The Name of a Tech Company: Definition, Responsibility, and the Reality Behind the Halo

A Silicon Valley zip code does not grant any company the divine right to call itself a "tech company."

Take Uber's recent high-profile turmoil, for example. Last year,the European Court of Justiceruled that Uber is not the "information society service" it claims to be, downgrading it to a taxi company.

The Uber case raises a series of important questions:

• What constitutes a tech company?
• Who has the authority to make this determination?
• What are the criteria?
• Why are companies eager to rebrand themselves as tech companies?

Traditional brick-and-mortar retailers, established financial institutions, and national restaurant chains are all leveraging the 21st-century slogan: "Every company is a tech company."

Some argue that the title of "tech company" cannot be self-awarded.

Forrester Vice President and Principal Analyst Ted Schadler told CIO Dive that if a company builds technology for customers to use, it is a true tech company. If customers are buying a business service built on technology, then the provider is not a true tech company.

Schadler's definition narrows the field, but Microsoft, IBM, and HP can still legitimately maintain their tech company reputations. However, his definition also implies that companies like Facebook and Google may need to reassess their positioning.

The new shiny target

The "tech company" label carries a certain halo that brands want to associate with. These companies also generally recognize the role of technology in competing effectively, and every industry wants a piece of that.

The restaurant industry is using technology to better reach customers and store employees. Pizza delivery chains, in particular, are heavily investing in technology to stand out. In October, Pizza Hut announced a partnership with Toyota to create a robotic pizza-making rig in the bed of an SR5 pickup truck. Drones have also entered the pizza delivery space.

But Pizza Hut still has to catch up to Domino's, which already has multiple online ordering services, including ordering via PlayStation and Amazon Alexa.

"If they're not tech companies, then some of them are almost tech companies that sell sandwiches or pizza," Pei Wei CIO Chris Andrews told CIO Dive. Restaurant companies like Pizza Hut and Panera Bread have been consistently investing in technology, especially restaurant tech.

Retail is embracing data curation. Online subscription shopping services like Stitch Fix make data science thefoundation of their corporate culture. The service collects 90 measurement data points from user profiles to build more accurate shopping profiles. The entire business is built on shopping data curation.

Nike compares itself to a tech company that happens to sell sneakers. The New York-basedNike House of Innovation 000allows customers to reserve shoe sizes via smartphone. Customers can pick up shoes from designated lockers and check out through the Nike Plus app.

Retail is not the only sector eyeing the tech industry's turf. According to CIO Lori Beer, JPMorgan Chase invented a blockchain based on Ethereum with open-source code. The company has seen results and has engineers moving into its internal blockchain team.

Andrews said that if a company is in a vertical industry, "you feel that off-the-shelf solutions sometimes don't fit your business 100%." This means companies are relying on internal development and partnerships with the tech industry.

Walmart and Microsoft announced an expanded partnership in November, including bringing together engineers from both companies to develop business applications on Microsoft Azure.

The CIOs of these companies are aggressively advancing technology implementation and reliance, and for good reason. However, even with growing digital customer service, these companies are still categorized by their public-facing offerings: retail, banking, and of course, pizza delivered on nights when no one can agree on dinner.

The allure of the title

Non-tech companies like to call themselves tech companies because it signals innovation to customers, employees, investors, and partners.

When a CEO announces new technology investments on an earnings call, the stock price often rises, because it signals to investors that the company is spending money to improve the business.

However, Schadler said this signaling is sometimes "artificial," "because they have to spend the money anyway." By labeling extra spending or technology investments, companies can boost market perception. Of course, he added, companies must show returns on technology investments to justify the stock market's "reward."

Companies not only want to look like tech companies, but also want to operate like them, adopting agile methodologies, analytics, and DevOps. There is a general belief that digital product management has surpassed IT product management.

"You have to be realistic about who you are and how you use technology," Andrews said. Companies looking to leverage technology beyond their own industry need to be strategic and honest. "Are you doing technology for technology's sake, thinking you're special, or can you choose to buy rather than build?"

Securing the talent and investment needed to drive the digital agenda is challenging, but it is becoming a top priority.

A dangerous game

The tech industry is known for lighter regulation, and any conflicts a "tech company" encounters may be self-inflicted.

"When there are no rules for what you're doing, people blame you for every bad thing that happens, because you reserved the choice and implied to people that you have complete and total control," Stanford adjunct professor and former Facebook CSO Alex Stamos said at a Tanium conference in Washington in November.

Facebook is a Silicon Valley company that often walks a tightrope of ethical behavior. But as long as Facebook operates under the guise of a tech company, it has a regulatory safety net.

Schadler believes Facebook is actually a publisher and communications company.

If the public ultimately demands that Facebook position itself as a media company, the company would fall into a web of media regulations it has previously been able to avoid. Schadler said that since launching in 2004, the social network has "fooled the world" into thinking it's a tech company.

This is not to say that Facebook and Google have not entered the realm of true tech companies by Schadler's standards. Facebook launched Workplace by Facebook in October 2016, offering communication software services to businesses. Google Cloud is now the third-largest cloud service provider and is involved in genuine technology products.

Over time, the line between "tech company" and other identities can easily blur. Companies outside the traditional tech sector are embracing it and proudly wearing the title.

A universal definition of "tech company" is unlikely to emerge, but it may always be a title worth pursuing, even with the added responsibility and criticism.