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Evaluating Investments in Portability and Interoperability between Software Service Platforms

Author

Listed:
  • Netsanet Haile

    (Seoul National University, Seoul, Korea)

  • Jörn Altmann

    (Seoul National University, Seoul, Korea)

Abstract

Within a closed ecosystem, end-users cannot interoperate with other platforms or port their software and data easily without a cost for interface integration or data re-formatting. The customers of these closed software service platforms are locked-in. Potential customers, who are aware of this lock-in issue, are hesitant to adopt a closed software service platform, slowing down the wide deployment of the software service platform. This paper applies an economic perspective to investigate the value creation for providers and users at different levels of interoperability. For the analysis, a value creation model for software service platforms within a software service ecosystem has been developed. Simulations of the value creation model show that, even if investments in interoperability and portability are aimed at addressing user requirements, their impact also drives the providers’ profitability. Furthermore, emerging providers require investing more than market leading providers, as they have less power to set de facto standards. The simulation results also show that there is an optimal level of investments, with respect to profit and return on investments. Overall, from these results, platform providers cannot only obtain an understanding on how investments in interoperability and portability impact cost, enable cost-effective service integration, and create value, but also design new strategies for optimizing investments.

Suggested Citation

  • Netsanet Haile & Jörn Altmann, 2017. "Evaluating Investments in Portability and Interoperability between Software Service Platforms," TEMEP Discussion Papers 2017136, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised May 2017.
    • Handle: RePEc:snv:dp2009:2017136
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    File URL: http://temep-repec.my-groups.de/DP-136.pdf
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    References listed on IDEAS

    as
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    6. Kibae Kim & Jorn Altmann & Junseok Hwang, 2010. "An Analysis of the Openness of the Web2.0 Service Network Based on Two Sets of Indices for Measuring the Impact of Service Ownership," TEMEP Discussion Papers 201067, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Oct 2010.
    7. Netsanet Haile & Jorn Altmann, 2015. "Risk-Benefit-Mediated Impact of Determinants on the Adoption of Cloud Federation," TEMEP Discussion Papers 2015122, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised May 2015.
    8. Juthasit Rohitratana & Jorn Altmann, 2012. "Impact of Pricing Schemes on a Market for Software-as-a-Service and Perpetual Software," TEMEP Discussion Papers 201288, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Mar 2012.
    9. Benlian, Alexander & Hess, T., 2010. "The risks of sourcing software as a service — An empirical analysis of adopters and non-adopters," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 57926, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
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    12. Selam Abrham Gebregiorgis & Jorn Altmann, 2012. "IT Service Platforms: Their Value Creation Model and the Impact of their Level of Openness on their Adoption," TEMEP Discussion Papers 201295, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jun 2012.
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    15. Ivan Breskovic & Jorn Altmann & Ivona Brandic, 2012. "Creating Standardized Products for Electronic Markets," TEMEP Discussion Papers 201296, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Sep 2012.
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    Cited by:

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    More about this item

    Keywords

    Cloud Computing; Software Service Platform; Interoperability; Portability; Value Creation Model; Computational Economics; Simulation; Value Analysis; Net Present Value; Return On Investments; Investment Assessment.;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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