Uncertainty Reduction in Software Development by the use of a Platform Based Development Strategy

Document type: Conference Papers
Peer reviewed: Yes
Author(s): Emil Numminen, Anders Wrenne
Title: Uncertainty Reduction in Software Development by the use of a Platform Based Development Strategy
Conference name: rd European Conference on Information Management and Evaluation
Year: 2009
Pagination: 356-362
ISBN: 978-1-906638-43-6
City: Gothenburg
ISI number: 000274173600040
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 process of developing software requires a substantial investment and the project has several sources of uncertainty. One part of this uncertainty is the inner uncertainty, i.e. the uncertainty related to the cost and time for developing the software. The second part of the uncertainty is the outer uncertainty, i.e. the market uncertainty whether the investment will yield a positive return or not. This paper looks at how the uncertainty associated with software development can be managed. For this purpose, a development model is constructed by analyzing three video games that has become successes for different reasons. The video game industry is used as a benchmark since video games exhibit the same type of uncertainties as software but in a more extreme way while sharing the same product characteristics which makes the comparison possible. The theoretical point of departure for the analysis is based upon the latest innovation and strategy research. Recent innovation and strategy literature stresses that flexibility in the development not only adds value to the project but also decreases uncertainty in the project because of real options planted into the project. In this paper we focus on how these options were planted into the video games and the result of it. We argue that the possibility to plant these real options is directly related to the use of a platform based development strategy. These video games were chosen so that three different types of platforms could be indentified. Each of these platforms resulted in a different type of a real option for future product development. The analyses focus on the uniqueness in the different platform in the sense that they lead to a competitive advantage for the firm from which different types of real options for future product development can be derived. The general analysis of the platform based development strategy results in three implications for software development. The paper ends with conclusions and suggestions for further research.
Subject: Business Administration\Management Control
Software Engineering\General
Keywords: Platforms, real options, software development, video game uncertainty