Alternative Business Models for Industrial Software Service Solutions
Permanent address of the item is
Teollisten palveluohjemistojen vaihtoehtoiset liiketoimintamallit
Industrial firms need software solutions to coordinate and control their systems. This thesis focuses on comparing three alternative business models for industrial software service solutions. The three software business models are the on-premises software, software-based services and Software as a Service. On-premises software is run on the customer’s servers and it has with three alternative revenue models: the perpetual license, maintenance agreement and the subscription model. The software-based services are services created from the outputs of software. Software as a Service is run the vendor’s servers and accessed over the internet, the business model has three main revenue models: subscription, pay-per-use and freemium model. On-premises software is an old concept but for instance the software-based services is a model completely missing from literature. Also the industrial point of view is absent from the Software as a Service literature. The thesis begins with a literature review but to discover the industrial perspective on the topic, five focus group discussions, with software and industry participants, were conducted. Based on these discussions a framework was constructed. The framework was then refined by conducting four unstructured interviews with key experts and finally the framework was validated by a weak market test in two workshops. The framework, constructed as the result of the thesis, consists of two decision trees to discover the best fitting delivery model and revenue model based on set specifications of a software product and the targeted customer in an industrial setting. The software vendor in this thesis is presumed to be an engineering company. The delivery model presents the obstacles for using an external server to run the software, the opportunities that the external server presents, the restrictions that may influence the decision between the customer’s and vendor’s servers and the final three delivery models. The revenue model decision tree presents a path where the two starting points are the on-premises software and the delivery model for Software as a Service. The framework does not present the most profitable and cost effective business models but the best fitting, based on distinguishing requirements and opportunities of each software business models.