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The context for this analysis is an
ecological model of component supply.

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component-based development

supply trends and strategies

According to the ecological model of component supply, there are multiple ecosystems, driven by different ecological principles. To make good money from software components, you have to respect all these ecological principles, which means you have to straddle multiple ecosystems.


software trends

greater differentiation of software work

Each advance in software engineering makes it more difficult for the software engineer to remain a true generalist. Some software engineers will become specialist component engineers, deploying formal methods to create and verify robust and widely reusable software components. Others will concentrate on satisfying local business requirements, designing context-sensitive and user-friendly interfaces.

from component scarcity to component abundance

A lot of the discussion of component-based development today is based on the premise that good components are scarce. A lot of the techniques are based on this mindset of component scarcity. However, if CBD takes off, we will quickly move into a world of component abundance. Indeed, we may even get into a world of component pollution, in which it becomes an antisocial act to overpublish redundant components.

increasing variety while decreasing variation

Standard components that can be configured in countless ways. For a business using CBD effectively, this establishes the possibility of mass customization, whereby the business can respond flexibly to the needs of individual customers, without losing economies of scale and scope.

increasing automation and maturity of tools

Existing CASE and OO vendors are starting to move into the CBD marketplace, and there are some exciting new players as well. Use of the current tools still demands considerable manual effort. Shells and interfaces often have to be built by hand, and the matching of component requirements is poorly supported. Over the next couple of years, we can expect the tools to become more powerful and easy to use, covering a greater range of the CBD processes. This will enable still greater productivity and scaleability.

software supply chain

types of supplier

Demand driven

Supply driven

Close relationship to customer base.

Focus on the services that are wanted in the selected market.

Competing on value.

Close relationship to technology base.

Focus on exploiting existing software assets.

Competing on price/cost.

Do you think there are any software supply ecosystems in which a supplier can be safe from competition from software mass customization? How would you be sure?

supply challenge

Bespoke. A software house that specializes in bespoke software development may detect increasing difficulties competing on price. If your competitors are achieving better economies of scale, without compromising quality and flexibility, then they will be able to undercut your prices.

Most software houses still bid for bespoke work on the basis of a simple formula: estimated cost plus contingency plus profit. There may be some opportunities for you to reduce costs or contingency, by improving your software process. But if your competitors are doing this too, this wonít be enough.

There are two possible strategies for survival. You can either move up the "food chain", concentrating on supply and packaging of services (while subcontracting the software engineering side to cheap suppliers in Bangalore). Or you can embrace the ecological imperative: conservation of energy.

Instead of bidding for bespoke work on a cost-plus basis, you must try to determine what the customer is willing to pay. If this isnít enough to cover your costs, then you need to find a way of satisfying the customer that leaves you with some residual value. If you have developed some software components that you can sell to other customers as well, this might well make up the difference. (There are other forms of residual value, but this is the most likely one for a software house to exploit.)

Off-the-shelf. Meanwhile, a software product vendor with a standard fixed range of products may detect increasing difficulties maintaining market share, or entering new markets. If your competitors can offer more flexible products, with greater availability and lower total cost of ownership, then they can erode your customer base.

The challenge for such suppliers is to leverage the economies of scale, to get wider flexibility and availability from an equivalent device base, and to get much greater internal levels of reuse. This is basically an architectural issue: how to improve the internal configuration and layering of the product. (Some suppliers will choose to keep the benefits of this improved architecture to themselves, while others will choose to open up the architecture to customers and third parties.

more

intermediaries

retail consolidation

recommended reading

Kevin Kelly. New Rules for the New Economy.
10 ways the network economy is changing everything.

US: Viking Penguin. UK: Fourth Estate. 1998

buy it from Amazon.com buy it from Amazon uk

acknowledgements


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This page last updated on June 24th, 1999.
Copyright © 1999 Richard Veryard
http://www.veryard.com

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