2011
EMSS 2011 Proceeding
A Simulation Study of The Interdependence Of Scalability And Cannibalization In The Software Industry
Authors: Francesco Novelli
Abstract
Dominant software vendors, whose applications have been predominantly delivered on-premises so far (i.e., installed, maintained and operated at customers? prem- ises) are challenged by the rising adoption of software as a service (SaaS) solutions, outsourced applications delivered through the web under subscription or usage- based pricing terms. As a response, these incumbent vendors extend their product portfolios with SaaS offer- ings, but thus risk to engender revenue cannibalization, as a newly introduced SaaS application may attract their own on-premises customers instead of expanding the market or drawing from a competitor?s customer base. At the same time they face the novel, severe scalability requirements of the technological and organizational infrastructure underlying a successful SaaS business. Using an agent-based simulation model, we study the interdependence between cannibalization and scalability in monopolistic and duopolistic software markets.
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