Develop guidance for a software supplier facing the issue of pricing of new versions of its software (see table 5.2).
What is the relation between software pricing and patent or copyright licensing terms and conditions (see section 8.1.3)?
Metcalfe's law is clearly simplistic in that for any given user some adopters are clearly more important than others. Given that the actual effect on demand is probably product-dependent, what would be a good methodology for estimating the diminution of demand in any specific case?
What are some specific strategies for reaching critical mass in software products, where the demand exceeds supply, in the presence of network effects? Do these strategies differ markedly for different types of software?
How is the notion of market share affected by various forms of software use, licensing, and pricing? What might be suitable measures of market share?
What are some ways that alternative software suppliers try to overcome switching costs for a prospective customer? Do these strategies differ across different types of software? How does software differ from other goods and services?
What is the relation between lock-in and innovation? How can even existing suppliers be constrained from introducing innovative technologies by their customers' switching costs?
This chapter has emphasized customer lock-in, but consider also supplier lock-in. Do suppliers become constrained by their own switching costs, or does the software industry as a whole become locked into existing technologies (e.g., through standardization)? What strategies can be employed to counter these effects?
Consider the issue of open versus proprietary systems. How do the strategies differ, and how does this interact with pricing, network effects, and lock-in?
How can the self-awareness property of software be used to aid suppliers or customers? Detail some ways, if exploited, it may affect the economic properties of software.
Discuss in some depth the advantages of subscription pricing, usage-based pricing, and pricing for periodic upgrades. Which is in the best interest of the supplier? the customer?
Considering the sources of competitive advantage as well as their limitations, has software proven to be a good business overall (relative to other products and services)? Have existing firms fully exploited their opportunities, or are there significant improvements in strategy that they could effect?
What are some ways that software pricing should and could take into account network effects?
Qualitatively, what do you believe is the relative importance of the sources of value (as reflected in willingness to pay) for software (see section 3.2)? How important are these generic factors in relation to specific capabilities and functionality?
Consider the triumvirate of software supplier, operator, and user, with revenues flowing from user to operator to supplier. What are the most appropriate pricing mechanisms for operator and supplier? What is the relation between these two pricing strategies?
Consider the relation of bundling and composability (see section 3.2.13). Does composability of the products within a bundle enhance the value of the bundle as a whole, and is this enhancement different than if the products were not bundled?
Congestion in the presence of statistical multiplexing displays the characteristic that throughput can be increased at the expense of latency, and vice versa. How do the relative values of throughput and latency differ across different types of software? To whom (user or operator) do these have primary value? How can this trade-off be used to maximize revenue?