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OEM: Should software companies also be hardware companies?


 I recently saw a quote from famed computer scientist Alan Kay. “People who are really serious about software should make their own hardware” is often mis-attributed to Steve Jobs as he said this at the phone launch in 2007, 25 years after Kay first said it (interestingly, he was discussing some coding he was doing for Mac at the time).

What I find more interesting is that this quote is sometimes attributed to Jobs; that it was first said 30 years ago and that so many software companies still regard this as a universal truth.

It’s hard to find an exact number (and can vary wildly from one industry to the next) but as many as 80% of software companies build the hardware on which they deliver their software to market today. Most see it as a “necessary evil” and have no desire to become hardware companies.

They’re keenly aware of the resource strain their hardware development efforts place on their organization and how it can detract from the software innovation they know will drive sales but continue on the same path for any number of reasons.

But what of the benefits and value of a closed ecosystem where all hardware/software and services are developed and managed internally? In enterprise settings, this model is neither easily replicable nor ideal for most software companies.

Why? Well, it comes down to resource focus and time and the ability to scale with little disruption and without increasing headcount if it’s not part of strategic planning.

Regardless of the size of the company, even small resource strains can create significant delays in new product development and time to market, which can significantly impact profits. Not to mention the procurement, testing and quality assurance, integration and supply-chain demands that are all part of the highly-variable process of bringing a hardware-based software solution to customers.

For instance, when it comes to purchasing multiple hardware components from disparate vendors in small quantities, there are economies of scale considerations. If your company is placing a small order, it will cost more. And, if anything goes awry before the order is processed (or while in transit), your order could be delayed so that larger orders get placed.

Working with a Tier-One hardware manufacturer can alleviate all of that as you leverage economies of scale that would be difficult or impossible independently. Additionally, it provides on-demand access to a comprehensive portfolio of leading-edge technologies that are all fully tested and quality assured to further speed time to market.

And, bringing a solution to end users is often just the beginning. Success is dependent on a service model that ensures up time and repairs (and software updates) in hours, not days.

Finally, when it comes to a closed ecosystem and “building your own,” innovation can be self limiting with fewer people exposed to fewer software-based projects. Dedicated engineers for a large manufacturer gain insights and drive new technologies based on the asks of multiple companies with different needs.

For companies that choose to focus on innovation and maintaining their competitive edge, outsourcing the executional details of product development is a logical one. Leveraging the engineering chops, product quality and supply chain/logistics capabilities of a company with all those resources in place means no added headcount or resource strain for the software company so they can focus on what they do best.

Are you still building your own hardware?

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