Software Business is the commercial activity of the software industry, aimed at producing, buying and selling software products or software services. The business of software differs from other businesses, in that its main good is intangible and fixed costs of production are high while variable costs of production are close to zero.D.G. Messerschmitt and C. Szyperski, Software Ecosystem: Understanding an Indispensable Technology and Industry, MIT Press, 2003 __TOC__
Types of software businesses Cusumano Cusumano M. (2003) Finding Your balance in the Products and Service Debate, Communications of the ACM. Vol. 46:3 and Nambisan Nambisan S. (2001) Why Service Business are not Product Businesses, MIT Sloan Management Review. Vol. 42:4 divide software companies (supplier-side) into service and product companies according to how they conduct business. Popp and Meyer give a more detailed analysis of different types of business models of software companies.
Software product business In the Software product business, Software is licensed for installation and execution on a user- or customer-supplied infrastructure. In the software product business, revenues typically originate from selling software upgrades to the customer.
Software service business Software services business is a strategy of a software company whose offering consists mainly of services or consulting relating to software development.
Characteristics of software services business
Generally, business model of a software company can be categorized as a product company, services company or a hybrid between these two models.Cusumano, Michael A., The business of software, Chapter 2., New York : Free Press, 2004 Software service business can also refer to offering Software as a Service.
Software services business can be categorized into the following categories: Companies that provide consultation services related to software business Companies that provide software development services as a subcontractor.
Service Operations Characteristics of Service Operations Bitran G. & Logo, M. 1993, A Framework for Analyzing Service Operations. European Management Journal 11 (3):271-282 that are relevant to software services industry: Intangibility: Service is produced instead of tangible product. Therefore, service innovations can be easily copied by competitors. Perishability: Human resource intensive services cannot be produced in advance, therefore demand and supply is difficult to manage. This also affects business scalability. Heterogeneity: Service encounters are unique and customer needs vary, therefore software services are difficult to standardize and productize. Therefore, service business is also difficult to scale.....
See also Business models for open source software
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