Analyzing and Managing Business Networks in the Software Industry
Edited by Slinger Jansen, Sjaak Brinkkemper and Michael Cusumano
Chapter 1: Defining software ecosystems: a survey of software platforms and business network governance
While in the early days of software engineering a software product was the result of effort of an independent software vendor to create a monolithic product, modern software strongly relies on components and infrastructure from third-party vendors or open source suppliers (Cusumano, 2004; Sawyer, 2000; Carmel, 1995). The relationships between software development firms and service companies shaped the product software landscape into software ecosystems, where suppliers and buyers of software products, components and technologies collaboratively create competitive value. One could state that the success of a product software company therefore no longer depends only on its own development quality but also on the way it manages its relationships (Gao and Iyer, 2006; Iyer et al, 2006; Farbey and Finkelstein, 2001). Software differs from physical goods in several ways. Software has no physical limitation, therefore the main limitations are conceptual, social and economic (Beizer, 2000; Messerschmitt and Szyperski, 2003). No other business has a gross profit margin of 99 percent on sold products (Cusumano, 2004). In other words, reproduction costs for software products are next to zero. Just as participants in a value chain of physical products, partners in a software value chain maintain ongoing business relationships. Up to the late 1980s, vertically integrated companies delivered complete system stacks (Cusumano, 2004).
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