Essentially, there are 3 choices for a software company:
- A pure product play (Some would argue that with the advance of open source and the broad adoption that it has been getting lately, that pure plays are getting much more difficult).
- A mix of products and services.
- A pure service play.
Cusumano goes on with his analysis and show how as companies mature, they tend to move towards more of a services model and provides excellent data to illustrate his argument. As we look at the growth of companies like IBM and Oracle, more and more of their revenues are coming from services. This clearly justifies their strategy behind open source where they can capitalize on their strength in services while maximizing the use of their R&D resources.
Finally, I particularly enjoyed Cusumamo's analysis of the factors that make software startup companies successful, with great examples to illustrate his point. Cusumano basically identifies 8 key criteria for assessing software start ups:
- The quality of the management team.
- Whether the market is attractive and has strong potential.
- How compelling is the offering?
- How much interest is the offering getting from customers?
- Is the company credible?
- What is the business model?
- How flexible is the management team?
- What is the payoff potential?