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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 {complink 379|Apple Inc.} and the competing {complink 11480|Amazon.com Inc.} 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.

7 comments on “Looking Inside & Beyond Products

  1. SP
    March 31, 2011

    Well Bay area is undoubtedly the best place to live. The weather reamins awesome. I agree with many of your comments that companies who are dominant in one market wants to be the key shareholders in all that business matters in that industry. One way its and one way you ar e killing the competetion.

  2. Backorder
    March 31, 2011

    Many semiconductor companies especially those manufacturing General Purpose processors, DSPs, Multimedia processors, FPGAs et al have at various points in time tried to consolidate the software expertise and sources. Key software development teams or individuals have been absorbed to ensure the “Supply” remains reliable. Does this sound like supply chain strategy of the Soft kind?

  3. Craig Gottlieb
    March 31, 2011

    I think what we're getting at is that in addition to managing suppoly chain for the processors, high tech companies that are getting into the content and integrated solutions business also need to start managing the content that is being managed on those processors.  There is now a parallel content product life cycle that high tech companies will need to consider as they move their businesses beyond just “boxes.”  This may not necessarily be as significant an issue for suppliers, however your point regarding embedded software illustrates how this can reach down through the supply chain as well.

  4. mario8a
    April 5, 2011

    Hi

    I agree SFO it's a great place to live, but too expensive unless your perform in Pear 39 with some of your best skills.

    Talking about managing the software as a commodity Ive seen lately that companies such DELL have to emerge in that field also, they are good supplying hardware but now the techology trend is demanding more development in soiftware applications than they core bussines as the PC and Laptops.

    in a few years most of the companes will require their our software develeopment department, however I'm not sure if sourcing for software will be considered a commodity or if should managed by the develepment teams.

     

  5. Mr. Roques
    April 16, 2011

    The biggest issue, one Apple doesn't have to deal, is what you mentioned, having control of the content supply chain, specially when you have an open structure. 

    Apple deals very well with content delivery because I controls everything but what can Android do? Problems that have come up lately (Skype, for instance) are a clear indication that they haven't solved that problem yet. 

  6. mario8a
    April 18, 2011

    Hi

    A couple simple reason why APPLE & DELL are very succesful and no-one can have a better market price is mostly due their distribution channels and their long partnership with their main suppliers.

    Regards

  7. prabhakar_deosthali
    May 20, 2011

    As far as the content delivery and management is concerned the Mobile service companies have taken the lead. With Caller tunes, Music downloads, news update and what not, these service providers employ innovative marketing campaigns to sell their soft merchandise to the mobile owners connected to their networks.  The revenues earned from the content sale is much more than the basic voice call call t services. Their Content management and delivery procesess and their link to the content suppliers is the best example of how the soft product supply chain works.

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