Simulation of the competition among traditional and on-demand software vendors
Abstract
In this work, we propose a simulation model to study the software market, and in particular the competition among on-premise and on-demand vendors of customer relationship management software. In this market two kinds of vendors, on-premise and on-demand vendors, and corporate customers interact. Vendors have an initial capital and a specific number of developers. They invest a fraction of their capital in their product quality and try to sell their products making a profit. Corporate customers buy software products for their employees, trying to minimize their cost and maximize their utility. The proposed model is able to reproduce the real trends of the market as regards both the price of software and the market shares of the vendors, despite there is relatively little empirical evidence available about the various mechanisms at play, and few experimental data. Our model could be used as a tool to forecast future market trends, or to plan business policies of investment and pricing. Any firm could calibrate this model depending on its past business trends in order to obtain simple guidelines to follow in the planning of business winning strategies.
References
[1]
<ref id="bibr1-0037549715620502">1 Pettey C, Van der Meulen R. Survey Reveals 95 Percent of Respondents Expect to Maintain or Grow Use of SaaS. Stamford: Gartner, 2011.
[2]
<ref id="bibr2-0037549715620502">2 Slowinski S, Nguyen R, Panicker S. Global software on demand. Shifting the balance of power. Societe Generale Cross Asset Research, 2007.
[3]
<ref id="bibr3-0037549715620502">3 Delli Gatti D, Gaffeo E, Gallegati M. Emergent Macroeconomics: An Agent-Based Approach to Business Fluctuations. Berlin: Springer, 2008.
[4]
<ref id="bibr4-0037549715620502">4 Mustonen M. Copyleft - the economics of Linux and other open source software. Informat Econ Policy 2003; Volume 15 Issue 1: pp.99-–121.
[5]
<ref id="bibr5-0037549715620502">5 Bonaccorsi A, Rossi C. Why open source software can succeed. Res Policy 2003; Volume 32 : pp.1243-–1258.
[6]
<ref id="bibr6-0037549715620502">6 Bitzer J, Schröder PJH. The impact of entry and competition by open source software on innovation activity. EconWPA, 2005, available at: <ext-link ext-link-type="uri" xlink:href="http://EconPapers.repec.org/RePEc:wpa:wuwpio:0512001">http://EconPapers.repec.org/RePEc:wpa:wuwpio:0512001</ext-link>.
[7]
<ref id="bibr7-0037549715620502">7 Lin L. Impact of user skills and network effects on the competition between open source and proprietary software. Electronic Commerce Res Appl 2008; Volume 7 Issue 1: pp.68-–81.
[8]
<ref id="bibr8-0037549715620502">8 Economides N, Katsamakas E. Two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry. Management Sci 2006; Volume 52 Issue 7: pp.1057-–1071.
[9]
<ref id="bibr9-0037549715620502">9 Cocco L, Mannaro K, Concas G. Study of the competition between proprietary software firms and free/libre open source software using a simulation model. In: Software Business Lecture Notes in Business Information Processing, Volume vol. 80. New York: Springer, 2011, pp. pp.56-–69.
[10]
<ref id="bibr10-0037549715620502">10 Cocco L, Concas G, Marchesi M. Agent-based modelling and simulation of the software market, including open source vendors. Int J Modell Sim 2014; Volume 34 Issue 3: pp.113-–119.
[11]
<ref id="bibr11-0037549715620502">11 Cocco L, Concas G, Marchesi M, Destefanis G. Agent-based modelling and simulation of the software market, including open source vendors. J Informat Technol Management 2013; Volume 24 Issue 1: pp.13-–25.
[12]
<ref id="bibr12-0037549715620502">12 Haruvy E, Sethi SP, Zhou J. Open source development with a commercial complementary product or service. Product Operat Management 2008; Volume 17 Issue 1: pp.29-–43.
[13]
<ref id="bibr13-0037549715620502">13 Ghosh RA. Study on the Economic Impact of Open Source Software on Innovation and the Competitiveness of the Information and Communication Technologies ICT Sector in the EU. UNU-MERIT, The Netherlands, 2006.
[14]
<ref id="bibr14-0037549715620502">14 Bucholtz C. CRM Total Cost of Ownership: Fees, Subscriptions and Hidden Costs. CRM Outsiders and SugarSRM, USA, 2011.
[15]
<ref id="bibr15-0037549715620502">15. Understanding Total Cost of Ownership of a Hosted vs. Premises-Based CRM Solution. The Yankee Group, USA, 2004.
[16]
<ref id="bibr16-0037549715620502">16. CRM Total Cost of Ownership Comparing Open Source Solutions to Proprietary Solutions. SugarCRM, USA, 2005.
[17]
<ref id="bibr17-0037549715620502">17 Dubey A, Wagle D. Delivering software as a service. The McKinsey Quarterly, Web exclusive, 2007.
[18]
<ref id="bibr18-0037549715620502">18 Thanawala M, Smith G, Dart J. Oracle SaaS Platform: Building On-Demand Applications. Oracle, USA, 2008.
[19]
<ref id="bibr19-0037549715620502">19 Lehmann S, Buxmann P. Pricing strategies of software vendors. Business Inform Syst Eng 2009; Volume 1 Issue 6: pp.452-–462.
[20]
<ref id="bibr20-0037549715620502">20 Dasgupta P, Das R. Dynamic pricing with limited competitor information in a multi-agent economy. In: 7th international conference on cooperative information systems, 2000, pp. pp.299-–310.
[21]
<ref id="bibr21-0037549715620502">21 Harmon R, Demirkan H, Hefley B, Auseklis N. Pricing strategies for information technology services: a value-based approach. In: Proceedings of the 42nd Hawaii international conference on system sciences, Volume vol. 1, 2009, pp. pp.1-–10.
[22]
<ref id="bibr22-0037549715620502">22 Rohitratana J, Altmann J. Impact of pricing schemes on a market for software-as-a-service and perpetual software. Future Gen Comput Syst 2012; Volume 28 Issue 8: pp.1328-–1339.
[23]
<ref id="bibr23-0037549715620502">23. Components of Total Cost of Ownership. CloudOne Corporation, Naperville, IL, USA, 2010.
[24]
<ref id="bibr24-0037549715620502">24. Software-as-a-Service; A Comprehensive Look at the Total Cost of Ownership of Software Applications. Software and Information Industry Association, USA, 2006.
[25]
<ref id="bibr25-0037549715620502">25 Berry ST. Estimating discrete-choice models of product differentiation. RAND J Econ 1994; Volume 25 Issue 2: pp.242-–262.
[26]
<ref id="bibr26-0037549715620502">26 Etro F. The economic impact of cloud computing on business creation, employment and output in Europe. An application of the endogenous market structures approach to a GPT innovation. Rev Business Econ 2009; Volume 54 Issue 2: pp.179-–208.
[27]
<ref id="bibr27-0037549715620502">27. SaaS CRM vs. On-Premise CRM: Which is the Rightchoice for Your Business? OSF Global Services, Canada, 2012.
- Simulation of the competition among traditional and on-demand software vendors
Recommendations
Electronic Markets and Geographic Competition Among Small, Local Firms
We study the impact of electronic markets on small, boutique firms selling presence goods or services-goods or services that must be consumed at the selling firm's location. These firms have recently begun to compete on electronic markets by selling ...
Intra-and Interformat Competition Among Discounters and Supermarkets
The price-aggressive discount format, popularized by chains such as Aldi and Lidl, is very successful in most Western economies. Its success is a major source of concern for traditional supermarkets. Discounters not only have a direct effect on ...
Retail Competition and the Dynamics of Demand for Tied Goods
We present a demand system for tied goods incorporating dynamics arising from the tied nature of the products and the stockpiling induced by storability and durability. We accommodate competition across tied good systems and competing downstream retail ...
Comments
Information & Contributors
Information
Published In
Copyright © © 2015 The Authors.
Publisher
Society for Computer Simulation International
San Diego, CA, United States
Publication History
Published: 01 January 2016
Author Tags
Qualifiers
- Research-article
Contributors
Other Metrics
Bibliometrics & Citations
Bibliometrics
Article Metrics
- 0Total Citations
- 0Total Downloads
- Downloads (Last 12 months)0
- Downloads (Last 6 weeks)0
Reflects downloads up to 09 Nov 2024
Other Metrics
Citations
View Options
View options
Get Access
Login options
Check if you have access through your login credentials or your institution to get full access on this article.
Sign in