Value Creation in Software Service Platforms

Netsanet Haile () and Jörn Altmann

No 2015123, TEMEP Discussion Papers from Seoul National University; Technology Management, Economics, and Policy Program (TEMEP)

Abstract: In order to benefit from operating an IT service platform (e.g., SaaS platform), platform providers need to find a way to keep their existing users and application services active sources of value. However, the understanding of how to achieve that is limited due to the newness of this kind of business. This paper investigates whether all stakeholders of the platform ecosystem can generate sufficient value when participating in the platform. As stakeholders, we consider application service users, service developers, and service platform providers. We also analyze the interrelationship between these stakeholders. The analysis outcome is a value creation model that allows the calculation of the stakeholders’ values. The model also helps inferring the relative impact of different factors on the evolution of values of the software service platform stakeholders. Our simulation results confirm that all stakeholders of a service platform mainly benefit from a growing installed base of application users. However, in a mature market, a large service variety mainly benefits the service platform provider, while the other stakeholders obtain a reduced increase in their benefits. In particular, the utility growth of application users becomes constrained as the benefit from new connections with other users decreases and the number of new services used decreases. Similarly, the revenue of service developer decreases, making service development less profitable. Therefore, we can state that not only a large fraction of the value creation goes to the platform provider but also that the software service ecosystem can collapse, if no mutually beneficial pricing of services is implemented.

Keywords: SaaS and PaaS Platform; Value Creation; Value Distribution Model; Two-Sided Network Effect; Business Modeling; Software Business; Cloud Computing; Software Ecosystem; Software Services. (search for similar items in EconPapers)
JEL-codes: C15 C44 C61 D01 D02 D11 D46 L11 L15 L86 M15 M21 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2015-09, Revised 2015-09
New Economics Papers: this item is included in nep-ict and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Journal of Future Generation Computer Systems (FGCS).

Downloads: (external link)
http://temep-repec.my-groups.de/DP-123.pdf First version, 2015 (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:dp2009:2015123

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 ().