ABSTRACT NO. 003 - 0237

The Impact of the New IT Technologies in the Business Model Transformation

Sixteenth Annual Conference of POMS, Chicago, ILApril 29 – May 2, 2005

Authors

Antonio Carlos Sanchez

MBA, Escola de Administração de Empresas de São Paulo (EAESP)/Fundação Getulio Vargas (FGV)

E_mail:Antonio.Sanchez@ae.ge.comPhone: +55 (12) 3927-8960 & +55 (11) 9938-3079

Carlos Yuji Sakuramoto

MBA and PhD Student of Escola de Administração de Empresas de São Paulo (EAESP)/Fundação Getulio Vargas (FGV)

E_mail:Carlos.sakuramoto@gm.comPhone: +55 (11) 4234-7693 & +55 (11) 9683-8710

Luiz Carlos Di Serio

PhD and professor of Escola de Administração de Empresas de São Paulo (EAESP)/Fundação Getulio Vargas (FGV)

E_mail:ldiserio@fgvsp.brPhone: +55 (11) 3281-7776 & +55 (11) 9957-2093

THE IMPACT OF THE NEW IT TECHNOLOGIES IN THE BUSINESS MODEL

TRANSFORMATION

SUMMARY

The software industry (computer programs) is one of the most important of the technology

sector, accounting for roughly 20% (US$222 billion) of Information Technology market.

Those programs process data and information assets therefore can be distributed in electronic

format. New technologies, specially the Internet, have deeply changed the business models of

those industries. As a direct result, all supply chain, from the manufacturers to final users,

had to be reconfigured. The present article will show those changes through the correlation

between theoretical concepts and some case studies.

INTRODUCTION AND MOTIVATION

Software industry is one of the most important of the Information Technology (IT) sector.

According to the report “The software sector: a statistical profile for selected OECD

countries” (ORGANISATION FOR ECONOMIC CO-OPERATION AND

DEVELOPMENT-OECD, 1998), its market share was 20% of the total IT sector in 1998. If

IT services are included, then sales figures surpass the ones for computing equipment.

According to the research study “Measuring electronic commerce: international trade in

software” (OECD, 1998), packaged software sales were US$109.3 billion in 1996, and could

reach US$221.9 billion in 2002.

A key characteristic of computer programs is they are information assets, and therefore can

be relatively easily distributed in electronic format. However, with the rise of Internet and

other information technologies, other aspects are now relevant. It is possible to foresee other

business models, which may greatly change the competitive environment.

The effects on business world due to software usage are enormous. It is unthinkable to

imagine the management of modern entrepreneurship without electronic mail, word

processors, and financial systems, among others. Therefore, changes in the strategic

landscape of this sector may have deep implications to others.

Another very important aspect is the fact that the evolutionary speed of the Information

Technology sector is one of the highest, which translates into competitive pressures from up

and down in the supply chain.

In summary, the present article shows how high evolutionary speed sectors (Fine 1999), from

the viewpoint of software manufacturers, are facing the strong competition.

METHODOLOGY

The objective of this article is to show how main companies in the IT value chain are

restructuring themselves, both internally and in terms of its relative position in the supply

chain, in order to face a rapidly changing competitive environment.

Research pillars are the exploration of secondary data and the methodology of multiple case

studies. This approach is highly recommended by several authors, such as follows: Yin

(2001), Flynn et all (1990), McCutcheon & Meredith (1993), Eisenhardt (1995), among

others. Those authors reason this type of methodology is ideal to understand complex

phenomena, which involves the interaction and combination of many variables.

Case studies will be analyzed under certain key theoretical frameworks, which were selected

by article authors. Strategic actions and movements will be studied and correlated to

applicable theoretical models.

THEORETICAL FRAMEWORK

The basic strategy model used for this research was the one developed by CHARLES FINE

(1999). Its fundamental assumption is that there are no permanent competitive advantage, but

opportunities for strategic positioning which vary throughout time.

According to the author, the basic variable that differentiates one sector from others is

evolutionary speed. The aerospace industry, for example, has a very low evolutionary speed,

since on average two new products are designed in a decade, and its life cycle can reach more

than 30 years. Internet sites are on the other extreme of the spectrum. Their content is

changed several times a week. This dynamic environment is shown on figure (1) below.

Figure 1: Market dynamics model by Fine

Source: Fine (1999)

Integrated ProductVertical Sector

Modular ProductHorizontal Sector

NicheCompetitors

TechnologicalAdvances

High Dimensional Complexity

Market Powerof Suppliers

OrganizationalInflexibilities

Profitability ofPatentedSystems

Pressure toDesintegrate

Pressure toIntegrate

An integrated product is the one parts have close functional relationship, and are not

interchangeable with parts from other manufacturers. On the other hand, a modular product

has interchangeable parts from different manufacturers. The vertical sector is the one main

companies internally integrate most of the supply chain. The horizontal one is the one the

supply chain is diversified in several manufacturers for each chain node.

Therefore, when sector structure is vertical and product design is integrated, disintegrating

forces (new entrants, inflexibilities, etc.) pressure the configuration towards horizontal and

modular. When sector structure is horizontal, another set of integrating forces (technological

advances, market power, etc.) pressure the configuration towards vertical integration and

integrated product design.

Authors define the following method to study the supply chain: 1-) Mapping of companies

and technologies of the supply chain, and each company capability. 2-) Answers to five

questions related to the evolutionary speed: 2.1-) What is the evolutionary speed of the

supply chain node under review and the sector as a whole? 2.2-) Which factors (such as new

entrants, technological innovations, new regulatory demands, etc.) drive node evolutionary

speed? 2.3-) What is the expected change in the evolutionary speed of the node due to

increased competition or change in innovation rhythm? 2.4-) What is the sector

configuration? Horizontal structure and modular products, or vertical and integrated? 2.5-)

What is current power dynamic of the node in relation to the supply chain?

Finally, the author describes the methodology to design a strategy for new product

development. Project should be synchronous in three dimensions: product, process, and

supply chain. The name chain for that methodology is simultaneous engineering in three

dimensions. This is an extension of the traditional simultaneous engineering, which attempts

to take into account product and process perspectives in the engineering design. The

simultaneous engineering model taking into account three dimensions is represented by the

author as follows:

Figure 2: Simultaneous engineering model in three dimensions

Source: Fine (1999)

The methodology proposed by FINE (1999) is comprehensive in terms of supply chain

analysis as a whole. However, other supporting theoretical frameworks are needed, both in

terms of competitive forces, and factors that may change the competitive scenario. PORTER

(1985), VENKATRAMAN (1994), and HAMEL (2000) models will support the analysis.

According to PORTER (1985), there are five basic forces exerting constant competitive

pressure on companies: from suppliers, new entrants, substitute products, customers, and

finally from other competitors in the same industry. Its graphical representation is as follows:

Space Architecture

Detailed functions and performance

specifications

Modular versus Integral

SpecificProcesses

ManufacturingSystems

Technology andEquipment

FunctionalversusCells

Architecture

Supply ChainProcessProduct

Technology Focus

Supply Chain Architecture

Logistics and Coordenation

System

Group of Organizations and Resource

Allocation

Autonomous versus

Integrated

Figure 3: Porter competitive forces model

Source: Porter (1985)

The strategy model presented by GARY HAMEL in his book Leading the revolution (2000)

is composed of four main blocks. They are customer interface, central strategy, strategic

resources, and value chain. The relationship of each of those blocks (customer benefits,

configuration, and company borders) determine the cohesion of the model as a whole.

Finally, the strategy should be based on factors with potential to generate value (efficiency,

unique, fit of the parts, and profit boosters). Its graphical representation is as follows:

Figure 4: Gary Hamel business strategy model

Threat of New Entrants

Suppliers Bargaining Power Bargaining Power Buyers

of Suppliers of Buyers

Threat of Substitutes

Substitutes

Industry Competitors

New Entrants

Intensity of Rivalry

Source: Hamel (2000)

When the business environment is sensitive to intensive use of information technologies, and

depending on how technological insertion takes place, deep changes may happen. They may

range from internal processes to the relationship between internal and external customers.

Even the business model may transform completely, as shown in the figure below:

Figure 5: Model of technological insertion and its benefits

Source: Venkatraman (1994)

High

RevolutionaryLevels

EvolutionaryLevels

Low HighPotential benefits

Deg

ree

of b

usin

ess

chan

ge

Business Scope Redefinition

Targeted Exploration

Internal Integration (Processes)

Process Reengineering

Business Network Reengineering

In summary, models employed in this paper were the following: 1-) Double-helix model

(figure 1); 2-) Mapping of companies and technologies of the supply chain, and each

company capability. 3-) Simultaneous engineering model in three dimensions (figure 2); 4-)

PORTER (1985) competitive forces model (figure 3); 5-) HAMEL (2000) business strategy

model (figure 4); 6-) VENKATRAMAN (1994) model of technological insertion and its

benefits (figure 5).

SOFTWARE INDUSTRY MAPPING

According to FINE (1999), the first step of the software industry analysis is to determine

technologies, companies and capabilities of the sector.

The different software products will be classified according to an adapted terminology

developed by LAUDON & LAUDON (2000).

SYSTEM SOFTWARE

According to LAUDON & LAUDON (2000), system software can be divided in three

categories: operating systems, utilities programs, and programming language translators.

Mapping of technologies and companies is shown on the following figure:

Figure 6: Mapping of technologies and companies for the system software sector

Source: Authors

Programming language translators will not be analyzed, since they represent a very particular

technical aspect, with limited reach to the final users.

Operating systems coordinate the various events between different computer components,

allocating available resources, and monitoring proper processing functions. In summary, they

control all basic functions of the computer.

Utilities programs coordinate and control routine machine operations, such as file ordering

and listing, printing, among others. They also manage pieces of information, such as file

creation, deletion, and merge.

Open-source code systems, i.e., programming codes that are not proprietary and are open for

any user to change it, are represented by the initial developer name.

Operating Systems MicrosoftCoordinate computer events DOSAllocate computer resources Windows 95/98

Monitor events Windows NT/2000Windows CE

Utilities Programs IBMSystem Routine operations OS/2

Software Information managementBell Labs

Language Translators Open-source codeInterpreters UNIXCompilers

Linus TorvaldsOpen-source code

LINUX

Brian BehlendorfOpen-source code

Apache

AppleMac OS

In terms of technology application, DOS, Windows 95/98 and O/S2 are stand-alone computer

programs. Windows NT/2000, UNIX and Apache are typical network software. Linux and

Mac OS are used for both stand-alone and network cases.

APPLICATION SOFTWARE

The second broad division proposed by LAUDON & LAUDON (2000) is the application

software. Those programs were divided into four categories according to the authors as

follows: programming languages of first, second, third, and fourth generations. Mapping of

technologies and companies is shown on the following figure:

Figure 7: Mapping of technologies and companies for the application software sector

Source: Authors

Programming languages of first, second, and third generations will not be reviewed in this

article, due to their technical specificity and less reach to the final customers.

First generation Query languageprogramming languages Data base SQL

Machine language Natural languageArtificial intelligence

Second generation etc.programming languages

Assembly language Report generatorsApplicationSoftware Third generation Graphical languages

programming languages SAS, Systat, etc…Fortran, Pascal, Cobol, Basic, C, etc…

Application generatorsFourth generation

programming languages High-levelprogramming languages

APL, Nomad2

Applicationsoftware packages

Programming languages of fourth generation are divided into eleven sub-categories, which

are as follows: query languages, report generators, graphical languages, application

generators, high-level programming languages, application software packages, software tools

for PC, object-oriented programming, HTML, XML, and the middleware.

The present study will focus on software tools for PC, object-oriented programming, HTML,

XML, and middleware. Several application software, such as report generators, graphical

languages, and application generators, are already part of other packaged programs, or have

very specific application. High-level languages are specialized technical subjects, and are not

of primary interest for this research.

Application software packages are targeted to specific areas, such as commercial,

mathematical, and scientific applications. Several different programs have been developed for

business applications, ranging from the traditional MRP (Material Resources Planning) to

financial market analysis, market forecasts, among others. There are a considerable number

of companies competing in this market. It is an expected behavior, since there are many

different applications in the business arena. A separate study is required to cover all the

complexity of this specific software sector.

Object-oriented programming is a technology, which application software is developed and

can be reutilized by other programs or users. Java, developed by Sun Microsystems, is

probably the most known example of object-oriented programming.

HTML (Hypertext Markup Language) is a programming language aimed at formatting

different elements in a page of a document. Those elements can be parts of traditional

documents, or even direct links to Internet pages. It is an open-source code program.

XML (Extended Markup Language) is a development of the HTML. Programmers can give

specific meaning to different fields in a document page. Therefore, differently from HTML,

which is basically a page-formatting tool, XML allows organizations to exchange information

through those fields with specific meaning. It is also an open-source code program.

The generic name middleware refers to a series of programs that allows incompatible

software applications to exchange information. One of the most known applications in this

field is the CORBA (Common Object Request Broker Architecture).

Software tools for PC are the well-known word processors, spreadsheets, databases, etc. They

are explored in more detail in the next sub-chapter, due to some specific aspects important for

the research.

Software tools for PC

According to LAUDON e LAUDON (2000), software tools for PC can be divided in eight

different groups. They are as follows: word processors, spreadsheets, databases, graphical

presentations, integrated packages, e-mail software, Web browsers, and collaboration tools.

They are all tools extensively used in any business, and help improve worker productivity, as

described by the same authors. Mapping of the software tools sector is shown on the

following figure:

Figure 8: Mapping of technologies and companies for the software tools sector

Source: Authors

MAPPING OF THE SUPPLY CHAIN AND COMPETITIVE POSITIONING

Now that technologies and companies were identified, the next step is the mapping of the

supply chain and the competitive positioning of each node in the network. The graphical

representation is shown on the following figure:

Figure 9: Mapping of the supply chain: software industry (own model)

Word ProcessorsMicrosoft Word, Corel WordPerfect, etc.

SpreadsheetsMicrosoft Excel, Lotus 1-2-3, etc.

Data BasesMicrosoft Access, Oracle, etc.

SoftwareTools Graphical Presentatiosfor PC Microsoft Powerpoint, Lotus Freelance Graphics, Aldus Persuasion, etc.

Integrated PackagesMicrosoft Office, Lotus SmartSuite, etc.

E-mail SoftwareMicrosoft Outlook, Sendmail, Eudora, Lotus Notes, etc.

Web BrowsersInternet Explorer, Netscape Navigator, etc.

Collaboration ToolsLotus Sametime, Microsoft Netmeeting, etc.

OperatingSystemsSuppliers

Software Tools

ProgramsSuppliers

HardwareDistributors

SoftwareDistributors

Suppliers

ApplicationSoftwareSuppliers

Corporate

HomeCustomers

Object-Oriented

for PCCustomers

Source: Authors

Figure 9 shows the direct link between two nodes in the chain, and not the full path from the

origin of the commercial relationship to its final destination. For instance, operating system

suppliers can deliver their products to hardware distributors, who in turn deliver to corporate

customers. This convention gives clarity to the graphical representation and is easier to

analyze.

Microsoft products dominate the operating systems segment, as noted by SHAPIRO &

VARIAN (1999) and FINE (1999). Windows (95/98/NT/2000) is the main product line. It is

a vertical sector with integrated products. It is very important to note that technological and

competitive moves in this sector will impact directly almost all others. This is due to the fact

that software tools for PC and application programs are, in most cases, designed for a specific

operating system, which is its development platform.

Microsoft also dominates the software tools for PC segment. The integrated software package

Microsoft Office has approximately 90% market share, according to SHAPIRO & VARIAN

(1999). Lotus Netmeeting, an IBM collaboration tool, is a strong competitor to Microsoft

products. Netscape Navigator web browser had a very strong market position in the past,

which has been lost to Internet Explorer due to an aggressive Microsoft strategy. Finally,

according to the article “Out in the open” (SURVEY, 2001) the e-mail software Sendmail is

responsible for two-thirds of the world’s e-mail traffic. However, when the software tools

sector is viewed as whole, Microsoft is the dominant supplier. It can be classified as a vertical

sector, with integrated products.

Object-oriented programming, HTML, XML, and middleware are programming languages,

which are primarily used for generating other applications. Taking into account the focus of

the present study, more important than identifying the competitive structure of that sector

according to FINE’s (1999) model, is the analysis of the impacts of those development tools

on the supply chain as whole.

Now that the supply chain has been studied according to the method proposed by FINE

(1999), next chapters will cover the factors that may change the dynamics and competitive

positioning of those sectors chosen for analysis.

SOFTWARE MIGRATION TO THE INTERNET

Article “Gathering steam” (SURVEY, 2001) highlights software is becoming more a service

accessed through the Internet, and less a product distributed by disks, CD’s, the World Wide

Web, etc. It is important to note it is not only a technological change, but also a change of

economics logic and business model. The same research notes that computer programs,

which are information assets, are developed and sold according to industrial production

patterns. It means software companies develop their products, distribute them, and then turn

back to the next version, which have more new tools added. In summary, the incentive,

positively reinforced by the stock market value, is not to offer easy of use and reliability, but

increasingly complex programs. Software migration to the Internet translates into new

services, targeted at customers needs, not at the producers’ interests.

In terms of programming code technology, that move of platforms should be very

pronounced. It is due to the fact software pieces were not developed to work in the Internet

environment. The stand-alone or network codes were designed to work with those platforms,

and should be replicated in each single client computer. Therefore, the most efficient

technological solutions should work with one single hardware and software platform, which

attends to several different clients.

Another important technology in this context is the networks based on the Internet, named

P2P (“Peer-to peer”), or in its general form, “the Grid”. In general terms, they are programs

that allow direct communication between computers, creating networks within the Web.

Thus, there is no need of direct intervention of a central server. The primary intent is to

leverage computational resources available, as described by the article “Profit from peer-to-

peer” (REPORT: COMPUTER NETWORKS, 2001).

After this quick review of the technologies involved, next paragraphs will analyze the three

main strategies of software migration to the Internet identified by the present study.

CASE STUDIES

MICROSOFT STRATEGY FOR SOFTWARE MIGRATION TO THE INTERNET

Microsoft project named .NET has the main objective to develop a system for Internet

servers. Microsoft’s position, reported in the article “Gathering Steam” (SURVEY, 2001), is

that even if software migrates to the World Wide Web, local processing power of stand-alone

clients is still necessary. It shows a clear intent of developing a standard for servers closely

related to the Windows operating system. The development code is the C# language

(developed by Microsoft), and associated tools Visual Studio.NET. Information exchange

standard will be XML.

P2P networks will likely reinforce the strategy above, since they suppose local and

distributed processing power as previously presented. Simple Internet stations with no

operating systems or processing power do not fill those requirements, as highlighted by the

article “Out in the open” (SURVEY, 2001).

In case Microsoft architecture obtains a competitive advantage over others, the sector of

operating systems suppliers will be dominated by the Windows standard. Moreover, that

dominant position will be transferred to Internet servers, which will work with the .NET

system, plus the functionalities for P2P networks.

Similarly, software tools for PC will continue under Microsoft control. Programs such as

WinWord, Excel, Access, PowerPoint, and integrated packages will likely stay resident in

stand-alone stations, not in Internet servers. However, it is also very likely Microsoft will

develop several other applications specific for the Internet. One example is the Hailstorm

quoted in the article “Waiting for the killer Apps” (KHARIF, 2001). Nevertheless, in case

Microsoft strategy prevails, revenues from those new services will add up to Windows based

systems, and not cannibalize them.

Hardware and software distributors, and home and corporate customers will continue to pay

user licenses to Microsoft. Probably buyer lock-in will be even stronger, due to the close

relationship between the stand-alone computer and Internet server standards.

IBM STRATEGY FOR SOFTWARE MIGRATION TO THE INTERNET

IBM is also developing its own project for Internet servers, named Websphere. Its main

philosophy is distributed processing. Specific software applications will remain resident in

different Internet servers, and will process data from different users. The standard for

information exchange will be the XML, as reported by MARKOFF (2001).

P2P technology is the essential complement to IBM strategy. As described by the article “Big

Blue’s tech on tap” (ANTE, 2001), IBM intends to spread the use of open-source code

programs, which drastically reduces costs associated with operating systems and software

tools for PC, and sells products and services aimed at P2P network setup. Application

programs offered will be collaboration tools, middleware, efficient use of networks, and

super-computing.

If IBM proposal has widespread acceptance, then value will significantly shift in the supply

chain. The usage of open-source code software will undermine Microsoft dominance in

operating systems and software tools for PC. Cost reduction due to adoption of open-source

code software will be a strong incentive working favorably for IBM, even taking into account

investments in training, migration to other platforms, among others.

Value transfer in the supply will be greater to the direction of hardware and software

suppliers. Former will supply mainframes needed for managing P2P networks, while the

second will provide consulting services to configure them. According to the article “Big

Blue’s tech on tap” (ANTE, 2001), market experts evaluate that IBM is better positioned in

those areas, in technological, personnel and financial terms. So it is easy to imagine who is

going to appropriate most of the value shift previously mentioned. However, the same article

highlights that Compaq, Hewlett-Packard and Sun Microsystems are searching similar

objectives.

IBM is targeting corporate consumers, as noted in the article “Big Blue’s tech on tap”

(ANTE, 2001). Nevertheless, in case open-source code software becomes easier to work

with, then it is possible to imagine that market penetration can reach home users too.

Therefore, it is likely that the operating systems and software tools for PC sectors will

become horizontal, with modular products. Supply chain value will then shift to the hardware

and software suppliers.

SUN MICROSYSTEMS STRATEGY FOR SOFTWARE MIGRATION TO THE

INTERNET

Sun Microsystems strategy is based on a distinct technology when compared to the others

presented so far. Its basis is object-oriented programming language Java.

The article “Battle of the platforms” (SURVEY, 2001) highlights that Java 2 (“Java 2

Platform, Enterprise Edition”, or J2EE, its most recent version) is not only a programming

language, but also a development environment, which gives professional programmers a

more suitable platform. Another important fact mentioned in the same article is that most

Web applications are developed with Java; specially those tailored for corporations, and are

executed in servers compatible with J2EE platform. The main reason for that success is the

easy and fast development of new and very specific programs, since modules previously

designed can be reused as basis for new applications. In summary, Sun proposal is distributed

processing in the Web, based on the J2EE platform.

Articles “Waiting for the killer Apps” (KHARIF, 2001) and “Software’s next leap is out of

the box” (MARKOFF, 2001) reports that Sun started a new project named Sun Open

Environment on April 2001. Sun’s goal is to offer a new development platform named JXTA

specially designed for P2P networks. The main objective is to offer an open-source code

language, which allows fast and easy design of experiments with Internet based networks, in

a similar way Unix contributed to the development of corporate networks.

Since JXTA does not require a user license agreement, apparently Sun intends to sell services

for P2P network development, along with its servers. There is one evidence in the article

“Big Blue’s tech on tap” (ANTE, 2001) showing the previous statement may be correct. It

reads that in 2001 Sun launched a new super-computing project based on P2P networks. As a

consequence, IBM and Sun strategies for P2P networks are very similar, excepting for the

development platform.

Concluding, since J2EE does not depend on the operating system, it is possible that the latter

looses much of its importance. The market for software tools for PC will become horizontal,

with modular products. Value will shift in the supply chain to the direction of hardware and

software suppliers. Sun can benefit from services and server sales, and J2EE platform license

agreements.

COMMENTS AND CONCLUSIONS

One important characteristic of the software sector is its intrinsic nature of dealing with

information assets. Therefore, the widespread use of the Internet, which is a very efficient

medium for distribution and coordination for that type of asset, launched new basis for the

development of new business models. Taking into account that evidence, the present paper

was able to identify that software migration to the Internet is in reality a combination of new

technologies and organizational models based on the Internet.

One important conclusion of the research is that there are strong forces to change the relative

competitive positions in this market, threatening Microsoft dominance in operating systems

and software tools for PC. It is also possible that value shifts considerably in the supply

chain. Moreover, those tendencies may reflect a transition to a new logic of economics for the

sector. Computer programs would be no longer viewed as products, but as services instead.

Therefore, it would be a very significant realignment of interests.

Nevertheless, Microsoft reaction power cannot be neglected. In more than one occasion it has

been very aggressive, efficient, and effective. So it is not possible to assure that this industry

focus will completely shift to services. In fact, even in terms of technological solutions, it is

very unlikely there will be a pronounced dominance of a computer program, just like

Windows is the dominant player in the operating system arena. So it is more reasonable to

suppose there will be several different options for business and technological solutions, at

least for the medium-term time frame. Thus, middleware software will probably continue to

be important applications for integrating different platforms and programs.

The value creation process, in this kind of industry, is being transferred to the final customer,

through Alpha and Beta version of software that used to be distributed to the clients in order

to get important feed back from them to enhance and correct the program to be incorporated

in the next version, and so on.

This process transforms the customer in the key element that powers the entire industry

supply chain, and also provides them exactly what they want and need. This evolution would

change drastically the entire business model of software and hardware industry from a

product into a service base business. Instead of buying and keeping updating the software, the

user may just use any software they want, need and desire, anytime, anywhere and in any

machine.

If the software industry changes into a service based, so the hardware industry will have to

change too, in order to make possible the business model transformation. Instead of

enhancing local processing machine, the next evolution could be a central and massive

parallel processing with a huge data center.

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KEY WORDS

Strategy; Programs; Computer; Industry; Software; Hardware; Companies, Technology; Capabilities; Processes; Products; Supply Chain.