There is something very exciting going on in the world of software: a shift towards developing new application software in-house (as opposed to relying on third party offerings). For instance, at USV we have developed the linksharing on usv.com and our new analyst application process. Why does that make sense now? Because writing small applications has become so easy that it is today’s equivalent of writing an Excel macro.

Chris Dixon has a good post yesterday where he describes some of the trends that have made this possible, including on demand infrastructure, lots of API based services, open source libraries and scripting languages. I would add to that a database layer that makes it easy to deal with semi-structured data, such as MongoDB (we are investors).

As a result the tradeoff has shifted from using a complete third party application to building it yourself for many projects. What you gain is fine grained control over design, functionality and integration with other systems you are using. What you pay is having code that you need to maintain. So if you are going that route there is a real premium on keeping your code short and super readable.

I am fully aware that we have gone through phases like this before. For instance in the early days of the PC that’s how I first earned money – writing in house software for the personnel department of the local Siemens branch in my hometown.

Still it feels like this time the in house approach will be here to stay and if anything be extended to non-programmers through services such as IFTTT. One of the key drawbacks of the in-house move during the PC days was the fragmentation of data. That is largely eliminated today as the data resides in the cloud in any case.

In addition to the cost and complexity of in-house development having come down massively there is another crucial reason for the shift (which also makes me believe it will be longer lasting): software plus data is increasingly the key competitive differentiator.

PS Back to my posts on the economy tomorrow