Software distribution processes

While my analysis will look primarily at software strategies for product companies, the issue of services cannot be ignored. Reading through Cusomano's book "The Business of Software", he blurs the distinction between product companies and services companies, saying that many product companies inadvertantly transform into services companies, particularly when bad times occur.

Software products, while sometimes having over 95%+ gross margins, appear to have a few major problems that are relevant to this analysis. First of all, they are in most customer's minds, discretionary. When times go bad, customers stop buying: and this can take place almost overnight. Secondly, the meteoric growth curves of software hide a hidden monster - saturation. Before the software company realises it, they have saturated their market. Further sales become harder and harder to come by. And finally there is the problem of commoditisation. If margins really are that phenomenal, then there is a greater tendency in the software world to try to undercut the competition, right to the point where the software itself becomes free. The lower margin opportunities provided by ongoing service revenues are seen as a buffer that can keep companies out of trouble, particularly in lean times.

I have a lot more to read, but these are key insights.

A few more news snippets: Microsoft have announced pricing details for Office 2007, Oracle tried to buy the owners of the freely available MySQL database, and an executive with SAP, has pooh-poohed the idea of open source enterprise application providers being able to stay in this market for the long-haul.