The Role of Platforms in Software Development - Planting Real Options to Manage Uncertainties

Document type: Conference Papers
Peer reviewed: Yes
Author(s): Emil Numminen, Anders Wrenne
Title: The Role of Platforms in Software Development - Planting Real Options to Manage Uncertainties
Conference name: International Conference on Information Management and Evaluation
Year: 2010
Pagination: 289-295
ISBN: 978-1-906638-57-3
City: Cape Town
ISI number: 000280731500032
Organization: Blekinge Institute of Technology
Department: School of Management (Sektionen för management)
School of Management S- 371 79 Karlskrona
+46 455 38 50 00
Language: English
Abstract: The innovation process of developing new software is a challenging job and an uncertain process because of the tasks associated with the development. These uncertainties can be categorized based on what drives the uncertainty. In this paper we separate between inner and outer uncertainty. Inner uncertainty stems from how a software product shall be developed and the cost associated with it. The outer uncertainty stems from what software product shall be developed and the revenues associated with it. This paper draws on theories from innovation and development research to develop a model to analyze how the uncertainty during a software development project can be managed. In doing so, we take a supply side view on software development where the firm does not merely respond to given market needs in the development cycle but instead plays a more active role. We operationalize the supply side of the innovation process in the software development by developing a model where we analyze how service platforms create real options for future innovations. An empirical study has been conducted to examine whether and how platforms are used in software development to plant options for future innovations as suggested by the model. The study was conducted at a company that primarily develops IT-phone-service products. This study shows that the company use platforms for the development of their products. Further, it is a prerequisite for developing software at the pace as well as the cost and the quality demanded by their customers. The platforms play different roles in the development depending on the product being developed. The study describes the development of two different products and how the platforms are used in different ways in the development of these products. The differences in the use of platforms is partly because of the different nature of the products but also due to the market maturity of the software, this result in a difference in the kind of real options that is created for the future. The study shows that both inner and outer uncertainties are reduced by the use of platforms in the development phase.
Subject: Software Engineering\General
Business Administration\Management Control
Keywords: Innovation; platform, real option, uncertainty reduction, software development