Application platform suite software vendors' strategies in standards driven industry networks

Abstract

Thesis (S.M.M.O.T.)--Massachusetts Institute of Technology, Sloan School of Management, Management of Technology Program, 2004.Includes bibliographical references (leaves 213-215).The emergence of industry standards often has disruptive impacts on the behavior of markets. It can drive commoditization, substitution and convergence. It also changes the industry structure creating new business models and value chains, coupled with the entrance of new firms and the exit of incumbents still entrenched in proprietary technology. Studies have been conducted on the impact of industry standards in the personal computer and microprocessor industries which resulted in the disintegration of the industries into a horizontally organized cluster of hundreds of firms, and the emergence of value-capture powerhouses within the industry. This thesis studies the shifts in industry structure in the field of Application Platform Suite (APS) software resulting from the emergence of Java programming language as the industry standard for non-Microsoft-based application development. APS software runs and manages the critical e-business applications managing the interactions between users and the enterprise backend IT systems. BEA Systems and IBM are the two dominant Java-based APS value-capture powerhouses within this industry. This thesis surveys and summarizes the existing body of research on industry dynamics, growth strategy, technology strategy and competitive strategy, applies it to the field of APS software industry to predict the dynamics of the value chains and propose future strategies in this industry. It predicts that (1) Success of Microsoft's entry into enterprise APS market is low to medium; (2) Success of IBM in creating a unified development platform is medium to low; and (3) Success of Microsoft's entry into SAP's core packaged business application market is medium to low. Building on these forecasts, the(cont.) thesis proposes the following strategies: (1) Microsoft should fundamentally change its business and technology strategy to shift the likely outcome towards its favor; (2) SAP should consider progressively outsourcing its back-end technology components to focus on the applications business, and BEA and IBM should consider positioning themselves as the preferred choice of the IT industry's back-end system provider; (3) Microsoft and BEA should invest in small open-source experimentation to understand the open-source dynamics; and (4) BEA should plan for the contingency of being an acquisition target with the primary aim of sustaining its fundamental position of remaining as an independent and pure-play infrastructure software vendor.by Boon Chung Phua.S.M.M.O.T