On May 7, 1947, Levitt & Sons announced its first rental homes in Levittown, New York. Of the 2,000 homes, more than half rented within two days. The Levitts were building at a rate of 30 houses per day by July 1948. The company’s assembly chain approach to construction allowed it to meet high demand for affordable homes with a single, replicable solution. The otherwise identical homes could be customized with the interior designs, embellishments and personal touch of the owners.
Today in the tech industry, we’re entering an era of Levittown software, and the change is important for all businesses. Technology companies now build Levittown-style products that are appropriate for a wide range of industries. The base product is quickly deployed, cost-effective and customizable. The companies that “rent” these products on an SaaS (software as a service) basis enjoy the highest standard in software without the costs, risks and tech quandaries of in-house development. This Levittown model is the future of many kinds of software.
“We built it in house” is no longer a bragging point. In most cases, “in-house” is now used to describe backwards software alongside “slow” and “user-unfriendly.” Still, companies resist letting go of archaic proprietary applications. People are used to it and it works OK, so why mess it with it?
This thinking used to work because consumer software and business software used to be similar in that everything was user-unfriendly. However, the rise of mobile devices, web services and web apps created a gap between consumer and business software. The ease of downloading, installing and using consumer apps highlighted just how antiquated business applications had become. Instead of accepting typical in-house business apps as they were, people questioned why they were so much more difficult to use than iOS and Android apps.
So, we’re moving from expensive, custom-made, in-house solutions to cost-efficient, customizable, easy-to-integrate solutions that perform well in a variety of contexts. The build-it-yourself era is giving way to prebuilt software that makes it possible to bring advanced capabilities “in house” almost instantly and get to market quicker.
An obvious cost advantage
Companies like [company]Salesforce[/company], [company]Magento[/company], [company]Yammer[/company], [company]Freshdesk[/company], [company]Asana[/company] and dozens of others are on the rise because they outmatch in-house software on usefulness and cost of ownership. Levittown made modern suburbia possible with all the safety, convenience and community people have come to expect in such neighborhoods. The mass production of quality houses also made home ownership available to millions of additional Americans.
All software is supposed to save time, raise revenue, cut costs and boost productivity, but we now know how difficult it is to meet those goals. New wave tech companies like Facebook, Google and Twitter have to hire thousands of developers with six-figure salaries to offer products that work well. Most companies don’t have the cash or bandwidth to support long development cycles and hire boatloads of developers.
If multi-billion dollar companies are putting all these resources into building products that are their source of revenue, why would non-tech companies think they can build their own CRM, help desk or payment software to that standard?
From build-it-yourself to do-it-yourself
Although build-it-yourself options are less desirable today, the Levittown breed of software has a “do-it-yourself” (DIY) component. You don’t install Salesforce and leave the software as is – instead, you integrate with your systems, tweak the fields, add on additional software and make it your own. All the companies I’ve described have experts who help their clients customize the system like this.
In the world of payment gateways, I’ve found that companies prefer to start with a pre-configured gateway loaded with features that increase conversions. It would be extremely expensive or impossible for companies to build these features on their own. So they use a pre-made solution, customize the appearance, plug in sales tax and ecommerce software, and then sell immediately. The base model takes care of heavy coding the way a Levittown house simplifies building, and then improvements and customization don’t require a software engineering army. Customization is now a DIY process with varying amounts of guidance from the provider.
Some techies might argue that the high performance, scalability and reliability of cloud computing is the key to companies like Salesforce. Without diminishing the importance of those qualities, I think the sweet spot between building it yourself and a prebuilt solution is what makes SaaS products so appealing.
The decision to build an e-commerce platform or global payment gateway is a multi-year, multimillion dollar initiative that can go horribly wrong. The risk versus reward equation points to Levittown software. This trend will allow companies to expand into new markets, offer new services and improve operations faster than ever before. So stop trying to be two businesses. Focus on what you’re good at, and let software companies fill in the gaps.
Ralph Dangelmaier is the CEO of BlueSnap, which aims to be the payments leader in e-commerce.