It’s not impossible, but it’s very hard and rarely successful. IT and Product Development are not the same. We must accept who we are and play to our strengths. IT is great at providing the right infrastructure and connectivity for employees, implementing COTS-based systems, providing employees with the right computing environment for them to do their jobs, and establishing a secured perimeter around the companies IT environment to protect their intellectual assets. This is critical to all companies and an important role.
Product development requires domain expertise, an ability to gain a deep understanding of the market, and ascertaining buyer/user problems and needs. At the same time translating all this into requirements that everyone can understand and engineering a software grade product that is unique in addressing the market's unmet needs. Yes, software developers are involved, but it takes much more wrapped around developing software to make Software Product Development successful. It takes an organization with a blend of domain and software development expertise, creative human factor design skills, while architecting complex software systems and ensuring it’s engineered to be easily configurable to meet the needs of each customer.
In addition, it also requires all these skills and people to operate harmoniously with agility, staying on track, with laser focus toward delivering the right product that meets the market, buyer and user's needs. This is much more than software development. This is what Software Product Development is all about.
It is the difference of these two worlds that make it very difficult to create innovative, product grade software solutions inside an IT organization. It’s also why, even software technology companies have two separate organizations, IT and Product Development or Engineering, depending what they call it. This is also why using outsourcing companies to augment the software development is not the answer either.
It is equally demanding to create new software products inside a service-based business opposed to a software product development company given the difference in mentality and focus in these two business models. But, if you don’t innovate, you die. And today most innovation comes through the use of software technology.
Some companies accept who and what they are, a service-based business, and focus on purchasing or licensing generic software, which is smart but you can’t be unique and innovative if you’re doing things the same as everyone else. If all your competitors can purchase or license the same software, well, it doesn’t transfuse the industry.
So what’s the answer? Some businesses have the capital to purchase a software product company that, at the core, has a solution close to meeting their needs, and if combined with their services, will transfuse unique value into their total offering. However, too many times, they attempt to integrate it in and disrupt the value expected.
There are a few unique companies that have a software product development formula which establishes a partnership thereby allowing for a service-based business to overcome the challenges I have outlined in this article. But a word of caution, avoid the tendency to treat it like staff augmentation, or control it like an IT organization. Doing so will kill any chance to get a unique software product that will differentiate your service offering and ultimately be a waste of valuable capital.