World Library  
Flag as Inappropriate
Email this Article

Software business

Article Id: WHEBN0021560276
Reproduction Date:

Title: Software business  
Author: World Heritage Encyclopedia
Language: English
Subject: Software business community, Software industry, Plex (software), Hewlett-Packard
Collection: Software Industry
Publisher: World Heritage Encyclopedia

Software business

This article is about selling software, for information about software made for business: Business software.

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[1] and fixed costs of production are high while variable costs of production are close to zero.[1][2]


  • Types of software businesses 1
    • Software product business 1.1
    • Software service business 1.2
      • Characteristics of software services business 1.2.1
      • Service Operations 1.2.2
  • Software Business Organizations 2
  • See also 3
  • References 4

Types of software businesses

Cusumano [3] and Nambisan [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.[1]

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 product company, services company or a hybrid between these two models.[5] Software service business can also refer to offering Software as a Service.

Software services business can be categorized into 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 [6] 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.

Software Business Organizations

See also


  1. ^ a b c Karl M. Popp and Ralf Meyer (2010). Profit from Software Ecosystems: Business Models, Ecosystems and Partnerships in the Software Industry. Norderstedt, Germany: BOD.  
  2. ^ D.G. Messerschmitt and C. Szyperski, Software Ecosystem: Understanding an Indispensable Technology and Industry, MIT Press, 2003
  3. ^ Cusumano M. (2003) Finding Your balance in the Products and Service Debate, Communications of the ACM. Vol. 46:3
  4. ^ Nambisan S. (2001) Why Service Business are not Product Businesses, MIT Sloan Management Review. Vol. 42:4
  5. ^ Cusumano, Michael A., The business of software, Chapter 2., New York : Free Press, 2004
  6. ^ Bitran G. & Logo, M. 1993, A Framework for Analyzing Service Operations. European Management Journal 11 (3):271-282
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.