Dr. Karl Popp at ICSOB 2010 1

Business Modelsin the Software Industry

Dr. Karl PoppCorporate DevelopmentSAP AGkarl.michael.popp@sap.comhttp://www.drkarlpopp.com

Dr. Karl Popp at ICSOB 2010 2

Agenda

• About SAP• A simple model for business models• Business models in the software industry

– Usual and unusual– Disruptive business models

• Business Models of large softwarecompanies

• Summary

© 2010 SAP AG. All rights reserved. / Page 3

47,598 SAP EMPLOYEESWORLDWIDE

ANNUAL REVENUESEXCEED €10.7 BILLION

OVER 97,000 COMPANIES INOVER 120 COUNTRIES RUNSAP SOFTWARE

© 2010 SAP AG. All rights reserved. / Page 4

35 YEARS OF INDUSTRY EXPERTISE

SERVICES

CONSUMERINDUSTRIES

TRADINGINDUSTRIES

FINANCIALSERVICES

PROCESSMANUFACTURING

DISCRETEMANUFACTURING

PUBLICSERVICES

© 2010 SAP AG. All rights reserved. / Page 5

A BELIEF THAT INNOVATION CANCOME FROM ANYWHERE

INNOVATION SAP Employees

Academic PartnersCustomers

Industry Partners

Research LabsDevelopment Labs

SAP Innovation Council

Dr. Karl Popp at ICSOB 2010 6

Researching the tree of life ofsoftware companies

Dr. Karl Popp at ICSOB 2010 7

Business Model

Type ofGoods andServices*

Businessmodel

Archetype*

RevenueModel

Businessmodel

consistsof

*Source: Weill et al., Do Some Business Models PerformBetter than Others? A Study of the 1000 Largest US Firms,MIT Center for Coordination Science Working Paper No. 226,2005.

Dr. Karl Popp at ICSOB 2010 8

Types of goods and services

Type ofGoods and

Services

financial physical intangible human

Dr. Karl Popp at ICSOB 2010 9

Source: Weill et al., Do Some Business Models Perform Better than Others? A Studyof the 1000 Largest US Firms, MIT Center for Coordination Science Working PaperNo. 226, 2005.

Business Models

Type of Goods/Services offered

Financial Physical Intangible Human

Creator Entrepreneur Manufacturer Inventor n/a

Distributor Financial

trader

Wholesaler,

RetailerIntangibles

distributor

n/a

Lessor Financial

lessorPhysical

lessor

Intangibles

lessor

Contractor

Broker Financial

broker

Physical

broker

Intangibles

broker

HR broker

Dr. Karl Popp at ICSOB 2010 10

Common Business Models in the Software

Industry

Type of Goods/Services offered

Financial Physical Intangible Human

Creator Entrepreneur Manufacturer Inventor n/a

Distributor Financial

trader

Wholesaler,

RetailerIntangibles

distributor

n/a

Lessor Financial

lessorPhysical

lessor

Intangibles

lessor

Contractor

Broker Financial

broker

Physical

broker

Intangibles

broker

HR brokerMost Softwarevendors havea consulting

business

Software vendors offering hostedsolutions or Software as a service

provide hardware usage tocustomers

Dr. Karl Popp at ICSOB 2010 11

Other Business Models in the Software Industry

Type of Products/Services offered

Financial Physical Intangible Human

Creator Entrepreneur Manufacturer Inventor n/a

Distributor Financial

traderWholesaler,

Retailer

Intangibles

distributor

n/a

Lessor Financial

lessor

Physical

lessor

Intangibles

lessor

Contracto

r

Broker Financial

broker

Physical

brokerIntangibles

broker

HR

broker

Softwarevendors

lendmoney

Software vendorsare matchmakers

for partnersolutions

Software vendorstrade intellectualproperty and doOEM and resell

agreements

Softwarevendors

have retailstores

Dr. Karl Popp at ICSOB 2010 12

Business Model and Operations Model

Type ofGoods and

Services

Businessmodel

Archetype

RevenueModel

ProductionModel

BusinessOperations

Model

Revenuegeneration/collection

model

BusinessModel

OperationsModel

isimple-

mentedby

isimple-

mentedby

isimple-

mentedby

isimple-

mentedby

Dr. Karl Popp at ICSOB 2010 13

Disruptive Business Models

• Disruptive Business Models– Undermine the business models of existing

companies in an industry• Are mostly hybrid business models

– i. e. a new combination of several types ofproducts/services, archetypes and revenuemodels

• Example: Google– Revenue mostly comes from advertising– other products/services don´t create revenue

Dr. Karl Popp at ICSOB 2010 14

Disruptive Business OperationsModels

• Disruptive Operations Models– Undermine the business operations models in

an industry• Mostly are new forms of Production Model, Business

Operations model or Revenue generation model (or acombination thereof)

• Examples– Amazon for bookshops– Docmorris for pharmacies in Europe– Dell for computers

Dr. Karl Popp at ICSOB 2010 15

SAP Business Model

Type of Products/Services offered

Financial Physical Intangible Human

Creator Entrepreneur Manufacturer Inventor n/a

Distributor Financial

trader

Wholesaler,

RetailerIntangibles

distributor

n/a

Lessor Financial

lessor

Physical

lessor

Intangibles

lessor

Contrac-

tor

Broker Financial

broker

Physical

brokerIntangibles

broker

HR

brokerSAP lendsmoney tocustomers

SAP´s ecohub ismatchmaker forpartner solutions

SAP provideshosted and

software as aservice solutions

SAP has aconsultingbusiness

SAP licensessoftware for onpremise use to

customers

Dr. Karl Popp at ICSOB 2010 16

SAP Revenue Model (excerpt)

RevenueStream fromcommercial

licenses

RevenueStream fromadaption/extension

RevenueStream frommaintenance

SAPRevenuemodel

consists of

RevenueStream from

support

RevenueStream fromsubscription

RevenueStream fromecosystem

RevenueStream

fromservices

consists of

RevenueStream from

reselling

Dr. Karl Popp at ICSOB 2010 17

Microsoft Business Model

Type of Products/Services offered

Financial Physical Intangible Human

Creator Entrepreneur Manufacturer Inventor n/a

Distributor Financial

trader

Wholesaler,

RetailerIntangibles

distributor

n/a

Lessor Financial

lessor

Physical

lessor

Intangibles

lessor

Contrac-

tor

Broker Financial

broker

Physical

brokerIntangibles

broker

HR

broker

Microsoft hasnumerousOEM deals

Microsoftbuilds and

sellshardware and

appliances

Microsoft ismatchmaker forpartner solutions

and partnerservices

Dr. Karl Popp at ICSOB 2010 18

Google Business Model

Type of Products/Services offered

Financial Physical Intangible Human

Creator Entrepreneur Manufacturer Inventor n/a

Distributor Financial

trader

Wholesaler,

Retailer

Intangibles

distributor

n/a

Lessor Financial

lessorPhysical

lessor

Intangibles

lessor Contractor

Broker Financial

broker

Physical

broker

Intangibles

broker

HR

broker

Google offersappliances

Google is matchmaker between customersand advertisers based on customer inquiries

Google providessoftware as a

service (Gmail,Google Apps)

Dr. Karl Popp at ICSOB 2010 19

Google Search Services and Compensation

SearchCustomers

AdvertisingAdvertisingCustomers Google

Products,Assets orServices Compensation

PPCadver-tisingservice

SearchService

SearchCompensation

Advertisingpayments

Search customerscompensate for the search

service with data abouttheir search interest, their

location etc.

Dr. Karl Popp at ICSOB 2010 20

Summary

• A Business Model Concept is the first stepto research the tree of life of softwarecompanies

• It shows ways to analyze existing and tocreate new business models

• Further research needed on– the different business models as they are

used in the software industry– Which partnering strategies make sense for

different business models and businessoperation models

Dr. Karl Popp at ICSOB 2010 21

A first glimpse on the tree of life

• Contents

• In print• ISBN : 978-3-8391-6983-4