Looking Inside & Beyond Products

We live near the two traditional hubs of the high-tech industry in the United States. Steve lives in the San Francisco Bay area and Craig outside Boston's Route 128 corridor. Naturally our geographical locations influence our lifestyles. After a longer, colder winter than usual, Craig is hesitantly emerging outdoors like some balding, middle aged Punxsutawney Phil.

On the other hand, Steve is getting ready to hunker down for what Mark Twain allegedly called his "coldest winter" -- summer in San Francisco. It's a lucky thing that the Giants won the World Series last year. Still, our indoor shelter gives us time to reflect on many things, including home repair, our dismal NCAA basketball tournament brackets, and of course, the supply chain.

Seeking out shelter from our respective climates has made us introspective, and we decided to take a look inside the devices that populate the high-tech supply chain. We spend most of our time looking at the actual guts of the products, that is to say microprocessors, connectors, thin-film displays and the like. But what about the figurative guts of the machine -- the software and content that we interact with and consume? Is there such a thing as "supply chain" for software and content? Should high-tech manufacturers care?

This would be a fairly short post if the answer were not "Yes."

As hardware and devices become more commoditized, and manufacturers scramble to get more vertically integrated, the management of software and content is a growing part of high-tech firms' revenues and profits. The App Store at Apple Inc. (Nasdaq: AAPL) and the competing Amazon.com Inc. (Nasdaq: AMZN) Appstore are certainly two examples of content, but there is a broader picture.

Take, for example, the movie supply chain. As movies have entered the digital age, major studios have made significant investments in developing processes and tools for managing digital content across pre-production (design), filming (manufacturing), editing (engineering changes), branding and marketing (content management), distribution (logistics), DVD sales (aftermarket sales), and digital rights management (supply chain security and product data management) to name a few.

As high-tech companies move to integrate software and content offerings across products and platforms, their supply chains must evolve to manage content alongside devices. This is a sticky wicket on multiple fronts. The content domain, while imperative to future growth in high tech, is fragmented. Apple has succeeded in the content supply chain because it has effectively created a sealed environment.

As other high-tech firms look to create their own content supply chains, they must build by acquisition, combat entrenched players, and overcome many other challenges. Then there is the problem of knitting together a content supply chain. The majority of high-tech concerns simply do not possess the proper infrastructure to manage content and software supply chains. Supply chain processes and systems are focused on the lifecycle of hardware and have difficulty adapting to concepts like service-level agreements, entitlements, software updates, and the like.

Where does your supply chain stand on the path to figuring out how to manage the "inside"? Is the move to content and software a part of your corporate and supply chain strategies, or are you taking a different approach? We see a variety of approaches in the market today, though it is still too early to know which will rise to the top.

As for us, it’s time to gear up for daffodils in New England and the dampness of San Francisco.