Software_business_models_v2

Software_business_models_v2 - So#ware
Business
Model
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Unformatted text preview: So#ware
Business
Model
 Disrup3on
 MIS
446
 Products
 •  Separable
 –  Making,
buying,
consuming
largely
3me‐independent
 •  Homogeneous

 –  Many
standards
for
quality,
size,
etc
 •  Inventoried
 –  Cri3cality
of
supply
chain
issues
 •  Tangible
 –  If
I
give
you
mine,
I
have
1
less
 –  Engage
physical
senses
 Services
 •  Inseparability
 Many
services
are
produced
and
consumed
at
the
same
moment
and
are
thus
 inseparable
in
3me.

A
haircut
is
inseparable;
legal
research
is
not.
 Heterogeneity
 Because
services
derive
from
providers
working
outside
of
a
standardized
 industrial
structure,
they
can
vary
in
their
quality
and
predictability
and
so
are
 heterogeneous.

Service
quality
will
vary
across
hotels
in
a
given
chain,
but
also
 from
the
same
desk
clerk
on
different
days.
 Perishibility
 Following
Adam
Smith’s
logic,
the
trait
of
services
to
be
in
the
moment
and
not
 able
to
be
inventoried
makes
them
perishable.

Seats
on
trains
and
airplanes
count
 as
classic
examples
of
perishibility,
as
do
billable
hours
in
professional
services.
 Intangibility
 Finally,
the
most
commonly
cited
dis3nc3on
holds
that
services
cannot
be
touched
 or
held
in
the
ways
a
product
can;
this
makes
them
intangible.


 •  •  •  Rethinking
Services
 •  Inverted
Inseparability
 –  Because
the
consumer
and
producer
are
always
mutually
involved
in
crea3ng
 value,
the
goal
should
be
to
maximize
customer
involvement
in
value
co‐ crea3on.
 –  Rather
than
being
a
limita3on,
heterogeneity
can
be
understood
as
 customiza3on,
which
is
to
be
pursued
rather
than
avoided.
 –  Because
services
can
result
in
long‐las3ng
benefits
(heart
surgery
is
an
 example)
and
because
stock‐keeping
is
expensive,
enterprises
are
beVer
 served
by
reducing
inventory
and
increasing
service
flows.
 –  Brand
power
and
a
reputa3on
for
service
quality
are
classic
intangibles.

 These,
rather
than
material
inputs,
o#en
create
a
product’s
differen3a3on
and
 value.

Physical
tangibility,
meanwhile,
limits
distribu3on
flexibility.
 •  Inverted
Heterogeneity
 •  Inverted
Perishibility
 •  Inverted
Intangibility
 Commodi7es
 Products
 Hybrids
 Purchased
Services
 Public
 Ser‐ vices
 Government
 Standard
 Engin‐ eered
 Farmed
 salmon,
 GM
 seed
 corn
 Capital
 Inter‐ mediate
 Ball
 bearing,
 micro‐ processor,
 upholstery
 fabric,
 sheet
 metal,
 newsprint
 End‐user
 Standard ‐ized
 Jet
engine
 “power
 by
the
 hour,”
 office
 furniture
 lease‐ back,
fast
 food,
safe
 deposit
 box
 Custom‐ izable
 An3‐virus
 so#ware,
 iPod/ iTunes,
 home
 mortgage,
 chemo‐ therapy
 Standard‐ ized
 Delivered
 Car
wash,
 train
3cket,
 security
 guards,
 movie
 theater,
 electricity
 Custom
 Delivered
 Haircut,
 surgery,
 house
 pain3ng,
 furniture
 movers,
 site
survey
 Co‐ created
 Tennis
 lessons,
 corporat e
audit,
 ERP
 impleme nta3on
 Coal,
 apples,
 pork
 bellies
 Pizza
 oven,
 crane,
 city
bus,
 milling
 machine
 Sweater,
 motor‐ cycle,
 apple‐ sauce,
 television
 Road
building,
 meat
 inspec3on,
 drug
 approval,
 military,
 police,
public
 educa3on,
 driver
 licensing
 Open‐Source
Insights
I
 •  Enterprise
so#ware
behaves
more
like
a
 service
than
a
product
 •  Informa3on
goods
are
priced
on
use‐value
not
 input
cost
 •  Most
so#ware
writers
on
the
planet
write
 custom
applica3ons
 •  Digital
goods
are
not
fishing
grounds
 •  Risk
and
cost
both
maVer
 Open‐Source
Insights
II
 •  Reputa3on
is
a
currency
 –  See
eBay
 •  Free
speech
vs.
free
beer
confused
most
 people
 •  Peer
review
works
beVer
than
proprietary
 R&D
for
complex,
connected,
informa3on
 goods
 •  Open‐source
ecosystem
spins
out
lots
of
 money
 America’s
Most
Wanted?
 IBM
PC
circa
1984
 Industry
Landscape
1984
 •  •  •  •  •  Macintosh
 IBM
 Microso#
 Intel
 IBM
“clones”
 Microso#
Environment
1995
 •  Internet
ramping
up:
Win95
a
major
help
 •  Weak
IBM
 •  Weak
hardware
sector
 •  •  •  •  •  Netscape
browser
exploding
in
popularity
 Desktop
PCs
predominate
 Moore’s
law
clicking
along
nicely:
early
Pen3ums
 CRT
displays

 High
switching
costs
to
0S/2,
Mac,
WordPerfect,
etc.
 –  Apple
(no
SteveJ
1985‐96):
"What
would
I
do?
I'd
shut
it
down
 and
give
the
money
back
to
the
shareholders.”
–
Michael
Dell,
 1997
 –  Compaq,
Dell,
Gateway,
IBM
in
market
share
fight

 Why
Did
Microso#
Succeed?
 •  Con3nuous
improvement
 •  “Embrace
and
extend”

 –  Included
other
people’s
good
ideas
 •  Huge
market
 •  Developers:
Best
tools
and
programs
 •  Tight
integra3on:

 –  ops
and
apps
 –  office
suite
 What
Changed?
 •  Industry
consolida3on
 –  Oracle
buys
Siebel,
Peopleso#,
JD
Edwards,
BEA
 –  IBM
buys
Lotus,
Ra3onal,
Cognos,
Informix,
PWC
 consul3ng
 –  HP
buys
Verifone,
Compaq/DEC,
Opsware,
EDS
 •  Implica3ons:
 –  More
overlapping
compe3tors
 –  More
big
players
 What
changed?
 •  Broadband
penetra3on
 •  Wi‐fi
 •  Moore’s
law
outruns
basic
needs
 –  Intel
encounters
physical
limits
(heat
esp.)
 •  Open‐source
market
share
(incl.
Mozilla)
 grows
AND
 •  Closed
Apple
universe
leverages
design,
user
 experience
 What
changed?
 •  Google
 –  Search
vs.
directories,
file
systems
 –  Cloud
compu3ng
 •  Millions
of
servers
 –  Blurring
the
data/applica3on/network
boundary
 –  Ad‐funded
business
model
 •  Salesforce.com
 –  SAAS
 What
changed?
 •  New
ways
to
write
applica3ons:
 –  “Programmable
web”

 –  Scrip3ng,
open
APIs,
lightweight
integra3on
 •  Social
networking
 –  MySpace

Facebook
QQ,
Orkut,
Hi5
 •  Social
so#ware
 –  Blogs,
wikis,
tagging
 Microso#
Environment
2005
 From
 1.  Applica3ons
on
a
processor
 2.  People
pay
for
products
 3.  Moore’s
law
//
with
MSFT
 4.  Desktop
as
primary
locus
 5.  Wired
Internet
 6.  Complex
development
 tools
 7.  Pay
upfront
then
pay
for
 maintenance
 8.  More
features
 

 To
 1.  2.  3.  4.  5.  6.  7.  8.  Services
on
a
network
 Expecta3on
of
free
 Moore’s
law
outruns
MSFT
 Mixed,
mobile
compu3ng
 environments
 Mixed
network
access
 Lightweight
development
 Revolt
against
 maintenance
 More
secure,
more
flexible
 “2006
is
going
to
be
an
amazing
year
 for
shipping
products”‐
Ray
Ozzie
 Compe3tors:
Salesforce
 Compe3tors:
IBM
 Ozzie
Talking
Points
 •  “Our
end‐to‐end
execu3on
of
key
scenarios
has
 o#en
been
uneven”
 –  Xbox
division
writes
off
$1.15b
June
2007
 –  Zune
–
need
we
say
more?
 –  Yahoo!
acquisi3on
 •  “Some
groups
.
.
.
develop
features
without
a
 clear
understanding
of
how
they’ll
be
used”
 –  SPOT
 –  Vista
fails:
XP
outsells
its
replacement,
Win
7
moved
 up
 Ozzie
Talking
Points
II
 •  “Products
must
be
easily
understood
by
the
user
 upon
trial”
 •  “Complexity
kills.

It
.
.
.
introduces
security
 challenges
.
.
.”
 –  The
ribbon
in
Office
2007
 –  Windows
Live 

 –  “This
year
will
probably
go
down
in
history
as
the
year
 of
Microso#
Office
vulnerabili3es.
Never
before
have
 we
[Symantec]
seen
such
a
high
level
of
ac3vity
 around
the
discovery
and
exploita3on
of
 vulnerabili3es
in
the
Microso#
Office
applica3on
 suite.”
(9/28/06)

 Current
State:
June
2008
 •  •  Gates
was
also
out
of
touch
on
the
latest
chapter
of
the
internet,
so>ware
as
a
service.
In
this
respect,
Gates
has
more
in
 common
with
execu3ves
at
Oracle
and
SAP
who
are
responding
and
trying
to
protect
their
core
licensing
businesses
against
 the
threat
posed
by
online
services.
He
has
liVle
in
common
with
the
true
believers,
such
as
Salesforce.com’s
chief
execu3ve
 Marc
Benioff
who
are
challenging
the
established
order
and
the
facts
as
we
know
them.
 When
it
came
to
so#ware
delivered
as
a
service,
Microso#
‐
like
Oracle
and
SAP
‐
ini3ally
ignored
it.
Finally,
Gates
‐
with
his
 chief
so#ware
architect
heir
Ray
Ozzie
‐
concocted
a
hybrid
alterna3ve.
Something
that
combines
service
in
the
cloud
with
 processing
on
the
PC,
outside
the
browser
‐
markets
where
Microso#
is
strong.
That
vision?
So>ware
plus
service,
a
mantra
 only
Microso>
is
chan7ng.
 Open
source
and
online
services
are
real
problems
for
Microso#.
In
the
1990s
Microso>
built
a
massive
army
of
developers
 and
partners
around
exci3ng
new
products
that
revolu3onized
compu3ng.
Windows
did
away
with
niche
opera3ng
systems
 and
Office
set
a
standard
on
personal
produc3vity,
crea3ng
mass
markets
that
individuals
could
buy
in
to
and
build
for.
 Years
later,
Microso>
is
not
genera7ng
that
level
of
excitement
anymore.
Today’s
genera3on
of
developers
is
excited
about
 Google,
Amazon
and
Facebook.
Not
just
as
online
des3na3ons,
but
also
in
terms
of
the
raw
code
resources
and
support
they
 are
geyng.
That’s
where
Microso#
won
in
the
1990s
‐
giving
away
for
free
or
a
low
cost
the
tools
and
resources
that
helped
 developers
build
applica3ons
for
Windows
and
Office.
Now
Google,
Amazon
and
Facebook
are
doing
the
same.
 John
Lam,
hired
by
Microso#
to
lead
its
work
on
a
version
of
Ruby
for
.NET,
put
it
succinctly
when
he
told
a
recent
Silicon
 Valley
scrip3ng
conference
that
Microso>
has
lost
a
genera7on
of
developers.
They
have
not
just
gone
online.
Thanks
to
 debacles
like
Windows
Vista
they
have
also
gone
over
to
the
Mac
as
a
development
plazorm
under
an
invigorated
Apple.
 The
foot
dragging
and
self‐serving
poli3cs
that
delivered
a
vendor‐friendly
but
inflexible
WS‐
architecture
has
seen
 developers
adopt
alterna3ves
like
Representa3onal
State
Transfer
(REST).
 •  •  •  Source:
“Bill
Gates
has
gone,
what's
his
legacy?”
The
Register,
6/30/08
 Going
Forward
 MS
Strengths
 •  •  •  •  •  •  Cash
 Channel
 Developers
 Brand
 Brainpower
 Porzolio
 –  –  –  –  –  Desktop
 Mobile
 Enterprise
 Personal
 Web
 MS
Vulnerabili7es
 •  10
years
lag
on
open‐ source?
 •  Size:
93,000
as
of
6/09
 •  Desktop‐centrism/weak
 mobile
presence
 •  Search
(w/Yahoo!)
 •  Pricing
 –  Developing
markets
esp.
 •  Leadership
a#er
Bill
G.
 ...
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