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The rise of the application economy

Jessica Twentyman — April 2015

In an age where user experience is increasingly defined by innovative apps, every business must become a software business, argues CA Technologies’ CEO Mike Gregoire.

The relationship between businesses and their customers is increasingly defined by digital. Whether checking a bank balance, booking a flight or buying groceries online, customers have come to expect websites and apps that are robust, highly engaging and frequently upgraded to exploit the latest platforms. And that means businesses now live or die based on the quality and frequency of their application delivery capabilities.

It doesn’t matter which industry a business operates in or the core products and services it delivers to customers, says Mike Gregoire, CEO of IT management software company CA Technologies in our exclusive Big Thinker video: “In the new ‘application economy’ every business needs to be a software business.”
Close encounters

“This isn’t just about software companies building software for software’s sake. This is about companies trying to get close to their customers — and the way they do that is the most personal way possible, with their mobile device.”

After all, many everyday transactions are now performed over digital channels. As customers, we’ve become accustomed to interacting not with other humans, but with software. That’s why the ‘application economy’ is redefining the rules of business for all kinds of companies, says Gregoire.

For one, it’s forcing them to scale the in-house development skills they need. “Take a look at Bank of America, for example. They have more software developers than Microsoft,” he says.

It’s informing how they think about customer experience. “When you look at companies like Nike, for example, they are just as much a software company as they are a lifestyle company,” says Gregoire. “And, when they’re thinking about new products, they’re thinking just as much about applications as they are about the hard goods they manufacture.”Turbulent evolution

Above all, it’s prompting a rethink of tried-and-tested strategies for success. “[Executives at UK supermarket chain] Tesco spend as much time thinking about software as they do about location and where they should put stores. And, for a retailer, that’s a completely different way of looking at their business. With retail, it has always been location, location, location. When you look at a company like Tesco now it’s apps, apps, apps.”

Gregoire doesn’t underestimate the challenge that lies ahead for companies embracing this new way of thinking. “I don’t think this is going to be a gentle evolution,” he says. Much will depend on how CEOs and CIOs are able to redefine their relationship and how they approach IT investment decisions, he adds.

CEOs and other C-level executives can no longer wait for the annual budgeting process to outline the business’s future software needs. They are now regularly coming directly to their CIOs with demands for applications that need to be ready in days or weeks, not months or years as might have been traditional. Together, teams must focus on “driving the top line, not protecting the bottom line,” he says.

It’s a tall order — and some businesses will inevitably get left behind as the application economy turns yesterday’s conventional wisdom on its head. But, adds Gregoire, for businesses that embrace this fundamental shift “the rewards will be outstanding.”

First published
April 2015
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About: Mike Gregoire
A 27-year veteran of software and services, Mike Gregoire has been leading the resurgence of $4.3bn IT management giant CA Technologies since 2012. As competitive on a racing bike as in the tech arena, the Canadian was earlier CEO of SaaS talent management pioneer Taleo.

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