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TECH TALK: Good Books: The Business of Software

June 9th, 2004 · No Comments

Microsoft Secrets. Competing on Internet Time. Platform Leadership. Japans Software Factories. These are some of the books authored by Michael Cusumano. So how could one can buy and read his latest book, The Business of Software, subtitled: What Every Manager, Programmer, and Entrepreneur Must Know to Thrive and Survive in Good Times and Bad.

For many (including me), software is our core business. It is the basis on which we are building our dreams of tomorrow. Cusumanos detailed book provides excellent insights into the world and business of software. From the books description:

The world’s leading expert on the global software industry and coauthor of the bestseller Microsoft Secrets reveals the inner workings of software giants like IBM, Microsoft, and Netscape and shows what it takes to create, develop, and manage a successful company — in good times and bad — in the most fiercely competitive business in the world.

In the $600 billion software industry it is the business, not the technology, that determines success or failure. This fact — one that thousands of once glamorous start-ups have unhappily discovered for themselves — is the well-documented conclusion of this enormously readable and revealing new book by Michael Cusumano, based on nearly twenty years of research and consulting with software producers around the world.

At the heart of the book Cusumano poses seven questions that underpin a three-pronged management framework. He argues that companies must adopt one of three basic business models: become a products company at one end of the strategic spectrum, a services company at the other end, or a hybrid solutions company in between. The author describes the characteristics of the different models, evaluates their strengths and weaknesses, and shows how each is more or less appropriate for different stages in the evolution of a business as well as in good versus bad economic times. Readers will also find invaluable Cusumano’s treatment of software development issues ranging from architecture and teams to project management and testing, as well as two chapters devoted to what it takes to create a successful software start-up. Highlights include eight fundamental guidelines for evaluating potential software winners and Cusumano’s probing analysis, based on firsthand knowledge, of ten start-ups that have met with varying degrees of success.

ADTMag wrote about the book and Cusumano:

To succeed long-term in the software business it is most important to have structure with flexibility. That is because the potential for change in this field is still so great.

For vendors, who, admittedly, are not universally loved by users, whole years of revenue gains were washed out. What is going on now? Said Cusumano: I think a lot of the enterprise technologies have become commodity-like. There are lots of players in the same spaces. Theyre competing for functionality, and prices.

You have low-cost Indian competitors. And you have some packaged solutions. You have some other stuff thats more difficult too, but the availability of low-cost packages – from SalesForce.com, or almost anything from Microsoft — and low-cost services from offshore are just pushing price points down, and thats what companies are struggling with.

It is like the revolution we had in the transition from mainframes to PCs, he said.

At the time of client/server computing, the hardware just became so much cheaper that there was this pushback from customers on spending tens of millions of dollars on the software and services side.

I think we are now in another pushback phase, Cusumano said, where customers dont want to spend millions of dollars on software to run on machines that cost a few thousand dollars. They dont want to pay 20 or 25 percent of the initial license fee in perpetuity for upgrades. They want to pay a lower percentage. We are in the midst of a consolidation.

In The Business of Software, Cusumano describes the varied paths vendors follow. It is important for buyers and sellers alike to realize, he notes along the way, that software is not really one kind of business. Software becomes whatever function or application it addresses, he writes. Those are the qualities of a unique kind of business, one that often borders on an adventure, one Cusumano covers most vividly.

Here is an excerpt from the book.

Tomorrow: The Business of Software (continued)


TECH TALK Good Books+T

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