From web agency to technology agency.

It’s no secret that I’m not exactly enthusiastic about the innovative spirit of the digital sector. Of course, this is especially true for the smaller agencies, but unfortunately it also applies to the large service providers. The industry is still working off the huge backlog of customer adaptations. And yes, the end is not yet in sight. However, the future will certainly not consist of doing the same old eCommerce, CMS or mobile projects. An outlook on something that will not become immediately relevant in the next 24 months, but is better to think about now.

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I think there are three trends that will influence the business model of large software service providers in the coming years:

Trend towards own teams

In recent years, I have repeatedly seen large companies build up their own agile teams and set them up on digitalization projects quite separately from the rest of the business. I have witnessed a few times how such an undertaking has failed. For example, when such a step is taken for cost reasons and people with little or no experience try to form such teams with mediocre developers.

Increasingly, however, this is working quite well with in-house teams. And because most customers now see themselves under real pressure when it comes to digital transformation, they are investing accordingly. This is problematic for service providers in two respects. On the one hand, it means a loss of potential revenue. On the other hand, we are also seeing a migration of good employees to such larger companies. If a provider says that there are no such cases in their own company, they either don’t have good developers or they are lying.

In most cases, this exodus also affects experienced, older employees who have seen the project business and would like to work for a larger company in a more established environment. The generally quite generous salaries on offer make it even easier for such candidates to make a decision.

Our response at AOE to this trend is that we anticipate it quite well with the Team & Method approach. Building a new team is a huge, long-term undertaking for the customer. It therefore makes sense to start with a team from an experienced service provider and to grow your own teams in parallel, so to speak. Customers who do a full cost calculation usually soon realize that the costs of external and internal teams are much closer together than they think.

Trend towards design thinking

Another trend that I am increasingly noticing is that companies want to see results faster and are increasingly using design thinking methods for new products and projects. I think that’s very good and a real paradigm shift. Anyone who passes these customers by as an agency or software service provider with traditional projects is practically out of the window from the outset.

Implementing this new approach is a major challenge for the digital sector. After all, it is not enough to simply plaster something on the website, as was the case with the “general switch” to agile project methods. That you’ve been doing it this way for a long time and that you have a few certificates. No, in extreme cases you have to have a prototype after 4 weeks and be able to test it. This requires teams that can react to such challenges in an interdisciplinary way. Not quite what you find in today’s general agency landscape. I wrote about this in detail last week.

Trend towards specialized service providers

Another trend that I have also noticed is that the best people are becoming self-employed and solving very specific tasks in small teams. These people have no inhibitions about throwing themselves into different project and team constellations and working in an interdisciplinary way.

This is convenient for companies that work with external or in-house teams. I don’t think it’s ever been so easy to put together really great teams in terms of skills on demand. The administrative hurdles and finding people are still difficult enough, and I would have a business idea for that if someone has time, but it’s quite easy to do if you have the right network.

Vision: A company that helps its customers to adapt new technology

The digital transformation is about catching up as a company with regard to user behavior. The biggest driver of this change in user behavior is always new technology. You can find a simple explanation of this here.

I think companies today and for quite some time to come are fundamentally bad at differentiating between what new technology is and what the relevant adaptation of the technology by their customers means for them. I think everyone has now understood this from the example of the smartphone.

Paradoxically, the exact same process is currently taking place in the automotive industry. New technology is available that enables a modified or new product that customers accept immediately as soon as the economics are right. We are not quite there yet. But the reservations for the Tesla Model 3 give a first taste of the development that will take place in this area. It’s not primarily about environmental protection: people who let me test drive a Tesla realize in the first two minutes that this is a fundamentally better product.

I think this is where we as a software service provider can help our customers. By moving away from the web orientation and looking left and right, experimenting with new technology and giving our customers a head start in adapting the technology. Sounds a little far-fetched at first. I know. But at AOE, for example, we have already made a significant contribution to the development of in-car systems for a major car manufacturer.

A handful of larger service providers that actually come from the traditional digital business are moving in the direction of technology adaptation. In this context, the work of the Finnish service provider “Reaktor“, which is currently in the process of realizing a nanosatellite, is also noteworthy. This is definitely something that a company with 400 employees can launch today as a side project. You can find more information here.

At the forefront of technology

Software is eating the world. It is only logical that when companies start to design more and more processes and products based on software, this software creation and adaptation also needs to be retained as a core competence within the company. The vast majority of interesting customers will therefore implement this themselves in the long term. The best and most agile producers are known to be those who build the tools that make the products themselves.

This kind of creative approach to technology is crucial for the future of leading service providers. That’s why we need R&D teams that can tackle new things. That’s how we understand which new technology we can use for which cases, what is missing in existing products to make them software-based. And earlier than our customers.

This positions you at one of the most important points in any company of the future. You move away from being a pure implementer and become a strategic partner for success-critical paths. And this, of course, in a field that is only becoming broader because more and more areas are being supported by digital technology. The digital workbench, as part of the service, will continue to exist. But it will become a commodity with all the disadvantages that entails for providers. So let’s not bet on it in the digital sector.