Software Vendor's Business Model Dynamics Case: TradeSys

Abstract

This case describes evolution of a small software company through three major phases of its life cycle. During the first phase, the business was founded within a subsidiary of a large multinational information technology (IT) company. In the second phase, the business evolved as a spin-off from the initial organization through a MBO (Management Buy-Out) into an independent software vendor. Finally, in the third phase, the business has established itself as a vertically-focused business unit within a publicly-quoted company operating in software and consulting businesses. These three phases are termed introduction, growth and maturity as defined by Cravens (1987, 376)1. The company described in this case, called TradeSys, Inc. (pseudonym), develops and sells software for trade unions and unemployment fund organizations. The business model of TradeSys, Inc. (later TradeSys) has evolved through a typical life cycle of product-oriented software companies in Finland. First, it was comprised of business information systems consultation and a proposition of systems solution to a few major customer organizations. This led to customer-initiated product development. Consequently, the deliverable of the very first project was developed as a solution to the needs of a single customer, which was later worked into a universal software product along with several customer projects. During all three major phases, the company had to rethink its business model and value propositions. At each stage, the ownership of the business has also changed. This case highlights the challenges of a business in the three major turning points in its life cycle and the major changes in the business model accordingly.