Value Creation in IT Service Platforms through Two-Sided Network Effects

Netsanet Haile () and Jörn Altmann
Additional contact information
Netsanet Haile: Technology Management, Economics, and Policy Program, College of Engineering, Seoul National University

No 201297, TEMEP Discussion Papers from Seoul National University; Technology Management, Economics, and Policy Program (TEMEP)

Abstract: IT service businesses can achieve economies of scale and scope faster than in traditional product businesses. In particular, as IT service platforms will become the founding infrastructure of our economies, the analysis and understanding of the value that a service platform can generate is of great importance. IT service platforms provide all involved market participants with different values. For this paper, we consider application service users, service developers and service platform providers as market participants and analyze the interrelationship between the value creations of these market participants. The basis for the description of the values and their interrelationship is the identification of parameters. Based on these parameters, a simulation model has been developed. It helps inferring the relative impact of these parameters on the evolution of the IT service platform stakeholder values. The results imply that there is a two-sided network effect. All stakeholders of a service platform mainly benefit from a growing installed base of application users. The benefit of a large service variety, however, mainly benefits the service platform provider. Therefore, we can state that a large fraction of the value from two-sided network effects goes to the platform provider.

Keywords: IT Service Platform; Value Creation; System Dynamics; Two-Sided Network Effect; Business Modeling; IT Business; SaaS; Cloud Computing. (search for similar items in EconPapers)
JEL-codes: C15 D02 D11 D46 D85 L14 L86 M15 M21 O31 O33 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2012-11, Revised 2012-11
New Economics Papers: this item is included in nep-cmp, nep-com, nep-ict and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Proceedings of 9th International Conference on Economics of Grids, Clouds, Systems, and Services (GECON 2012), November 2012.

Downloads: (external link)
http://temep-repec.my-groups.de/DP-97.pdf First version, November 2012 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:snv:dp2009:201297

Access Statistics for this paper

More papers in TEMEP Discussion Papers from Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) Contact information at EDIRC.
Bibliographic data for series maintained by Jorn Altmann ().