What is the platform for a software

Platform strategy

Two types of platforms

Computer science understands a platform to be a technical solution on the basis of which other technical solutions can be implemented. Software platforms are of particular importance in business informatics. Software platforms are software solutions on the basis of which other software solutions can be executed.

Variants can be distinguished in the software solutions [Buxmann et al. 2011]: Industry platforms are software solutions that serve as the basis for complementary applications that are usually created by different companies in a common ecosystem or industry. This must be distinguished from product platforms. Product platforms support the reuse of software modules and are therefore an aid for the efficient production of a large number of functionally similar software products.

Building platforms requires specific strategies. The specific strategies for setting up industry platforms and product platforms are shown below.

Strategies for building industry platforms

The primary goal of the operators of industry platforms is to ensure the attractiveness of their own platform by offering the broadest possible range of complementary applications for the largest possible group of end customers [Gawer 2009]. The strategic challenge results from the trade-off between diversity and control. By opening the platform to external developers, the variety of complementary innovations can be increased. At the same time, however, opening the platform can also lead to a loss of control over the platform [Benlian et al. 2015].

The second challenge for operators of industry platforms is pricing. It is specific that both the end customers and the providers of complementary applications are relevant for the operator of a platform. Both markets are connected with one another, since the scope of the range of applications increases the attractiveness of the platform for end customers, but conversely, applications are only developed for platforms that can be expected to have a sufficient number of end customers as users. This problem can be grasped with the construct of two-sided markets [Rochet, Tirole 2006]. For example, it can be shown that the outlined "chicken and egg" problem can be solved by targeted subsidization on one of the two sides of the market.

An example of the successful establishment of a software industry platform is the Apple-operated App Store for iPhone and iPad applications. By opening up the smartphone platform to application developers, end customers now have over 2,200,000 applications to choose from (as of October 2017). Apple has waived the subsidization of general partners for its App Store, but in the standard case receives 30% of the sales generated via the platform from the general partners.

Strategies for building product platforms

When introducing product platforms, the focus is on reducing the costs of software development. The specific goal is to develop a given amount of software products with the smallest possible number of modules or to be able to present the largest possible number of variants of a product on the market with a given number of modules. A large number of companies, both user companies and specialized software companies, have been attempting such projects for years - with varying degrees of success.

It should be noted that the cost structure in software development changes significantly with the introduction of a product platform. For the developing company, the introduction of a product platform initially means that not inconsiderable investments have to be made in setting up the platform. In addition, there are costs for integrating each module stored in the platform into the products. These costs are typically only overcompensated if the products are technically similar and a larger number of modules can be used in several products [Baldwin and Clark 1997].

A major challenge for software companies is to organizationally implement the rather abstract idea of ​​product platforms. The first starting points for this can be found in newer concepts of component-oriented software development as well as in the idea of ​​product lines.

 

literature

Baldwin C.Y. ; Clark K.B .: Managing in an age of modularity. Harvard Business Review (1997), 75, pp. 84-93.

Benlian, A., Hilkert, D., Hess, T .: How open is this platform? The meaning and measurement of platform openness from the complementor's perspective. Journal of Information Technology (2015), 30: 3, pp. 209-228.

Buxmann, P.; Diefenbach, H. Hess, T .: The software industry. 2nd edition, Berlin et al. 2011.

Gawer, A. (Ed.): Platforms, Markets and Innovation. Edward Elgar, London 2009.

Rochet, J.; Tirole, J .: Two-sided Markets: A Progress Report. In: The RAND Journal of Economics 37 (2006) 3, pp. 645-667.

author


Prof. Dr. Thomas Hess, Institute for Information Systems and New Media, Ludwig Maximilians University Munich

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