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Strategy for Software Companies:
What to Think About
Presenter
Michael Cusumano, M.I.T.
Summary
This talk focuses on the most common debate one hears among software entrepreneurs: Do you want to be a services company or a products company? Most software companies want to sell standardized products because, once you have developed the product, selling one copy or a million copies costs about the same. The conventional wisdom is that products are the way to grow a company rapidly and profitably. In contrast, software-related services are labor intensive. A company can grow revenues only as fast as it can hire new employees. However, data on the software business during the past decade suggests that creating a successful software products company is actually very hard to do. Moreover, in bad economic times, such as the recent Internet bust, customers often refuse to buy new software products or pay high prices. The only revenues left to many software companies are those from long-term service and maintenance contracts. So the best business model at least for an enterprise software company may not actually be the products business, but some combination of products and services. This presentation argues that this combination is the best strategy, even though conventional wisdom also says that products and services are very different kinds of businesses and difficult for the same company to do both well at the same time.
Presenter Resume
Michael A. Cusumano is the Sloan
Management Review Distinguished Professor at the Massachusetts Institute
of Technology's Sloan School of Management. He specializes in strategy
and technology management in the computer software industry, as well as
automobiles and consumer electronics.
He has consulted for major companies around the world, including Alcatel,
AOL, AT&T, Business Objects, Cisco, CuraGen, DEC, Ericsson, Fiat,
Telecom Italia, Ford, Fujitsu, General Electric, Fidelity, Verizon,
Hitachi, i2 Technologies, IBM, Intel, Lucent, MediaOne, Merrill Lynch,
MITRE, MultiLink, Motorola, NASA, NEC, NorTel, Robert Bosch,
Schlumberger, Siemens, Tandem Computer, Texas Instruments, and Toshiba.
He is a director of Infinium Software (ERP applications) and Investhink,
Ltd. (financial services content and integration software), and an
advisor to NetNumina Solutions (e-business software), firstRain (wireless
and web services software), H-5 Technologies (digital search technology),
and Sigma Technology Group PLC (early stage ventures).
Professor Cusumano is the author of several best sellers. Platform
Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation
(2002, with Annabelle Gawer) examines how industry leaders orchestrate
complementary innovations that make their platforms more valuable.
Microsoft Secrets (1995, with Richard Selby) is a best-selling study of
Microsoft's strategy, organization, and approach to software development,
and has approximately 150,000 copies in print in 14 languages. Competing
on Internet Time: Lessons from Netscape and its Battle with Microsoft
(1998, with David Yoffie), was named one of the top 10 business books of
1998 by Business Week and Amazon.com, and played a central role in the
Microsoft anti-trust trial. Thinking Beyond Lean: How Multi-Project
Management is Transforming Product Development at Toyota and Other
Companies (1998, with Kentaro Nobeoka) analyzes product development and
platform strategies in the auto industry.