Chapter 6

1. The acronym for infrastructure service provider, ISP, is the same as for an Internet service provider but not to be confused with it. The Internet service provider is both an infrastructure service provider (providing backbone network access) and an application service provider (providing application services like e-mail and Web hosting).

2. The telephone industry has traditionally called telephony a service, and additional features such as call waiting value-added service features. In fact, telephony is both an application (it provides specific capabilities to end-users) and a service (there has typically been a service provider, who does provisioning and operation). As telephony is licensed as a software application based on a generic Internet infrastructure, it becomes clearer that telephony is an application that may or may not be provided as a service.

3. Software suppliers are themselves major customers for software. They may license modules to be incorporated into their own products, or they certainly purchase development tools (such as build systems or compilers). They also incorporate many standard business functions like sales and accounting that are supported by applications acquired from other firms.

4. If a software supplier targets original equipment manufacturers or service providers as exclusive customers, there is an opportunity to reduce development and support costs because the number of customers is smaller and the execution environment is much better controlled.

5. In the case of both material and information goods, suppliers have found ways to approximate use-based pricing without direct usage reporting. A common approach is to lease rather than sell, and base the rental charges on the time of possession. An automobile logs its distance traveled (today using software), and that log can be captured when the car is returned. Utility meters are often read by sending a worker to the physical premises.

6. This example is based on the American Institute of Certified Public Accountants Statement of Position (SOP) No. 98-1 (Luecke, Meeting, and Klingshirn 1999).