Internal development is a double edged sword. With internal development you gain greater control, but you’re limited by your own capabilities. With external development, you should have access to a broader range of expertise and theoretically save cost, but you lose some control. The pendulum on build vs. buy decisions swings in both directions. It seems that Dick’s believes that these systems are mission critical and that the greater advantage is to bring development in-house. While I respect Dick’s decision to move development in-house, I think more retailers are looking to outsource than build/expand an internal development capability.

This is interesting given the very small relative size of Dick’s versus Home Depot. Diverting a lot of resources in this direction as opposed to sourcing best in class tech may be risky. Absent in the news is anything about Dick’s investments in analytics to better inform how it runs its business through technology. If anything, retailers need to invest more here and have a strategy.

So Dick’s wants to get into the software development business? With plenty of third-party software vendors, which most would be happy to customize to their needs, I’m surprised Dick’s would want to spend the money and time it takes to develop their own solution. Retail is what they do best, and most might say, “Stick to what you do best.” The exception to this may be that they can’t find what they want (highly doubtful, but possible). If that’s the case, it might make sense to create their own software. And to recoup some of the effort and cost, they may want to license their solution to other retailers.

There are two schools of thought. After decades in this business, I belong to the school that says: unless you have devised the better mouse trap, and no commercially-available software comes close to supporting your need, buy it! There are many reasons for this. The next best thing to re-inventing the wheel at huge costs, which a single retailer cannot amortize over a customer base of 50, 100, or 200 other retailers, is to license the best available solutions, and modify them to suit your business, but I don’t recommend this either.

Having been a retailer, I REALLY like this idea. A little like private label development though, it’s not anywhere near as easy as it sounds. But to have the ability, let’s say, as a merchant, to talk to your developers and tell them what kind of reporting you thought you really needed and then to work with them on-site and then actually get it? That is SUCH a home run (opening day, sorry) for all involved.

Also, think of your insights team having the ability in-house to sort information and derive what they think is most relevant and apply it to the business they are intimately involved with — wow. When you consult or are a vendor to a brand, it’s like being a grandparent. But if you ARE the brand, you’re absolutely the parent. That metaphor really holds in this case.

In-house development is nothing new; Crate & Barrel did it for years, and Target had a huge development farm in India. I’ll defer to Mr. Gaffney’s good judgment.

Many online retailers see themselves as tech companies first and hence do much of their development in-house until they realize there are significant disadvantages to doing so. The argument that they get “just what the business wants” also means they are limited to the knowledge within that business. The fact that it is slower and unless he builds a huge empire will create a big backlog of projects and the projects delivered get out of date very quickly are just a few reasons why this is a flawed strategy.

It is a brave or foolish man that believes he knows better than everyone else. I thought most retailers had grown out of this some years ago. Technology moves too fast, especially in the dynamic world of retail.

Um, how do I say this nicely? I think it’s a very strange decision. I thought we were over the “do it yourself” era of software development.

It sounds like I’m in the minority on this one (and I don’t claim any expertise on software development), but it seems like a smart move on Dick’s part — provided that they can hire the right talent to execute the strategy in a cost-effective manner. After all, who knows more about the specific complexity of Dick’s business than the company itself? As the demands for system development get more complex (driven by real-time inventory management and omnichannel initiatives), Dick’s is at least trying to control its own destiny.

I agree with many of the sentiments here. Being a retailer is hard enough, but staying at the cutting edge of emerging technologies while trying to maintain the age-old inventory and POS solutions would require one hell of an internal team.

We’ve seen a few retailers (attempt to) do this before with customer marketing and loyalty applications with very mixed results.

In one case, an in-house dev group developed an application for a pilot program and it worked reasonably well but was largely absent a rich feature set. In another case, a similar size retailer earmarked $15 million for a new platform and after spending $9 million pulled the plug.

Whether Dick’s is successful depends on its IT leadership and ability to attract talented people to their team. Starting with a hurdle rate of 10x incremental revenue for the business case is reasonable but spending 10 percent of incremental sales on new technology seems high for retail. Let’s hope they got their incremental revenue right.

The challenge of doing it in house is that you are limited by the expertise available and you don’t get the scale of knowledge of requirements in the future that you haven’t thought of. Also third party vendors would be reluctant to share information with you.

I remember long time ago working at a retail software company and we were told not to show our software to certain retailers who are known to leverage vendor IP for in house development. You also create a proprietary platform that is difficult to maintain when the talent changes.

Building a best-in-class software development team is an expensive proposition and it is typically only feasible for very large retailers. While having an in-house software development team has some benefits – agility, control and focus – the disadvantages often outweigh these benefits. Internal development team don’t have the breadth of creative expertise as a lager IT organization that has the luxury of a team of specific focus areas with detailed expertise in a wide range of topics. Also, companies (software vendors and creative agencies) that work with multiple retailers can draw upon best practices of successful development designs and implementation approaches and apply them to your project.

Why would you forge nails when you can buy them at the hardware store.

There is no magic to writing and developing software for a business. Bringing it in-house for a company the size of Dick’s is a logical move and one that makes logical sense when empowering the company to better manage its inventory, logistics, and retail trackability. I applaud Dick’s and believe that there is no difficult move to their bringing software development in-house.