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But most companies could do things their suppliers do, because companies always have the option of hiring people with those skills and developing those competen

But most companies could do things their suppliers do, because companies always have the option of hiring people with those skills and developing those competencies in house. E.g. Google moved from running their software in commercial datacenters to building their own, or how Amazon has progressively taken over more and more of the supply chain. Android is sold to firms that can build their own mobile operating systems and have done so in the past, yet it's still profitable for Google to do it for them. Fundamentally, business is about specialisation. Your customers always have the option of becoming jacks-of-all-trades but generally recognise it's best not to. Obviously if the value you're selling is so thin that your customers regularly and genuinely feel they could roll their own without incurring much cost, that's no good, but that's going to typically be the case in the early days before you had a chance to build up much value.

nostrademons 6y ago
That's an option in the same way that anyone can go back to college, specialize in pre-med, go to med school, complete residency, and then become a doctor. It's possible in theory. In practice, you're looking at a decade+ of your life, with significant risk that each step fails. So it is with companies bringing core competencies in-house. Each step takes time, and is fraught with risk. It's not a matter of simply hiring people with the right skillsets. You need to know what the right skillsets are, and how to judge them. You need to hire managers and executives to oversee them. You need to convince all of the above people that they should work for this new company that's just entering the market and may reconsider in a couple years, vs. stick with their bread and butter that's been doing it for decades. Company leadership needs to prioritize integrating the new competency, which often means challenging a lot of their assumptions about how the business works. Investors need to be on board: integrating your suppliers often does bad things to your margins and costs. Tooling and capital investments need to be made, and they can take years to plan out and execute. With developer tools specifically, the alternative to buying the product is often "We'll have a team of engineers spend a quarter or two building something that is specific to our needs", and no changes need to be made at the management/executive/personnel/financial levels. If, say, you're building a SaaS for a non-tech business, the alternative is "We need to learn how to manage software development processes, and hire a bunch of engineers, and get executive buy-in, and re-build the communication pathways in our org so this new division knows what to build." A lot of businesses actually try this, but the results have been predictably bad, and that creates a ready market for non-tech SaaS vendors.
- cutemonster 6y ago
  > That's an option in the same way that anyone can go back to college, specialize in pre-med [ ... ] Another analogy: Tesla's customers get the idea to just design and build their own cars instead. Thanks for an insightful reply -- slightly helps me when thinking about my own projects
- thu2111 6y ago
  I think you may be over-exaggerating the difficulty of doing this. Companies both insource and outsource things pretty frequently. For example it's common for tech firms to insource catering. Building restaurants is not a core competency, yet they are perfectly able to do it and haven't suffered any great distraction from doing so. In practice one company acquiring another, or even just poaching some employees, is a common thing that happens so frequently we take it for granted. When Apple acquired PA Semi nobody batted an eyelid even though they were in-sourcing something as complex and difficult as CPU design. And there are many examples outside of the computing industry too. With developer tools specifically, the alternative to buying the product is often "We'll have a team of engineers spend a quarter or two building something that is specific to our needs" If it takes a small team of engineers only six months to roll their own version of your product, that's what I meant by the value proposition being quite thin (or your price being too high). Also, most companies outside of very rich tech firms will not actually staff up an entire project just to clone a tool they could acquire off the shelf, unless that really is the only reasonable path forward e.g. their needs genuinely are unique. Now, in computing we do have the issue that the prevalence of VC money, and indifference of VCs to whether it's being well spent, has created a large population of "very rich tech firms" with lots of apparently bored engineers working at them. So they spend a lot of time churning out open source frameworks that they maintain for a few years and then abandon, even when they could have used something else. That's rather unique to software but I don't think it's something inherent to developers as a type of person. Rather, it's inherent to a market where money is free and firms compare themselves to each other by the sheer size of their engineering teams. Outside of the Valley that problem mostly goes away.

nostrademons 6y ago

That's an option in the same way that anyone can go back to college, specialize in pre-med, go to med school, complete residency, and then become a doctor. It's possible in theory. In practice, you're looking at a decade+ of your life, with significant risk that each step fails. So it is with companies bringing core competencies in-house. Each step takes time, and is fraught with risk. It's not a matter of simply hiring people with the right skillsets. You need to know what the right skillsets are, and how to judge them. You need to hire managers and executives to oversee them. You need to convince all of the above people that they should work for this new company that's just entering the market and may reconsider in a couple years, vs. stick with their bread and butter that's been doing it for decades. Company leadership needs to prioritize integrating the new competency, which often means challenging a lot of their assumptions about how the business works. Investors need to be on board: integrating your suppliers often does bad things to your margins and costs. Tooling and capital investments need to be made, and they can take years to plan out and execute. With developer tools specifically, the alternative to buying the product is often "We'll have a team of engineers spend a quarter or two building something that is specific to our needs", and no changes need to be made at the management/executive/personnel/financial levels. If, say, you're building a SaaS for a non-tech business, the alternative is "We need to learn how to manage software development processes, and hire a bunch of engineers, and get executive buy-in, and re-build the communication pathways in our org so this new division knows what to build." A lot of businesses actually try this, but the results have been predictably bad, and that creates a ready market for non-tech SaaS vendors.

cutemonster 6y ago
> That's an option in the same way that anyone can go back to college, specialize in pre-med [ ... ] Another analogy: Tesla's customers get the idea to just design and build their own cars instead. Thanks for an insightful reply -- slightly helps me when thinking about my own projects
thu2111 6y ago
I think you may be over-exaggerating the difficulty of doing this. Companies both insource and outsource things pretty frequently. For example it's common for tech firms to insource catering. Building restaurants is not a core competency, yet they are perfectly able to do it and haven't suffered any great distraction from doing so. In practice one company acquiring another, or even just poaching some employees, is a common thing that happens so frequently we take it for granted. When Apple acquired PA Semi nobody batted an eyelid even though they were in-sourcing something as complex and difficult as CPU design. And there are many examples outside of the computing industry too. With developer tools specifically, the alternative to buying the product is often "We'll have a team of engineers spend a quarter or two building something that is specific to our needs" If it takes a small team of engineers only six months to roll their own version of your product, that's what I meant by the value proposition being quite thin (or your price being too high). Also, most companies outside of very rich tech firms will not actually staff up an entire project just to clone a tool they could acquire off the shelf, unless that really is the only reasonable path forward e.g. their needs genuinely are unique. Now, in computing we do have the issue that the prevalence of VC money, and indifference of VCs to whether it's being well spent, has created a large population of "very rich tech firms" with lots of apparently bored engineers working at them. So they spend a lot of time churning out open source frameworks that they maintain for a few years and then abandon, even when they could have used something else. That's rather unique to software but I don't think it's something inherent to developers as a type of person. Rather, it's inherent to a market where money is free and firms compare themselves to each other by the sheer size of their engineering teams. Outside of the Valley that problem mostly goes away.