SB Program University of Jyväskylä Basics of Software Business ITK260 Fall 2003, Rauli Käppi In cooperation with Oulu and Helsinki SB-programs Special thanks to Oulu SB-line, who has been the major contributor for this material

SB Program University of Jyväskylä Lecture focus  Recap information required for the rest of the course  Open Source Software as a special case  Product families and platforms

SB Program University of Jyväskylä Future schedules  First exam at Place Ag Gamma  Second exam At Place Ag C234.1  Interesting visiting lecturers –Monday at 12, Ag. Alfa "Elektroninen liiketoiminta rahoittajan silmin" Jari Piiponniemi, Evli Corporate Finance –Monday at 12, Ag. Aud. 1 (4 h) Startup.com – commenting his own experiences _After_ the movie Jouko Salonen, Republica Oy  Old exam material is available 5th floor (cabinet by the PC-class)

SB Program University of Jyväskylä Open Source Software -Free software  One form of software products  Differences comparing to traditional software product approach in development process, market approach, (often in) marketing and testing  Began as a phenomenon started by individuals / groups of individuals  Today used also as a strategic tool for larger companies (examples HP Java application server software, Sun OpenOffice)  Companies mix the traditional product processes and OSS / freeware / shareware practices

SB Program University of Jyväskylä Open Source Software (OSS)  Interest to OSS has increased notably after several success stories  among these are the Apache server, Perl programming language, SendMail mail handler, MySQL database, and Linux operating system,  Sun’s OpenOffice is seeking for acceptance as a corporate initiative – kill-market move against Microsoft Office (Microsoft counter-arguments?)  Firewalls, Virus scans, etc..

SB Program University of Jyväskylä Open Source Software (OSS) cont.  The OSS paradigm: –the source code must be freely available for modifications and redistribution without any charges –Open Source Initiative keeps track and grants licenses for software that complies with the OSS definitions  OSS paradigm can also be discussed from a philosophical perspective

SB Program University of Jyväskylä Motivations and drivers for OSS development, by O'Reilly, Hightower et al.  Technological; the need for robust code, faster development cycles, higher standards of quality, reliability and stability, and more open standards or platforms  Economical; the corporate need for shared cost and shared risk  Socio-political; scratching a developer’s “personal itch”, peer reputation, desire for “meaningful” work, and community oriented idealism

SB Program University of Jyväskylä OSS Process 1. Problem discovery 2. Finding volunteers 3. Solution identification 4. Code development and testing 5. Code change review 6. Code commit and documentation 7. Release management

SB Program University of Jyväskylä The OSS development method is characterized with following statements:  The systems are built by potentially large numbers of volunteers  People choose the task they are interested in (this is dependant on the organisation – there can be assingments)  Explicit system level design may be poor  There is no project plan, schedule or list of deliverables  The system is augmented with small increments  Programs are tested frequently

SB Program University of Jyväskylä Some comments:  From a legal perspective the OSS development paradigm should be seen more as a licensing structure exploiting the terms of General Public License  More information on licensing:  At this moment the most widely published results concentrate mostly on large software tools development efforts as well as Internet based products  Under OSS paradigm developed software can also been used in new business endeavors, thus founding the whole business idea on using only OSS originating software, BUT HOW?

SB Program University of Jyväskylä The classification of products (Ullrich-Eppinger) 1. Market pull products – products which are defined by careful identification of customer requirements 2. Technology push products – products which rely on the possibilities offered by new technology 3. Platform products, are built around one single technical system 4. Process-intensive products, where the manufacturing technique is a pivotal part of the product 5. Customised products, which are the results of single-time planning and design  Many software companies have started through classes 1 and 2  This has put company emphasis on the different phases of the development process instead of the product architecture

SB Program University of Jyväskylä Common European channels for small businesses  Companies such as HP, IBM and Nokia offer partnering for small companies in their specific domains  This offers the possibility to carry out international high tech business for small and medium-sized companies without the cost of running your own international organisation  The terms of the partnering contract are crucial  The focus and mechanisms of the co-operation must be clear  Different countries may require different approaches

SB Program University of Jyväskylä Different forms of collaboration between companies Transaction Consecutive transactions Long-term Customer relationship Partnership Strategic alliance Networked organisation Vertical integration

SB Program University of Jyväskylä Nokia supply network as an example Depth of cooperation Time Source: Ali-Yrkkö (2001) LEVEL 1. Subcontracting of manufacturing LEVEL 2. Partnership in manufacturing LEVEL 3. R&D Outsourced resources LEVEL 4. R&D Partnership

SB Program University of Jyväskylä Software product distribution  A common model today is to sell the products through distributors and / or partners □ a more challenging option is ”to go out there” and learn the business culture of a new country □ USA is recommended in some cases due to its large, relatively coherent market  The pricing of a software product can be: □ fixed □ end-user adoption □ subscription □ pay-per-use

SB Program University of Jyväskylä Level of productisation SW productisation level Customer price – Customer-specific costs Customer price SW is well productised, if the amount of cost / work required when installing, maintaining, modifying or updating is relatively small compared to the original customer price of the SW.

SB Program University of Jyväskylä Phases of productisation 1. Development of the product (iterative) 2. Productisation of services 3. Implementation of customer-specific additions and transferal of customer-specific services to partners (configuration switches) 4. In a more mature stage some services can be replaced by additional products / modules thus increasing efficiency 5. Part of the services production are transferred to the customer 6. Part of the partner services are insourced to the customer

SB Program University of Jyväskylä Productisation for different market segments - note: economics department may define these as marketing decisions  What are the market segments, the SW is aimed to be productised for?  What are the needs and requirements for the market segments?  How extensive functionality is required from the core product?  What additional products and services are needed in addition to the core product?  Which of these are implemented by the company and which are outsourced?

SB Program University of Jyväskylä Platform- / product framework thinking (Sääksjärvi)  Background –Short product life cycle –A single product is not enough –The principle of technological push  Opportunities –Large market potential –Extensive customisation per deployment –Product variation  Benefits –A product Family instead of a single product –A common core / framework for the product family members –Possibilities for reuse

SB Program University of Jyväskylä Platform –strategy (Sääksjärvi)  The planning of product development and relevant decision- making becomes more concrete  The focus shifts to larger and longer-term investments instead of spread-out separate products and their multiple issues

SB Program University of Jyväskylä Product family  A product family is a set of products with a common platform (or a set of components, framework), but also have unique features to fulfill the requirements of different customer types  A product family is targeted towards a single market segment, as individual products have been differentiated for different small niche-segments  In practice these terms are often used in wider meanings

SB Program University of Jyväskylä A software product platform / framework (Sääksjärvi) Aims at improving development productivity Is common for several product versions and has been implemented beforehand to be reused as a core component for the product variants Is based on selected core technology which is the same in all product variants The products that are varied within the capabilities of the platform stay within the selected market focus The success of this platform approach can be verified only afterwards by checking the previous conditions

SB Program University of Jyväskylä Thank you for the course…  Good luck to the exam…  Comments and questions are welcome even through mail… parts that you didn’t understand, did like, did not like, would have liked to hear more about…