Chapter 34: Software Vendor s Business Model Dynamics Case--TradeSys

Risto Rajala, Helsinki School of Economics

Finland

Matti Rossi, Helsinki School of Economics

Finland

Virpi Kristiina Tuunainen, Helsinki School of Economics

Finland

EXECUTIVE SUMMARY

This case describes evolution of a small software company through three major phases of its life cycle. During the first phase, the business was founded within a subsidiary of a large multinational information technology (IT) company. In the second phase, the business evolved as a spin-off from the initial organization through a MBO (Management Buy-Out) into an independent software vendor. Finally, in the third phase, the business has established itself as a vertically-focused business unit within a publicly-quoted company operating in software and consulting businesses. These three phases are termed introduction, growth and maturity as defined by Cravens (1987, 376)^[1].

The company described in this case, called TradeSys, Inc. (pseudonym), develops and sells software for trade unions and unemployment fund organizations. The business model of TradeSys, Inc. (later TradeSys) has evolved through a typical life cycle of product-oriented software companies in Finland. First, it was comprised of business information systems consultation and a proposition of systems solution to a few major customer organizations. This led to customer-initiated product development. Consequently, the deliverable of the very first project was developed as a solution to the needs of a single customer, which was later worked into a universal software product along with several customer projects. During all three major phases, the company had to rethink its business model and value propositions. At each stage, the ownership of the business has also changed. This case highlights the challenges of a business in major turning points in its life cycle and the major changes in the business model accordingly.

^[1]Cravens has adapted this analysis from Ben M. Enis, Raymond La Grace, and Arthur E. Prell, "Extending the Product Life Cycle," published in Business Horizons 20 (June 1977), Copyright by the Foundation for the School of Business at Indiana University.