Grady H. Campbell, Jr.

May 18, 2000

Prosperity Prosperity Heights HeightsSoftwareSoftware

Emerging Software BusinessModels

Copyright © 2000, Prosperity Heights Software. All Rights Reserved.

IEEE NoVa

© 2000, PHS

Presentation Objective

Examine historic software business modeltrendsCharacterize emerging modelsPerspectives:

Role of standardization vs customizationTechnology vs markets as business drivers

Blurring of product-service distinction

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An inherent tension

Customization–

one of a kind

Standardization–

one size fits all

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Software business model

trends

one-size-fits-all one-of-a-kind

1950 - 1980 bundled custom

1980 - ? mass-market “industry” custom

2000+ application mass-customizationservice

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Comparison of model types

One-size-fits-all

Many customersStandardizedfunctionalityHigh investment riskMarket & competitiondrive change

One-of-a-kind

Few customersFunctionality tailoredto specific needsLow investment riskCustomer needs drivechange

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Emerging software businessmodels

For each:What is itExamples; who uses itBenefitsChallengesReferences

The Application ServicesBusiness Model

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Application services - definition

Software built for shared remote executionInternet/intranet-based accessMinimum physical disseminationPer-access or subscription pricingIntegration of services with product offering

Motivation: exploit efficiencies offered byemerging technology

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Application services - adopters

Oracle: thin-client network computers,hosted applications and databasesSun: Java™ servletsMicrosoft: “Next Generation WindowsServices”Hewlett-Packard: pay-per-use hostedapplicationsPortera Systems: business services

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Application services - benefits

(versus mass-market software)

ProducersEase of distribution and upgradeRenewable revenue streamLess need for platform diversity

CustomersIncremental cost, low investment (pay as you go)Reduced computing resources needed

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Application services - challenges

TechnicalAccessibility: Network/server delays, congestionReliability, security of serviceSupport for customization

EconomicCost of re-architecting existing productsAcceptability of new pricing schemesReduced value of existing desktop investment

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Application services - references

Greg Goth, “The Next Gold Rush: Application ServiceProviders Stake Their Claims in a Red-Hot Market” IEEESoftware 17 (2), March/April 2000, 96-99.

Websites:

The ASP Industry Consortium <aspindustry.org><www.aspnews.com>

<www.oracle.com/iplatform/index.html?ihost.html><www.portera.com>

The Mass-CustomizationBusiness Model

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Mass-customization - definition

Customized products for a coherent marketHybrid of mass-market & custom modelsCapability to build a family of similarproducts from analysis of market needsProducts differ for each customer and asneeds change

Motivation: Leverage similar developments

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Mass-customization - adopters

Thomson-CSF (trainers, air traffic control)Lockheed-Martin (satellite avionics, testequipment)Lucent (telephone switching)Rockwell (GPS receivers)Traditional manufacturers (e.g., Motorola)Apparel industry (e.g., Levi Strauss)

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Mass-customization - benefits

(versus custom software)

Competitive advantage in a marketCustomization at lower costProducts faster and/or with less effortMore consistent product quality

Capitalization of product line expertiseFor customers, better fit to needs soonerwith less effort for them

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Mass-customization - challenges

TechnicalCustomization mechanismsVersion management

EconomicCommitting to invest in software capability

Anticipating future market needsAligning businesses to markets (vs technology)More training focus on business competencies

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Mass-customization - references

B. Joseph Pine II, Mass Customization, Harvard BusinessSchool Press, 1993.

R. R. Macala, et al., "Managing Domain-Specific, Product-LineDevelopment", IEEE Software 13 (3) May 1996, pp.57-67.

I. Jacobson, et al, “Making the Reuse Business Work,” IEEEComputer 30 (10), Oct 1997, p. 36-42.

Websites:

Prosperity Heights Software: <www.domain-specific.com>

Software Engineering Institute: <www.sei.cmu.edu/plp>

European Software Institute <www.esi.es/Projects/reuse>

Gerber Scientific <www.mass-customization.com>

other references: <www.domain-specific.com> # DsE # References

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Mass-customization -

DsE methodology

Process adoption:Improve product linebusiness capabilitiesDomain engineering:Build a product familyand process/environmentApplication engineering:Build applicationproducts

DomainEngineering

Domain

ApplicationProduct

ApplicationEngineering

Product Uses

CustomerNeeds

Market andProject Needs

BusinessObjectives

Domain-specific Engineering™

ProcessAdoption

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Contact information

Prosperity Heights Software

www.domain-specific.com

GradyCampbell@domain-specific.com+ 1 703 573 3139