SlideShare uma empresa Scribd logo
1 de 31
Baixar para ler offline
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 1
Software Business Now and in the
Future –
Fundamentals, Trends and Opportunities
Jyrki Kontio, Ph.D.
jyrki.kontio@iki.fi
http://www.jyrkikontio.fi/
jyrki.kontio@rdware.com
http://www.rdware.com/
Copyright Jyrki Kontio, 2009
Information about the use and licensing of this material:
http://creativecommons.org/licenses/by-nc-nd/3.0/
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 2
Presenter Background
Principal Consultant and Founder of R & D-Ware Oy
Board member at
QPR Software Oyj
Webropol Oy
Finnish Software Entrepreneurs Association
Finnish Information Processing Association
Professor of Software Business, Helsinki University of Technology, 2002 – 07
 Adjunct professor of Software Engineering (1997-2000)
Nokia, 1986 – 2002
 Knowledge-based systems research and consulting at Research Center (1986-92)
 Manager of the software engineering research group at Research Center (1992-94)
 Quality manager at a business unit (1997-99)
 Senior manager at Nokia Networks: process management (1999-2000)
 Principal Scientist at Nokia Research Center, software capability (2001-02)
Other experience
 Senior researcher at University of Maryland in professor Basili’s research group (1994-96)
 Software development and management in software houses and corporations (1982-1986)
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 3
Outline
 Why is Software Business important?
 What are the critical challenges in Software
Business?
 How is Software Business different from other
businesses?
 What are current and future trends and what
do they mean?
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 4
Why is Software Business
important?
 Declining work
hours
 Aging population
 Price competition
in manufacturing
industries
•Substantial
improvements are
needed in all industries
 Software
•We need to find other
growth industries
 Software
Growth Forum
Jyrki Kontio
Board Member
Software Entrepreneurs’ Association
Finnish Information Processing Association FIPA
www.jyrkikontio.fi
Growth Forum
• A national, industry-driven initiative jointly with
academia, goverment organizations and small and
large software firms
• Objectives:
– Understand how important software is for the Finnish
economy
– Find out the biggest challenges for growth
– Propose concrete action to overcome these challenges
New Insights
• Industry has had continuous strong growth
• Over 2% of GNP
– Substantial addtional impact on the economy
• Willingness to grow is the most important factor
influencing the growth of a firm
• IT industry is very international already now
• Internationalization is the most important growth path
for practically all growth-driven firms
Challenges
Industry’s Internal Challenges
1. Sales and marketing (1)
2. Small company size (2)
3. Poor understanding of the market and the customer (3)
4. Difficulties in defining a growth strategy (4)
National Challenges
1. Lack of enteprenerial culture (5)
2. Small size of Venture Capital market (6)
3. Poor willingness to take risks (7)
4. Poor ability to take risks (8)
Global Challenges
1. Long distance to markets and innovation hubs (10)
2. Global competition in products and solutions (12)
Challenges
Industry internal challenges National challenges Global challenges
1. Shortcomings in sales and
marketing (1)
2. Small company size (2)
3. Poor knowledge of the market
and the customer (3)
4. Difficulties in creating the growth
strategy (4)
5. Insufficient partnership networks
(9)
6. Leadership challenges during
growth (11)
7. Managing the growth (13)
8. Increasing complexity of
management due to growth (14)
9. Poor compatence and skills
development (16)
1. Cultural anti-
entrepreneurial climate (5)
2. Small size of the capital
market (6)
3. Low willingness to take
risks (7)
4. Poor ability to take risks
(8)
5. Difficulties of measuring IT
benefits (15)
6. Young people are not
interested in the field (18)
1. Long distance from
the markets and
innovation centers
(10)
2. Global competition in
products and
solutions (12)
3. Competition of other
economic areas for
workforce and firms
(17)
4. Price competition
from offshore
competitors (19)
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 11
WHAT IS SOFTWARE BUSINESS?
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 12
What is Software?
Specifications
and design
documentation
Executable
code
Data and databases
Manuals
and guidelines
Source code
Customer
Delivery
Service€
Software exists because you plan to make money with it: the
business model is an essential “component” of software
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 13
Volendam Manifesto on Software
Business – Expert Panel
Professor Sjaak Brinkkemper, Utrecht University
Professor of product software, meeting organizer
Professor Anthony Finkelstein, University College London:
A leading software engineering scholar in Europe, ICSE-04 general chair
Professor Alan Hevner, National Science Foundation and U of South Florida:
Program coordinator at NSF, published a highly cited paper ” Design Science
Research in Information Systems” in MISQ
Professor Jyrki Kontio, Helsinki University of Technology
Professor of Software Product Business, Head of the Software Business Laboratory
Professor Alan MacCormack, Harvard Business School:
A leading U.S. scholar in software business and software architecting from business
perspective
Professor Tony Wasserman, Carnegie Mellon West University:
Experienced software entrepreneur, founder and president of IDE (Software through
Pictures, reached Top 500 Inc. list)
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 14
Definitions
 Software Ecosystem is a specific perspective to a subset of an economy
where software constitutes a substantial part of the transactions between
agents on the marketplace.
 Software Business refers to transactions between agents, trading software-
based assets.
 Agents are organizations or individuals;
 Assets include financial assets, buildings, other resources, capabilities, and, of
course, software
 Transactions include monetary transactions, transfer of goods, provision of
services, and, of course, delivery and deployment of software
 Software Business Research Field studies how these assets are created
to create value, how agents interact and what kind of transactions take place,
and how technologies are used to support this business.
 We study issues related to bringing software assets to the market.
Specifically, we study how these assets are developed to create value, how
agents interact, and what kind of transactions take place, and how
technologies are used to support this business.
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 17
Characteristics of Software
 Complexity
 Conformity
 Changeability
 Invisibility
 Configurability
 Digital good
 Human development
process
 Technological change rate
 Extreme integration
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 18
Brooks:
No Silver Bullet
Complexity
Each unit is unique and interacts with
many other units
Abstraction (easily) hides complexity
Yet complexity is an essential feature
of software
Conformity
There are no natural laws governing
software
Human judgment has determined
many of the “constants” in software
– many of them are not compatible
Software must conform to other
disciplines
Changeability
Software is tied to other “systems” that
evolve:
– user needs
– organization
– laws, society
– hardware platforms
– other software systems
Change is a given environmental factor
Invisibility
Can’t touch, feel, or smell
Models (abstractions) are always partial
and multidimensional
It is difficult to understand what
software is
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 19
Other Technical
Characteristics of Software
Configurability
 Software can be configured near or
at runtime into different
configurations
 Mass customization at point of sale
possible
Digital good
 Software is entirely digital
 Can be copied error-free
 Can be digitally transmitted
Human development process
 Software engineering is people
dependent:
–Human creativity
–Subjectivity of specification and design
–Dependence on teamwork
Technological change rate
 No other technology evolves so
rapidly
– ”Programming languages change in less than
10 years”
– ”Application platforms change every 5 years”
– ”Development paradigms change every 10
years”
– ”Development environments are updated
annually”
Extreme Integration
 Software is technically linked to
many other systems
 Software is closely tied to
processes of an organization
 Software creates many social
interactions and dependencies
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 20
Characteristics of Software
• Complexity
• Conformity
• Changeability
• Invisibility
• Configurability
• Digital good
• Human development process
• Technological change rate
• Extreme integration
Implications to Business
• Easily deployed
• Economies of scale
• Economies of scope
• Instant scalability
• Difficulty of engineering
• Experience good
• Lock-in
• Network effects
From Technical to Business
Characteristics
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 21
Software is Easily Deployed
 Software can be taken to use easily, regardless of time and
place
 Downloaded on demand
 Automatic installers
 No storage costs
 Instant and low cost access in many situations
 Advances in usability have made instant use common
 Network access required
 Examples:
 Software upgrades, e.g., anti-virus software
 Mobile phone game downloads
 Time-based capacity in a network
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 22
Software has
Economies of Scale
 Definition:
 Economies of scale exist when the cost of production/manufacturing
decreases when large numbers of the good are produced
 Once developed, software has tremendous economies of
scale
 Integration and training costs reduce immediate economies of
scale
 Standardizing (”productizing”) services and integration will improve
economies of scale
 Examples:
 Microsoft products, any packaged, high volume software
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 23
Software has
Economies of Scope
 Definition:
 “Fewer inputs, such as effort and time, are needed to produce a greater
variety of outputs.
 Greater business value is achieved by jointly producing different
outputs. Producing each output independently fails to leverage
commonalities that affect costs.” (www.sei.cmu.edu/productlines/glossary.html)
 Good architecting and business planning increase potential for
economies of scope
 Examples:
 IT companies offering products for the telecom sector
 Google offering its generic search engine also for company intranets
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 24
Software has Instant Business
Scalability
 Software has nearly instant business scalability: possibility
to deliver large quantities with relatively small change in the
use of resources
 In practice, scalability is limited through:
 Human sales efforts
 Logistics (traditional delivery)
 Invoicing
 Support requests
 Examples:
 Internet allows easy and fast distribution
 Netscape invested in high-volume business applications early
 Amazon.com built up scalability early
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 25
Difficulty (and cost) of
Engineering
 Development of the first version of software is
costly and time-consuming
 Business case for software is largely
dependant on the volume of use
 It is really, really hard to estimate and deliver
cost, schedule and functionality accurately
 Examples:
Software customization
New release development
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 26
Software is an
Experience Good
 Experience good: product characteristics are difficult
to observe in advance, but these characteristics can
be ascertained upon consumption or use
 Any description or metric about software is bound to
be an abstract summary of software
 Examples:
 SAP
 Network management software
 iTunes software
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 27
Software has
Strong Lock-in Effects
 Definition:
 Initial sales or ownership of products create an investment for the
customer that makes him reluctant to change products or vendors
 Software lock-in occurs, e.g., through
 Customization of software
 Integration of software with other systems
 Learning curve costs
 Customer specific knowledge in services
 Examples:
 Mobile phone
 SAP
 Microsoft Windows operating system
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 28
Software has Strong Network
Externalities
 Definition:
 “effects on a user of a product or service of others using the
same or compatible products or services” (http://www.answers.com/)
 “a cost or benefit that arises from production and falls on
someone else than the producer” (Bowman & Ambrosini, 2000)
 Examples
 Positive network externalities:
– Consulting service available
– Fax machine, MS-Office
– GSM standard
– Facebook
 Negative network externalities:
– Other users on a shared Internet connection
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 29
Trends affecting Software
Business
 Softwarization – “ohjelmistoituminen”
 Services and functionality in traditional products are offered through software
 Servicization – “palvelullistuminen”
 Software functionality is increasingly offered as a “service”
 Hybridization – ”hybridisoituminen”
 Functionality, services and content together create value to users
 Productization – ”tuotteistuminen”
 Both software and services are being ”productized” for efficiency and profitability
 Componentization – ”komponentoituminen”
 Components are increasingly used as building blocks of systems
 Communization – ”yhteisöllistyminen”
 User communities are involved in the development of software
 Commoditization – “tavallistuminen”
 Hardware and basic software functionality are becoming standard and available (cheap or free)
 Internetization – ”internetistyminen”
 Internet is the platform – and it’s mobile
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 30
Example of an Industry Change
Sales and
distribution
Application
software
Operating
system
Computer
Chips
IBM Digital Sperry Wang
Vertical Software Industry
Structure -- ca. 1980’s
Sales and
distribution
Application
software
Operating
system
Computer
Chips
Retail
stores
Superstores Dealers Mail
order
Word Word
Perfect
Etc.
DOS and Windows OS/2 Mac Unix
Compaq Dell Packard
Bell
HP IBM
Intel architecture Motorola RISCs
ym.
Horizontal industry structure
ca. 1995
Andy Grove, 1996
The Converging
Communications Network
Industry Structure… TBD
코어 네트워크
전화 모바일
데이터
통신
인터넷 라우터&서버
HW & SW
단말 마켓
인터넷 서버
PC 게임기기 휴대전화
SW 제품 SaaS
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 31
Trends have Compound
Effects
?
Softwari-
zation
Servici-
zation
Hybridi-
zation
Producti-
zation
Compo-
nenti-
zation
Commun-
ization
Commo-
ditization
Interneti-
zation
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 32
Implications of Trends
Softwarization
• Expanding markets and opportunities
• New domains
Servicization
• Easier buying decision, easier use, harder dev’t
• Lower prices, more customers
Hybridization
• Synergies between products, services and contents
Productization
• Ability to identify the common needs of many
• More competition, more potential
Componentization
• Your software is build from existing components
• Your software will be a component
Communization
• Customers are closer and have more power
• Network effects have major potential
Commoditization
• Your software will become obsolete – unless you
differentiate
Internetization
• Accesssibility and distribution revolution
• Online depedence
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 33
Conclusions
 Software drives the economy
 Most critical issues determining the success of
a software firm are non-technical
 Software business has unique chracteristics –
master them
 A substantial change is taking place – risks
and opportunities are plentiful
© Jyrki Kontio, R & D-Ware Oy 27/11/2009 34
Thank you
QUESTIONS?
Further info:
http://www.rdware.com
Download a copy of these slides:
http://www.jyrkikontio.fi/material.php

Mais conteúdo relacionado

Mais procurados

A Look at Risks in IT Projects: A Case Study during the Merger Period in the ...
A Look at Risks in IT Projects: A Case Study during the Merger Period in the ...A Look at Risks in IT Projects: A Case Study during the Merger Period in the ...
A Look at Risks in IT Projects: A Case Study during the Merger Period in the ...Marcirio Chaves
 
Beyond Free/Open Source Software
Beyond Free/Open Source SoftwareBeyond Free/Open Source Software
Beyond Free/Open Source SoftwareMarco Fioretti
 
Inter firm relationships and safe nests
Inter firm relationships and safe nestsInter firm relationships and safe nests
Inter firm relationships and safe nestsAlberto Minin
 
Some Internet Topics: Horizontals, the IETF, and IPv6
Some Internet Topics: Horizontals, the IETF, and IPv6Some Internet Topics: Horizontals, the IETF, and IPv6
Some Internet Topics: Horizontals, the IETF, and IPv6Internet Society
 
Incorporation of GlobalIssue factors in SDLC by using Inverse Requirement
Incorporation of GlobalIssue factors in SDLC by using Inverse RequirementIncorporation of GlobalIssue factors in SDLC by using Inverse Requirement
Incorporation of GlobalIssue factors in SDLC by using Inverse Requirementiosrjce
 
Online Collaboration Tools 8.10.2013
Online Collaboration Tools 8.10.2013Online Collaboration Tools 8.10.2013
Online Collaboration Tools 8.10.2013Tero Peltola
 
Resume FMB slideshow
Resume FMB slideshowResume FMB slideshow
Resume FMB slideshowFred Blodgett
 

Mais procurados (12)

A Look at Risks in IT Projects: A Case Study during the Merger Period in the ...
A Look at Risks in IT Projects: A Case Study during the Merger Period in the ...A Look at Risks in IT Projects: A Case Study during the Merger Period in the ...
A Look at Risks in IT Projects: A Case Study during the Merger Period in the ...
 
Beyond Free/Open Source Software
Beyond Free/Open Source SoftwareBeyond Free/Open Source Software
Beyond Free/Open Source Software
 
Lecture 1 se
Lecture 1 seLecture 1 se
Lecture 1 se
 
2011/09/13 - Introduction
2011/09/13 - Introduction2011/09/13 - Introduction
2011/09/13 - Introduction
 
Chinese Software Industry
Chinese Software IndustryChinese Software Industry
Chinese Software Industry
 
Inter firm relationships and safe nests
Inter firm relationships and safe nestsInter firm relationships and safe nests
Inter firm relationships and safe nests
 
Some Internet Topics: Horizontals, the IETF, and IPv6
Some Internet Topics: Horizontals, the IETF, and IPv6Some Internet Topics: Horizontals, the IETF, and IPv6
Some Internet Topics: Horizontals, the IETF, and IPv6
 
04 privacy
04 privacy04 privacy
04 privacy
 
Intel case study
Intel case studyIntel case study
Intel case study
 
Incorporation of GlobalIssue factors in SDLC by using Inverse Requirement
Incorporation of GlobalIssue factors in SDLC by using Inverse RequirementIncorporation of GlobalIssue factors in SDLC by using Inverse Requirement
Incorporation of GlobalIssue factors in SDLC by using Inverse Requirement
 
Online Collaboration Tools 8.10.2013
Online Collaboration Tools 8.10.2013Online Collaboration Tools 8.10.2013
Online Collaboration Tools 8.10.2013
 
Resume FMB slideshow
Resume FMB slideshowResume FMB slideshow
Resume FMB slideshow
 

Destaque

Every business a software business
Every business a software businessEvery business a software business
Every business a software businessallan kelly
 
InduSoft Consulting Services Webinar
InduSoft Consulting Services WebinarInduSoft Consulting Services Webinar
InduSoft Consulting Services WebinarAVEVA
 
Stephen Allott Business of Software Conference Europe 2015 Scaling Software C...
Stephen Allott Business of Software Conference Europe 2015 Scaling Software C...Stephen Allott Business of Software Conference Europe 2015 Scaling Software C...
Stephen Allott Business of Software Conference Europe 2015 Scaling Software C...Business of Software Conference
 
Gofusion India
Gofusion  India Gofusion  India
Gofusion India gofusion
 
Rob Castaneda, Some Things Great Software Companies Do That You Don't Have To...
Rob Castaneda, Some Things Great Software Companies Do That You Don't Have To...Rob Castaneda, Some Things Great Software Companies Do That You Don't Have To...
Rob Castaneda, Some Things Great Software Companies Do That You Don't Have To...Business of Software Conference
 
Software Architecture - Business software taxonomies
Software Architecture - Business software taxonomiesSoftware Architecture - Business software taxonomies
Software Architecture - Business software taxonomiesJose Emilio Labra Gayo
 
Software Architecture Reconstruction: Why What and How
Software Architecture Reconstruction:  Why What and HowSoftware Architecture Reconstruction:  Why What and How
Software Architecture Reconstruction: Why What and HowMehdi Mirakhorli
 
Freemium: New Software Business Model
Freemium: New Software Business ModelFreemium: New Software Business Model
Freemium: New Software Business ModelNilofer Merchant
 
The Business of Software, Distribution, and System Integration
The Business of Software, Distribution, and System IntegrationThe Business of Software, Distribution, and System Integration
The Business of Software, Distribution, and System IntegrationISA Marketing & Sales Summit
 

Destaque (9)

Every business a software business
Every business a software businessEvery business a software business
Every business a software business
 
InduSoft Consulting Services Webinar
InduSoft Consulting Services WebinarInduSoft Consulting Services Webinar
InduSoft Consulting Services Webinar
 
Stephen Allott Business of Software Conference Europe 2015 Scaling Software C...
Stephen Allott Business of Software Conference Europe 2015 Scaling Software C...Stephen Allott Business of Software Conference Europe 2015 Scaling Software C...
Stephen Allott Business of Software Conference Europe 2015 Scaling Software C...
 
Gofusion India
Gofusion  India Gofusion  India
Gofusion India
 
Rob Castaneda, Some Things Great Software Companies Do That You Don't Have To...
Rob Castaneda, Some Things Great Software Companies Do That You Don't Have To...Rob Castaneda, Some Things Great Software Companies Do That You Don't Have To...
Rob Castaneda, Some Things Great Software Companies Do That You Don't Have To...
 
Software Architecture - Business software taxonomies
Software Architecture - Business software taxonomiesSoftware Architecture - Business software taxonomies
Software Architecture - Business software taxonomies
 
Software Architecture Reconstruction: Why What and How
Software Architecture Reconstruction:  Why What and HowSoftware Architecture Reconstruction:  Why What and How
Software Architecture Reconstruction: Why What and How
 
Freemium: New Software Business Model
Freemium: New Software Business ModelFreemium: New Software Business Model
Freemium: New Software Business Model
 
The Business of Software, Distribution, and System Integration
The Business of Software, Distribution, and System IntegrationThe Business of Software, Distribution, and System Integration
The Business of Software, Distribution, and System Integration
 

Semelhante a Future of Software Business

OSS - enterprise adoption strategy and governance
OSS -  enterprise adoption strategy and governanceOSS -  enterprise adoption strategy and governance
OSS - enterprise adoption strategy and governancePrabir Kr Sarkar
 
The Principles Of Software Engineering
The Principles Of Software EngineeringThe Principles Of Software Engineering
The Principles Of Software EngineeringDana Boo
 
Why open source is good for your economy
Why open source is good for your economyWhy open source is good for your economy
Why open source is good for your economyDirk Riehle
 
Open Source and its role in a new IT ecosystem
Open Source and its role in a new IT ecosystemOpen Source and its role in a new IT ecosystem
Open Source and its role in a new IT ecosystemBruno von Rotz
 
Cultivating Sustainable Software For Research
Cultivating Sustainable Software For ResearchCultivating Sustainable Software For Research
Cultivating Sustainable Software For ResearchNeil Chue Hong
 
Tracking the Solutions Powering the Next Generation of Embedded Systems in Q4...
Tracking the Solutions Powering the Next Generation of Embedded Systems in Q4...Tracking the Solutions Powering the Next Generation of Embedded Systems in Q4...
Tracking the Solutions Powering the Next Generation of Embedded Systems in Q4...VDC Research Group
 
System Software Integration, Witekio
System Software Integration, WitekioSystem Software Integration, Witekio
System Software Integration, WitekioWitekio
 
Impact of Software Development Outcoursing on Growth of the IC Sector in Deve...
Impact of Software Development Outcoursing on Growth of the IC Sector in Deve...Impact of Software Development Outcoursing on Growth of the IC Sector in Deve...
Impact of Software Development Outcoursing on Growth of the IC Sector in Deve...AnthonyOtuonye
 
A_Statistical_Study_and_Analysis_to_Identify_the_Importance_of_Open-source_So...
A_Statistical_Study_and_Analysis_to_Identify_the_Importance_of_Open-source_So...A_Statistical_Study_and_Analysis_to_Identify_the_Importance_of_Open-source_So...
A_Statistical_Study_and_Analysis_to_Identify_the_Importance_of_Open-source_So...hani727151
 
Experiences with enterprise architecture using togaf and ibm rational system ...
Experiences with enterprise architecture using togaf and ibm rational system ...Experiences with enterprise architecture using togaf and ibm rational system ...
Experiences with enterprise architecture using togaf and ibm rational system ...james_dzidek
 
TEKES signaalisession alustus
TEKES signaalisession alustusTEKES signaalisession alustus
TEKES signaalisession alustusSofokus
 
Software Engineering chapter_1_5.ppt
Software Engineering chapter_1_5.pptSoftware Engineering chapter_1_5.ppt
Software Engineering chapter_1_5.pptHammad Ahmad
 
F-Secure Cloud Software icgse2013
F-Secure Cloud Software icgse2013F-Secure Cloud Software icgse2013
F-Secure Cloud Software icgse2013Janne Järvinen
 
An Introduction To Software Engineering
An Introduction To Software EngineeringAn Introduction To Software Engineering
An Introduction To Software Engineeringsritikumar
 
Software development for the diversification of Nigeria Ecomony
Software development for the diversification of Nigeria EcomonySoftware development for the diversification of Nigeria Ecomony
Software development for the diversification of Nigeria EcomonyPatrick Ogbuitepu
 
Economic value of open source
Economic value of open sourceEconomic value of open source
Economic value of open sourceCarlo Daffara
 
software engineering documents.pptx
software engineering documents.pptxsoftware engineering documents.pptx
software engineering documents.pptxMakinde Akindeji
 
Developing a National Software Strategy: Some IP Considerations
Developing a National Software Strategy: Some IP ConsiderationsDeveloping a National Software Strategy: Some IP Considerations
Developing a National Software Strategy: Some IP Considerationsipspat
 

Semelhante a Future of Software Business (20)

OSS - enterprise adoption strategy and governance
OSS -  enterprise adoption strategy and governanceOSS -  enterprise adoption strategy and governance
OSS - enterprise adoption strategy and governance
 
The Principles Of Software Engineering
The Principles Of Software EngineeringThe Principles Of Software Engineering
The Principles Of Software Engineering
 
Why open source is good for your economy
Why open source is good for your economyWhy open source is good for your economy
Why open source is good for your economy
 
Open Source and its role in a new IT ecosystem
Open Source and its role in a new IT ecosystemOpen Source and its role in a new IT ecosystem
Open Source and its role in a new IT ecosystem
 
Cultivating Sustainable Software For Research
Cultivating Sustainable Software For ResearchCultivating Sustainable Software For Research
Cultivating Sustainable Software For Research
 
Tracking the Solutions Powering the Next Generation of Embedded Systems in Q4...
Tracking the Solutions Powering the Next Generation of Embedded Systems in Q4...Tracking the Solutions Powering the Next Generation of Embedded Systems in Q4...
Tracking the Solutions Powering the Next Generation of Embedded Systems in Q4...
 
System Software Integration, Witekio
System Software Integration, WitekioSystem Software Integration, Witekio
System Software Integration, Witekio
 
Impact of Software Development Outcoursing on Growth of the IC Sector in Deve...
Impact of Software Development Outcoursing on Growth of the IC Sector in Deve...Impact of Software Development Outcoursing on Growth of the IC Sector in Deve...
Impact of Software Development Outcoursing on Growth of the IC Sector in Deve...
 
A_Statistical_Study_and_Analysis_to_Identify_the_Importance_of_Open-source_So...
A_Statistical_Study_and_Analysis_to_Identify_the_Importance_of_Open-source_So...A_Statistical_Study_and_Analysis_to_Identify_the_Importance_of_Open-source_So...
A_Statistical_Study_and_Analysis_to_Identify_the_Importance_of_Open-source_So...
 
Businessonopen2012
Businessonopen2012Businessonopen2012
Businessonopen2012
 
Experiences with enterprise architecture using togaf and ibm rational system ...
Experiences with enterprise architecture using togaf and ibm rational system ...Experiences with enterprise architecture using togaf and ibm rational system ...
Experiences with enterprise architecture using togaf and ibm rational system ...
 
TEKES signaalisession alustus
TEKES signaalisession alustusTEKES signaalisession alustus
TEKES signaalisession alustus
 
chapter_1_5.ppt
chapter_1_5.pptchapter_1_5.ppt
chapter_1_5.ppt
 
Software Engineering chapter_1_5.ppt
Software Engineering chapter_1_5.pptSoftware Engineering chapter_1_5.ppt
Software Engineering chapter_1_5.ppt
 
F-Secure Cloud Software icgse2013
F-Secure Cloud Software icgse2013F-Secure Cloud Software icgse2013
F-Secure Cloud Software icgse2013
 
An Introduction To Software Engineering
An Introduction To Software EngineeringAn Introduction To Software Engineering
An Introduction To Software Engineering
 
Software development for the diversification of Nigeria Ecomony
Software development for the diversification of Nigeria EcomonySoftware development for the diversification of Nigeria Ecomony
Software development for the diversification of Nigeria Ecomony
 
Economic value of open source
Economic value of open sourceEconomic value of open source
Economic value of open source
 
software engineering documents.pptx
software engineering documents.pptxsoftware engineering documents.pptx
software engineering documents.pptx
 
Developing a National Software Strategy: Some IP Considerations
Developing a National Software Strategy: Some IP ConsiderationsDeveloping a National Software Strategy: Some IP Considerations
Developing a National Software Strategy: Some IP Considerations
 

Future of Software Business

  • 1. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 1 Software Business Now and in the Future – Fundamentals, Trends and Opportunities Jyrki Kontio, Ph.D. jyrki.kontio@iki.fi http://www.jyrkikontio.fi/ jyrki.kontio@rdware.com http://www.rdware.com/ Copyright Jyrki Kontio, 2009 Information about the use and licensing of this material: http://creativecommons.org/licenses/by-nc-nd/3.0/
  • 2. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 2 Presenter Background Principal Consultant and Founder of R & D-Ware Oy Board member at QPR Software Oyj Webropol Oy Finnish Software Entrepreneurs Association Finnish Information Processing Association Professor of Software Business, Helsinki University of Technology, 2002 – 07  Adjunct professor of Software Engineering (1997-2000) Nokia, 1986 – 2002  Knowledge-based systems research and consulting at Research Center (1986-92)  Manager of the software engineering research group at Research Center (1992-94)  Quality manager at a business unit (1997-99)  Senior manager at Nokia Networks: process management (1999-2000)  Principal Scientist at Nokia Research Center, software capability (2001-02) Other experience  Senior researcher at University of Maryland in professor Basili’s research group (1994-96)  Software development and management in software houses and corporations (1982-1986)
  • 3. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 3 Outline  Why is Software Business important?  What are the critical challenges in Software Business?  How is Software Business different from other businesses?  What are current and future trends and what do they mean?
  • 4. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 4 Why is Software Business important?  Declining work hours  Aging population  Price competition in manufacturing industries •Substantial improvements are needed in all industries  Software •We need to find other growth industries  Software
  • 5. Growth Forum Jyrki Kontio Board Member Software Entrepreneurs’ Association Finnish Information Processing Association FIPA www.jyrkikontio.fi
  • 6. Growth Forum • A national, industry-driven initiative jointly with academia, goverment organizations and small and large software firms • Objectives: – Understand how important software is for the Finnish economy – Find out the biggest challenges for growth – Propose concrete action to overcome these challenges
  • 7. New Insights • Industry has had continuous strong growth • Over 2% of GNP – Substantial addtional impact on the economy • Willingness to grow is the most important factor influencing the growth of a firm • IT industry is very international already now • Internationalization is the most important growth path for practically all growth-driven firms
  • 8. Challenges Industry’s Internal Challenges 1. Sales and marketing (1) 2. Small company size (2) 3. Poor understanding of the market and the customer (3) 4. Difficulties in defining a growth strategy (4) National Challenges 1. Lack of enteprenerial culture (5) 2. Small size of Venture Capital market (6) 3. Poor willingness to take risks (7) 4. Poor ability to take risks (8) Global Challenges 1. Long distance to markets and innovation hubs (10) 2. Global competition in products and solutions (12)
  • 9. Challenges Industry internal challenges National challenges Global challenges 1. Shortcomings in sales and marketing (1) 2. Small company size (2) 3. Poor knowledge of the market and the customer (3) 4. Difficulties in creating the growth strategy (4) 5. Insufficient partnership networks (9) 6. Leadership challenges during growth (11) 7. Managing the growth (13) 8. Increasing complexity of management due to growth (14) 9. Poor compatence and skills development (16) 1. Cultural anti- entrepreneurial climate (5) 2. Small size of the capital market (6) 3. Low willingness to take risks (7) 4. Poor ability to take risks (8) 5. Difficulties of measuring IT benefits (15) 6. Young people are not interested in the field (18) 1. Long distance from the markets and innovation centers (10) 2. Global competition in products and solutions (12) 3. Competition of other economic areas for workforce and firms (17) 4. Price competition from offshore competitors (19)
  • 10. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 11 WHAT IS SOFTWARE BUSINESS?
  • 11. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 12 What is Software? Specifications and design documentation Executable code Data and databases Manuals and guidelines Source code Customer Delivery Service€ Software exists because you plan to make money with it: the business model is an essential “component” of software
  • 12. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 13 Volendam Manifesto on Software Business – Expert Panel Professor Sjaak Brinkkemper, Utrecht University Professor of product software, meeting organizer Professor Anthony Finkelstein, University College London: A leading software engineering scholar in Europe, ICSE-04 general chair Professor Alan Hevner, National Science Foundation and U of South Florida: Program coordinator at NSF, published a highly cited paper ” Design Science Research in Information Systems” in MISQ Professor Jyrki Kontio, Helsinki University of Technology Professor of Software Product Business, Head of the Software Business Laboratory Professor Alan MacCormack, Harvard Business School: A leading U.S. scholar in software business and software architecting from business perspective Professor Tony Wasserman, Carnegie Mellon West University: Experienced software entrepreneur, founder and president of IDE (Software through Pictures, reached Top 500 Inc. list)
  • 13. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 14 Definitions  Software Ecosystem is a specific perspective to a subset of an economy where software constitutes a substantial part of the transactions between agents on the marketplace.  Software Business refers to transactions between agents, trading software- based assets.  Agents are organizations or individuals;  Assets include financial assets, buildings, other resources, capabilities, and, of course, software  Transactions include monetary transactions, transfer of goods, provision of services, and, of course, delivery and deployment of software  Software Business Research Field studies how these assets are created to create value, how agents interact and what kind of transactions take place, and how technologies are used to support this business.  We study issues related to bringing software assets to the market. Specifically, we study how these assets are developed to create value, how agents interact, and what kind of transactions take place, and how technologies are used to support this business.
  • 14. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 17 Characteristics of Software  Complexity  Conformity  Changeability  Invisibility  Configurability  Digital good  Human development process  Technological change rate  Extreme integration
  • 15. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 18 Brooks: No Silver Bullet Complexity Each unit is unique and interacts with many other units Abstraction (easily) hides complexity Yet complexity is an essential feature of software Conformity There are no natural laws governing software Human judgment has determined many of the “constants” in software – many of them are not compatible Software must conform to other disciplines Changeability Software is tied to other “systems” that evolve: – user needs – organization – laws, society – hardware platforms – other software systems Change is a given environmental factor Invisibility Can’t touch, feel, or smell Models (abstractions) are always partial and multidimensional It is difficult to understand what software is
  • 16. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 19 Other Technical Characteristics of Software Configurability  Software can be configured near or at runtime into different configurations  Mass customization at point of sale possible Digital good  Software is entirely digital  Can be copied error-free  Can be digitally transmitted Human development process  Software engineering is people dependent: –Human creativity –Subjectivity of specification and design –Dependence on teamwork Technological change rate  No other technology evolves so rapidly – ”Programming languages change in less than 10 years” – ”Application platforms change every 5 years” – ”Development paradigms change every 10 years” – ”Development environments are updated annually” Extreme Integration  Software is technically linked to many other systems  Software is closely tied to processes of an organization  Software creates many social interactions and dependencies
  • 17. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 20 Characteristics of Software • Complexity • Conformity • Changeability • Invisibility • Configurability • Digital good • Human development process • Technological change rate • Extreme integration Implications to Business • Easily deployed • Economies of scale • Economies of scope • Instant scalability • Difficulty of engineering • Experience good • Lock-in • Network effects From Technical to Business Characteristics
  • 18. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 21 Software is Easily Deployed  Software can be taken to use easily, regardless of time and place  Downloaded on demand  Automatic installers  No storage costs  Instant and low cost access in many situations  Advances in usability have made instant use common  Network access required  Examples:  Software upgrades, e.g., anti-virus software  Mobile phone game downloads  Time-based capacity in a network
  • 19. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 22 Software has Economies of Scale  Definition:  Economies of scale exist when the cost of production/manufacturing decreases when large numbers of the good are produced  Once developed, software has tremendous economies of scale  Integration and training costs reduce immediate economies of scale  Standardizing (”productizing”) services and integration will improve economies of scale  Examples:  Microsoft products, any packaged, high volume software
  • 20. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 23 Software has Economies of Scope  Definition:  “Fewer inputs, such as effort and time, are needed to produce a greater variety of outputs.  Greater business value is achieved by jointly producing different outputs. Producing each output independently fails to leverage commonalities that affect costs.” (www.sei.cmu.edu/productlines/glossary.html)  Good architecting and business planning increase potential for economies of scope  Examples:  IT companies offering products for the telecom sector  Google offering its generic search engine also for company intranets
  • 21. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 24 Software has Instant Business Scalability  Software has nearly instant business scalability: possibility to deliver large quantities with relatively small change in the use of resources  In practice, scalability is limited through:  Human sales efforts  Logistics (traditional delivery)  Invoicing  Support requests  Examples:  Internet allows easy and fast distribution  Netscape invested in high-volume business applications early  Amazon.com built up scalability early
  • 22. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 25 Difficulty (and cost) of Engineering  Development of the first version of software is costly and time-consuming  Business case for software is largely dependant on the volume of use  It is really, really hard to estimate and deliver cost, schedule and functionality accurately  Examples: Software customization New release development
  • 23. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 26 Software is an Experience Good  Experience good: product characteristics are difficult to observe in advance, but these characteristics can be ascertained upon consumption or use  Any description or metric about software is bound to be an abstract summary of software  Examples:  SAP  Network management software  iTunes software
  • 24. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 27 Software has Strong Lock-in Effects  Definition:  Initial sales or ownership of products create an investment for the customer that makes him reluctant to change products or vendors  Software lock-in occurs, e.g., through  Customization of software  Integration of software with other systems  Learning curve costs  Customer specific knowledge in services  Examples:  Mobile phone  SAP  Microsoft Windows operating system
  • 25. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 28 Software has Strong Network Externalities  Definition:  “effects on a user of a product or service of others using the same or compatible products or services” (http://www.answers.com/)  “a cost or benefit that arises from production and falls on someone else than the producer” (Bowman & Ambrosini, 2000)  Examples  Positive network externalities: – Consulting service available – Fax machine, MS-Office – GSM standard – Facebook  Negative network externalities: – Other users on a shared Internet connection
  • 26. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 29 Trends affecting Software Business  Softwarization – “ohjelmistoituminen”  Services and functionality in traditional products are offered through software  Servicization – “palvelullistuminen”  Software functionality is increasingly offered as a “service”  Hybridization – ”hybridisoituminen”  Functionality, services and content together create value to users  Productization – ”tuotteistuminen”  Both software and services are being ”productized” for efficiency and profitability  Componentization – ”komponentoituminen”  Components are increasingly used as building blocks of systems  Communization – ”yhteisöllistyminen”  User communities are involved in the development of software  Commoditization – “tavallistuminen”  Hardware and basic software functionality are becoming standard and available (cheap or free)  Internetization – ”internetistyminen”  Internet is the platform – and it’s mobile
  • 27. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 30 Example of an Industry Change Sales and distribution Application software Operating system Computer Chips IBM Digital Sperry Wang Vertical Software Industry Structure -- ca. 1980’s Sales and distribution Application software Operating system Computer Chips Retail stores Superstores Dealers Mail order Word Word Perfect Etc. DOS and Windows OS/2 Mac Unix Compaq Dell Packard Bell HP IBM Intel architecture Motorola RISCs ym. Horizontal industry structure ca. 1995 Andy Grove, 1996 The Converging Communications Network Industry Structure… TBD 코어 네트워크 전화 모바일 데이터 통신 인터넷 라우터&서버 HW & SW 단말 마켓 인터넷 서버 PC 게임기기 휴대전화 SW 제품 SaaS
  • 28. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 31 Trends have Compound Effects ? Softwari- zation Servici- zation Hybridi- zation Producti- zation Compo- nenti- zation Commun- ization Commo- ditization Interneti- zation
  • 29. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 32 Implications of Trends Softwarization • Expanding markets and opportunities • New domains Servicization • Easier buying decision, easier use, harder dev’t • Lower prices, more customers Hybridization • Synergies between products, services and contents Productization • Ability to identify the common needs of many • More competition, more potential Componentization • Your software is build from existing components • Your software will be a component Communization • Customers are closer and have more power • Network effects have major potential Commoditization • Your software will become obsolete – unless you differentiate Internetization • Accesssibility and distribution revolution • Online depedence
  • 30. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 33 Conclusions  Software drives the economy  Most critical issues determining the success of a software firm are non-technical  Software business has unique chracteristics – master them  A substantial change is taking place – risks and opportunities are plentiful
  • 31. © Jyrki Kontio, R & D-Ware Oy 27/11/2009 34 Thank you QUESTIONS? Further info: http://www.rdware.com Download a copy of these slides: http://www.jyrkikontio.fi/material.php