Business Models in the software industry Icsob 2010 keynote

Business Models in the Software Industry Dr. Karl Popp Corporate Development SAP AG karl.michael.popp@sap.com http://www.drkarlpopp.comDr. Karl Popp at ICSOB 2010 1

Background information http://www.drkarlpopp.com/BusinessMod Business Models elsintheSoftwareindustry.html in the software industry Profit from Software Ecosystems ISBN-13: 978-3842300514 Business Models, partnership models and ecosystems in the software industry Examples from over 50 software companiesDr. Karl Popp at ICSOB 2010 2

Agenda • About SAP • A simple model for business models • Business models in the software industry – Usual and unusual – Disruptive business models • Business Models of large software companies • SummaryDr. Karl Popp at ICSOB 2010 3

35 YEARS OF INDUSTRY EXPERTISE TRADING INDUSTRIES CONSUMER FINANCIAL INDUSTRIES SERVICES PROCESS DISCRETE MANUFACTURING MANUFACTURING SERVICES PUBLIC SERVICES© 2010 SAP AG. All rights reserved. / Page 5

A BELIEF THAT INNOVATION CAN COME FROM ANYWHERE Customers Academic Partners Industry Partners INNOVATION SAP Employees SAP Innovation Council Research Labs Development Labs© 2010 SAP AG. All rights reserved. / Page 6

Researching the tree of life of software companiesDr. Karl Popp at ICSOB 2010 7

Business Model Business model consists of Type of Business Revenue Goods and model Model Services* Archetype* *Source: Weill et al., Do Some Business Models Perform Better than Others? A Study of the 1000 Largest US Firms, MIT Center for Coordination Science Working Paper No. 226, 2005.Dr. Karl Popp at ICSOB 2010 8

Types of goods and services Type of Goods and Services financial physical intangible humanDr. Karl Popp at ICSOB 2010 9

Business Models Type of Goods/Services offered Financial Physical Intangible Human Creator Entrepreneur Manufacturer Inventor n/a Distributor Financial trader Wholesaler, Intangibles n/a Retailer distributor Lessor Financial lessor Physical lessor Intangibles Contractor lessor Broker Financial broker Physical broker Intangibles HR broker broker Source: Weill et al., Do Some Business Models Perform Better than Others? A Study of the 1000 Largest US Firms, MIT Center for Coordination Science Working Paper No. 226, 2005.Dr. Karl Popp at ICSOB 2010 10

Common Business Models in the Software Industry Type of Goods/Services offered Financial Physical Intangible Human Creator Entrepreneur Manufacturer Inventor n/a Distributor Financial trader Wholesaler, Intangibles n/a Retailer distributor Lessor Financial lessor Physical Intangibles Contractor lessor lessor Broker Financial broker Physical broker Intangibles HR broker broker Most Software Software vendors offering hosted vendors have solutions or Software as a service a consulting provide hardware usage to businessDr. Karl Popp at ICSOB 2010 11 customers

Other Business Models in the Software Industry Type of Products/Services offered Financial Physical IntangibleSoftware vendors Human Software trade intellectual vendors property and do have retail Creator Entrepreneur Manufacturer Inventor OEM and resell n/a Software stores agreements vendors Distributor Financial trader Wholesaler, Intangibles n/a lend Retailer distributor money Lessor Financial Physical Intangibles Contractor lessor lessor lessor Broker Financial broker Physical broker Intangibles HR broker Software vendors broker are matchmakers for partner solutionsDr. Karl Popp at ICSOB 2010 12

Business Model and Operations Model Type of Business Goods and model Revenue Business Services Archetype Model Model is is is is imple- imple- imple- imple- mented mented mented mented by by by by Revenue Production Business generation Operations Operations Model Model /collection Model modelDr. Karl Popp at ICSOB 2010 13

Disruptive Business Models • Disruptive Business Models – Undermine the business models of existing companies in an industry • Are mostly hybrid business models – i. e. a new combination of several types of products/services, archetypes and revenue models • Example: Google – Revenue mostly comes from advertising – other products/services don´t create revenueDr. Karl Popp at ICSOB 2010 14

Disruptive Business Operations Models • Disruptive Operations Models – Undermine the business operations models in an industry • Mostly are new forms of Production Model, Business Operations model or Revenue generation model (or a combination thereof) • Examples – Amazon for bookshops – Docmorris for pharmacies in Europe – Dell for computersDr. Karl Popp at ICSOB 2010 15

SAP Business Model Type of Products/Services offered Financial Physical Intangible Human Creator Entrepreneur licenses SAP Manufacturer Inventor n/a software for on premise use to SAP provides Distributor Financial trader Wholesaler, customers Intangibles n/a hosted and Retailer distributor software as a service solutions Lessor Financial Physical Intangibles Contrac- lessor lessor lessor tor Broker Financial broker Physical broker Intangibles HR broker broker SAP has a SAP lends consulting money to business SAP´s ecohub is customers matchmaker for partner solutionsDr. Karl Popp at ICSOB 2010 16

SAP Revenue Model (excerpt) Revenue Revenue Revenue Revenue Stream Stream from Stream from Stream from from subscription ecosystem reselling services consists of SAP Revenue model consists of Revenue Revenue Revenue Revenue Stream from Stream from Stream from Stream from commercial adaption/ support maintenance licenses extensionDr. Karl Popp at ICSOB 2010 17

Microsoft Business Model Type of Products/Services offered Financial Physical Intangible Human Microsoft Creator builds and Entrepreneur Manufacturer Inventor n/a sells hardware and Microsoft has Distributor Financial trader Wholesaler, Intangibles n/a appliances numerous Retailer distributor OEM deals Lessor Financial Physical Intangibles Contrac- lessor lessor lessor tor Broker Financial broker Physical broker Intangibles HR broker Microsoft is broker matchmaker for partner solutions and partner servicesDr. Karl Popp at ICSOB 2010 18

Google Business Model Type of Products/Services offered Financial Physical Intangible Human Creator Entrepreneur Manufacturer Inventor n/a Google provides Distributor Financial trader Wholesaler, Intangibles n/a software as a Google offers Retailer distributor service (Gmail, appliances Google Apps) Lessor Financial lessor Physical Intangibles lessor lessor Contractor Broker Financial Physical Intangibles HR broker broker broker broker Google is matchmaker between customers and advertisers based on customer inquiriesDr. Karl Popp at ICSOB 2010 19

Google Search Services and Compensation Search customers compensate for the search service with data about their search interest, their location etc. Advertising Search payments Compensation Advertising PPC Search Search Google Service Customers adver- Customers tising service Products, Assets or Compensation ServicesDr. Karl Popp at ICSOB 2010 20

Summary • A Business Model Concept is the first step to research the tree of life of software companies • It shows ways to analyze existing and to create new business models • Further research needed on – the different business models as they are used in the software industry – Which partnering strategies make sense for different business models and business operation modelsDr. Karl Popp at ICSOB 2010 21

Background information http://www.drkarlpopp.com/BusinessMod Business Models elsintheSoftwareindustry.html in the software industry Profit from Software Ecosystems ISBN-13: 978-3842300514 Business Models, partnership models and ecosystems in the software industry Examples from over 50 software companiesDr. Karl Popp at ICSOB 2010 22

Video lessons • Get your education online at mindbites.com: • http://www.mindbites.com/lesson/13903- software-business-model-basics • http://www.mindbites.com/lesson/13904- software-revenue-modelsDr. Karl Popp at ICSOB 2010 23

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Business Models in the software industry Icsob 2010 keynote

by Karl Popp on Jun 23, 2010

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Business Models in the software industry Icsob 2010 keynote — Presentation Transcript