Why Are Retailers Moving Software Development In-House?

Retailers want control over their data and software with UX designed for a millennial workforce. If they can't find it in your software, they'll build it themselves.

retail software development

There’s a concerning trend occurring among enterprise retailers: They’re moving software development in-house.

The Wall Street Journal reports Dick’s Sporting Goods, led by CTO Paul Gaffney, is the latest to build in-house teams to develop software with goals of creating better customer experiences, revamping technology to suit its millennial workforce, and, ultimately, gaining a stronger competitive advantage. Gaffney used a similar strategy in his previous position at Home Depot.

This year, Dick’s Sporting Goods’ software development team will complete its new inventory tracking system and put the finishing touches on its e-commerce platform.

As an ISV, it’s time to ask yourself what retailers can do on their own that you can’t provide.

The Answers

Rasmus Skjoldan, CMO and Project Strategist at Magnolia CMS, says the primary answer relates to data. “Having full access to data is a crucial driver,” says Skjoldan, “Retailers want to stop relying on outside vendors to manage data sets.”

Skjoldan says retailers will take on substantial ongoing expenses to have in-house software development teams, but when he talks to the retailers he works with at Magnolia, “I don’t hear about the costs, only the data.”

Another potential advantage of in-house software development is decreased risk. “Choosing platforms is extremely daunting,” Skjoldan says. “If a retailer makes the wrong choice it can put them in a deeply problematic situation that can impact their business for years.”

“An in-house workforce allows them to develop — and change directions — faster than if they had to negotiate with third-party companies and wait until resources are available for their project. In-house, they simply do it,” he says.

Challenges In-House Retail Software Development Teams Need to Overcome

Skjoldan says getting an in-house software development team functioning at peak can be just as hard as setting up a retail business in the first place. They will be recruiting from the same underpopulated talent pool that ISVs and others draw from, and they will also need to find ways to ensure reliability of their software as developers shift roles or leave the company.

He adds that to successfully develop software in-house retailers may also need to restructure their organizations so software engineers with technical expertise and retailers with industry expertise can work together and avoid conflict as to “who is in the driver’s seat.”

Advice for ISVs

Skjoldan says that if your ISV is beginning to feel the impact of retailers moving software development in-house, there are some changes you can make that may turn the tide. First, if the user experiences your application provides isn’t as easy as a smartphone, it’s time to redesign. “In the old days, people worked with whatever horrible tool they had. They just had to accept it,” comments Skjoldan. “Now people use software every day, and they carry the expectations that software in the workplace will be just as easy to use as their personal apps.” He says he’s heard of many instances in which people left companies because they were forced to use technology that resulted in bad user experiences. “Workforce experiences are becoming very important,” he says.

Skjoldan adds that it’s also vital to provide customization to your enterprise retail clients’ applications. “Enterprise software needs to be extremely specialized depending on the business’ needs and how they need to weave processes together,” he says. “And it requires a ton of insight into what the particular needs of that business are.”  He says that employing UX designers and business consultants to bridge the usability and operational sides of software can be extremely useful.

The most important change you can make, however, relates to data transparency. “The more you can deliver in terms of it, the better chance you have of working with the trend instead of against it,” Skjoldan says. 

Mike Monocello

The former owner of a software development company and having more than a decade of experience writing for B2B IT solution providers, Mike is co-founder of DevPro Journal.

The former owner of a software development company and having more than a decade of experience writing for B2B IT solution providers, Mike is co-founder of DevPro Journal.