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Journal ArticleDOI

The Changing Software Business: Moving from Products to Services

Michael A. Cusumano
- 01 Jan 2008 - 
- Vol. 41, Iss: 1, pp 20-27
TLDR
A dramatic shift is under way in the enterprise-software industry as established vendors embrace services in the wake of declining product revenues and it remains to be seen whether life-cycle dynamics or business-model choices are behind the long-term trend.
Abstract
The dramatic changes in the software business over the past few years have important implications for both users and producers of software products and services. Traditional product sales and license fees have declined, and product company revenues have shifted to services such as annual maintenance payments that entitle users to patches, minor upgrades, and often technical support. A dramatic shift is under way in the enterprise-software industry as established vendors embrace services in the wake of declining product revenues. It remains to be seen whether life-cycle dynamics or business-model choices are behind the long-term trend.

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References
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The business of software

TL;DR: If software is not a product but a medium for storing knowledge, then software development is not an product-producing activity, it is a knowledge-acquiring activity.
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The changing labyrinth of software pricing

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Making Profits after the Sale

TL;DR: Knecht et al. as mentioned in this paper pointed out that the after-sales business accounts for 10 to 20 percent of revenues and a much larger portion of total contribution margin in most industrial companies.
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