Optimal versioning strategies for software firms in the competitive environment

Yangyang Sun, Chuangyin Dang and Gengzhong Feng

International Journal of Production Research, 2021, vol. 59, issue 22, 6881-6897

Abstract: Software-as-a-service (SaaS) is gaining tremendous popularity in the enterprise software releases, which has brought the growing challenge for the incumbent used to adopt the on-premise licensing model. In this paper, we focus on the optimal versioning strategy problem of the incumbent when he faces the competition from the entrant who releases the SaaS software. He can choose from providing the upgraded on-premise software, turning to offer the SaaS version of the software, and releasing both the versions. We indicate that releasing both versions won't be the optimal choice in the competitive environment. When the upgrade cost is above a certain value, and the gap of value is below a threshold positively linear correlated with the upgrade cost, the incumbent prefers the SaaS strategy. Otherwise, the on-premise strategy generates the highest profit. A special case is that in the medium switching cost environment, the SaaS strategy can be optimal for all possible values of upgrade cost. Finally, We consider the problem in the presence of network effect and in the uncovered market setting. The results provide effective managerial insights into the strategy selection for the incumbent.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/00207543.2020.1828641 (text/html)
Access to full text is restricted to subscribers.

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:taf:tprsxx:v:59:y:2021:i:22:p:6881-6897

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TPRS20

DOI: 10.1080/00207543.2020.1828641

Access Statistics for this article

International Journal of Production Research is currently edited by Professor A. Dolgui

More articles in International Journal of Production Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().