Welcome to this third module on digital business models. In this module, we'll discuss how and why developers are emerging as the new decision makers. In 2011, venture capitalist Marc Andreessen coined the phrase that has become since a Silicon Valley favorite. He said: "Software is eating the world." He explained it as follows: "Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the required technology to transform industries through software finally works, and can be widely delivered at global scale." We now see that software is becoming a competitive advantage in industry after industry. For example, today, most businesses in media, games, finance, or transportation, advertising, and sports are using software to improve operations, optimize their supply chain, and improve the overall customer experience. In these industries, a company not using software across the organization is choosing to make itself uncompetitive. Imagine, for example, a media business without a digital presence, games company not developing games for Apple or Android devices, a financial institution not using software for high-frequency trading, imagine a transportation company not using software to route its fleet of vehicles, or an advertising company not using software to track the online behavior of its users. Today, businesses in healthcare, construction, agriculture, real estate, banking, education, retail, tourism, and so on are finding they need to use software to remain competitive. Tomorrow, businesses in chemical goods, energy, fashion, pharmaceuticals, probably even mining, will be using software to remain competitive. Software is indeed eating the world. It's common knowledge that software developers are at the center of software innovation. After all, they build the software that is eating the world. But it's not just that. Many modern competitive battles have been won by attracting developers. Let's see a few of those. Microsoft Windows emerged as the dominant operating system in the 1990s and 2000s because of the superior developer strategy, in fact, making developers and applications into first-class citizens of its product. In mobile, Apple iOS and Google Android took the number one spot from Nokia and BlackBerry in smartphones because of being the first to build a thriving developer ecosystem around their platforms. Facebook won over MySpace in part by opening its platform to third-party developers. Salesforce took the number one spot from Oracle in CRM and now has twice the market share of its closest competitors. Salesforce claims an astounding five million registered developers in 2018. In telephony and messaging, Twilio won over telecom providers in extending the value of telecoms beyond telephony and messaging by understanding how to market and sell software developers. In 2018, Twilio has a 100,000 customers using its communication solutions and more than $700 million in annualized revenue run rate. Amazon Web Services won over Microsoft, Google, IBM, and Oracle by being the first to address its Cloud software solutions to independent developers. Indeed, many modern competitive battles have been won by attracting developers. But let's take a step back. Exactly who are these software developers? Traditionally, a software developer is seen as a code engineer, a person who's involved with the design, development, and testing of software code. The definition and skills of a software developer expanded significantly with the advent of the smartphone era since 2007. Mobile apps now need, not just to function well, they need to differentiate amongst millions of other apps. They need to live up to the high visual design standards. Developers now need to engage and retain the user past the first use of the app. Developers are, therefore, not just coders. They often need skills in business, user-interface design, marketing, and customer support. Developers need not have just advanced coding skills either. Software tools have improved massively over the last 10 years. There are now software development tools that do not require any knowledge of coding. For example, you can build a website code free with development tools from squarespace.com. You can build a code free app with appmachine.com, and you can program your thermostat to talk to your car and the weather forecaster via IFTTT.com, again, without using any code. Developers can work in any industry, from games, healthcare, to agriculture. You will find developers whenever software needs to be created or integrated within an organization. Developers build software for a very diverse spectrum of computing devices, for mobile apps, websites, desktop apps, and Cloud, meaning back-end services. Developers also program Internet of Things services such as a thermostat, a car, a navigation system, or a retail-people tracking service. Developers, in a sense, are the force behind the augmented and virtual reality experiences that are set to revolutionize computing over the next 10 years. Developers can be hobbyists, students, entrepreneurs, professionals, and managers. We'll examine the different types of developers later in the chapter. Let us now consider a different question. How important are developers? For many, developers are often seen as sitting at the bottom of an organization, as lacking decision-making power. In the traditional definition of information technology, decisions are taken at the very top of the organization, typically by the CIO, that is the Chief Information Officer, the CTO, that is a Chief Technology Officer, or the Vice President, i.e, VP of engineering. But that's mostly history. As we argue in the book, Developer Marketing: The Essential Guide, the nature of development has been permanently changed by the uptake of open-source and the advent of Cloud computing. Software developers today can readily find code and tools to evaluate, use, and learn, and they're increasingly influential in their companies' technology selection processes. The availability of open source code and free to trial software development kits has allowed developers to evaluate platforms and tools, and choose what to use without having to ask their manager or procurement team to sign off on a license for paid software. They're increasingly in control over the process by which software enters the organization. As complexity increases, the managers to which they once deferred, are now asking them to steer technology adoption decisions. Similarly, developers can now easily adopt to Cloud platform during the early phases of development and testing that can instantly license, provision, and use tools that previously would have required evaluation and sign off from their manager, a purchasing department or a system administrator sitting within the IT department. Delays and paperwork are avoided, and these developers can experiment and innovate, jumping ahead first into free trials, supported by dynamic communities that share goodwill in form of code examples, instructional videos, and expert discussion forums. Providing developers with the technical tools they need to be productive as they evaluate and prototype is key, along with the means to scale up the production further down the line. Now, how do these observations map to today's developers? Can we turn to data? Indeed, we can. From our SlashData data survey conducted in mid-2019 to see if it confirms the anecdotal evidence about developer influence on purchasing. Insights from the survey are based on the responses of over 20,000 developers from across more than 150 countries. The data shows that 68 percent of front-line developers were involved in software tooling decisions. Between 40 and 60 percent of developers said they were in a position to make recommendations or influence decisions. Separately, the research found that more than a third of developers acquired tools for their personal use. This means they have, at least, some decision-making power, at least, a small budget to spend, but the key is that they act as a wedge point that can introduce tools and demonstrate their value to others based on actual experience and results, acting as evangelists across their organization. The days are over when an inadequate tool could be pushed down from the CIO down the organization. Decisions are increasingly made at lower organizational levels because of the complexity and fast-changing nature of software, combined with a myriad of back-end corporate systems to which they need to integrate. Effectively, developers decide what software not to buy and generate the choices of software to buy. As a result, software companies have to win over developers first, even if developers don't make the final purchasing decision. In effect, developers are the new decision makers. In the next lesson, we'll attempt to understand a bit more about developers, their motivations, and the type of platforms they work on. See you soon.
