Workshop title: “Software Entrepreneurship: Products vs. Services Business Models and Key Success Factors”

Duration: 4 hours

Michael Cusumano,
Sloan Management Review Distinguished Review Professor,
MIT’s Sloan School of Management

Workshops is organized
with support from

Description: This workshop summarizes key points and builds on my latest book, The Business of Software (2004).

First, we will discuss a common debate among entrepreneurs and managers, in software and other businesses: Do you want to be mainly a products company or a services company?
Many software companies with product ideas and access to large consumer or enterprise markets want to sell standardized products because the replication cost is trivial and there is the potential for enormous economies of scale. In contrast, most services businesses are labor intensive and usually scale only with increasing headcount, as firms such as SAP and Oracle have done. However, products in software and other industries become commoditized over time; they are also subject to discretionary spending, the ups and downs of business cycles, and changes in technology.

To answer the question of which is the better "business model" -- products, services, or something in between, in terms of firm performance and market valuation over time -- my research team and I have constructed a database of over 400 public software companies going back over 15 or more years.

Second, we will discuss the environment for software entrepreneurship, where new ideas tend to come from, and my 8 key success factors for a software startup. We will also illustrate these points with some cases of startups I have been involved with personally, each with different business models and different outcomes.

Copyright © 2005 by RUSSEE & RUSSOFT