most complete.
Salesforce would like you to believe the customer should be the beating heart of every platform and while it is certainly true that every business needs happy customers to grow and survive, it is the business’ profit that is the lifeblood of business. Therefore, it is only by building your industry platform on a financial management application that you will gain true visibility into your revenues, your costs, your profits. This true business intelligence will allow you to constantly improve operational efficiencies over and over again.
Most companies don’t have the resources to build an industry platform and for most companies there are already industry platforms which their business can buy into that are sufficient as foundations for 21st Century trade. For example, Foodware365 for the food and drink industry or LS Central for Retailers.
But what if there is no fit for purpose industry platform for your industry? And what if you have the resources to build one?
Perhaps you should. Because if you don’t, one of your competitors will.
Some other considerations
There are a few other less revolutionary ideas why you may prefer to build on Microsoft Dynamics 365 than to buy into a ready built platform.
When you buy an Add In, you buy all the Add In whether you need it or not. Most Add Ins began life a custom build for a customer. Let’s say, for example, this customer was a dairy business. This customer is in your industry (e.g. food) but it is in a completely different business to your business since you’re a meat producer and they’re a milk producer. The Add In may have functionality related to milk production which offers no benefit to your business. Are you paying for this needless functionality?
In addition, your requirements might be leaner than the Industry Best Practise requirements that have been built into the Add In. The Food Safety module, for example, may perhaps be too rigorous for your business in that your business may not have the discipline, the personnel or the management oversight to follow all the necessary steps that the best practise process demands. This means you might be paying for a solution that you cannot fully avail of.
2) Is the Add In commercially future proof?
While the right industry platform should be designed with the proper R&D, how well funded is the IP owner? What happens to the IP if the IP owner goes bust?
It should be obvious to avoid any Add Ins that are locked. If the IP Owner is the only company with access to that source code, then your business will become beholden to that IP Owner.
As with all significant decisions, there is no right answer. There are instead compromises, pros and cons which must be weighed and debated. For these reasons, we recommend that all our customers work with a trusted partner to help guide them in the right choice for their long-term benefit.
Next up in this Build versus Buy series is a deep dive into some emerging technologies (Blockchain, Internet of Things, Artificial Intelligence and Virtual/Augmented Reality, etc.) since some of these technologies have already emerged and are going to impact you and your business sooner than you may realise… the answers you seek for the particular situation you find yourself in may not be as clear cut as they once seemed…