Futuregazing, part 3: The new commoditisation.

The Build vs Buy debate is changing again. Companies that serve the M&E Industry should take note. blog.mindrocketnow.com

February is a bit late to make predictions for the year, even if it still feels like the year has only just started. Instead, this year I thought I’d write about advances I’d like to see in the industry. These will probably arrive later than 2014, but I think they’re necessary, and sooner rather than later. In this entry, I look at a familiar debate, dressed a little differently.

Commoditising and Specialising

There won’t be more money to spend this year than last. The reality is that the economy as a whole, though growing once more, is still fragile. So money, especially Capex, needs to be carefully husbanded. This is necessitating trying to buy as “off-the-shelf” as possible. And if the solution isn’t available off-the-shelf, the larger buyers are starting to force commoditisation to make it off-the-shelf.

What is currently specialist will be tomorrow’s commodity, and tomorrow will also bring a new specialism. The infrastructure of today’s media business is often blighted from specialism: from hardware, software, even the cables in today’s head end are specialist. However, better integration is bringing “In A Box” solutions to the market. Channel IAB, OTT IAB, Post IAB are all coming soon, or already here. And best of all, it doesn’t matter where the box is, so no need to own expensive data centres, just expensive data pipes.

Big data and analytics is a new capability that media companies are starting to learn to harness. Today, you need to hire an expensive System Integrator with a specialist analytics department to build and manage your analytics solution, but this too is ripe for commoditisation. Tomorrow, you should be able to upload your feeds, and get an analytics solution back. Because the smarts aren’t in the machine that takes inputs to outputs. What needs to be kept in-house because it truly provides a market differentiator, is the understanding of which conclusions are needed by the business, and how to prove them with the data going in. Future Business Analysts need to be Data Scientists too. Commoditise what doesn’t differentiate.

The bonus feature of forcing commoditisation, is that it lowers barrier to providing a product. More vendors = more competition = higher quality and lower price (at least lower Capex, if not Opex). What’s not to like?

Well, this is the nub of the old build versus buy debate that is always going on. We can make the hoary old assumption that if you buy something, it’ll do 80% of what you want to do. So what happens with the remaining 20%? The options haven’t changed over time: you either customise the solution to do the remaining 20% (in which case you go from buy to build); or you get the organisation to do the remaining 20% (and pay the cost of getting the business to behave differently); or you forget about the last 20% (and hope that it isn’t the key to your competitive advantage). Forcing commoditisation is a way of forcing that 80% to 90%, but it doesn’t make the debate go away.

More in this series: part 2, part 4.