IDEAS home Printed from https://ideas.repec.org/a/spr/infsem/v19y2021i1d10.1007_s10257-020-00499-9.html
   My bibliography  Save this article

An analysis of product strategy in cloud transition considering SaaS customization

Author

Listed:
  • Zhongdong Xiao

    (Xi’an Jiaotong University)

  • Wenjun Shu

    (Xi’an Jiaotong University)

  • Abigail Osei Owusu

    (Xi’an Jiaotong University)

Abstract

When traditional enterprise software vendors adapt to software as a service (SaaS) practices and evolving to cloud service models, there is a major change occurring in the enterprise: a new hybrid product strategy consists of on-premises software and competitive customized SaaS. For the first time, we build a stylized model to reveal the influence of SaaS customization on the decisions of monopoly software vendor in the transition period. Increasing the customization efficiency of SaaS results in two possible structural regimes in the market. One is single on-premises software dominate the market if SaaS is customized at a low level and the other is hybrid products segment the market if SaaS is moderate-level customized. Surprisingly, software vendors with high customization proficiency should not allow SaaS products to dominate the market. It would benefit more from offering a competitive hybrid product strategy. Therefore, this paper does not recommend traditional software vendors to transform into pure cloud service providers. This key findings remain valid in the extended analysis of other customization technologies. Besides, the extension models show that both configuration and personalization customization technologies outperform the modification customization technology.

Suggested Citation

  • Zhongdong Xiao & Wenjun Shu & Abigail Osei Owusu, 2021. "An analysis of product strategy in cloud transition considering SaaS customization," Information Systems and e-Business Management, Springer, vol. 19(1), pages 281-311, March.
  • Handle: RePEc:spr:infsem:v:19:y:2021:i:1:d:10.1007_s10257-020-00499-9
    DOI: 10.1007/s10257-020-00499-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10257-020-00499-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s10257-020-00499-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Abhijit Dutt & Hemant Jain & Sanjeev Kumar, 2018. "Providing Software as a Service: a design decision(s) model," Information Systems and e-Business Management, Springer, vol. 16(2), pages 327-356, May.
    2. K. Sridhar Moorthy, 1984. "Market Segmentation, Self-Selection, and Product Line Design," Marketing Science, INFORMS, vol. 3(4), pages 288-307.
    3. Hsing Kenneth Cheng & Shengli Li & Yipeng Liu, 2015. "Optimal Software Free Trial Strategy: Limited Version, Time-locked, or Hybrid?," Production and Operations Management, Production and Operations Management Society, vol. 24(3), pages 504-517, March.
    4. Shengli Li & Hsing Kenneth Cheng & Yong Jin, 2018. "Optimal Distribution Strategy for Enterprise Software: Retail, SaaS, or Dual Channel?," Production and Operations Management, Production and Operations Management Society, vol. 27(11), pages 1928-1939, November.
    5. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    6. Jia, Kunhao & Liao, Xiuwu & Feng, Juan, 2018. "Selling or leasing? Dynamic pricing of software with upgrades," European Journal of Operational Research, Elsevier, vol. 266(3), pages 1044-1061.
    7. Katz, Michael L, 1984. "Firm-Specific Differentiation and Competition among Multiproduct Firms," The Journal of Business, University of Chicago Press, vol. 57(1), pages 149-166, January.
    8. Hal R. Varian, 2000. "Buying, Sharing and Renting Information Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 473-488, December.
    9. Dan Ma & Abraham Seidmann, 2015. "Analyzing Software as a Service with Per-Transaction Charges," Information Systems Research, INFORMS, vol. 26(2), pages 360-378, June.
    10. Hemant K. Bhargava & Vidyanand Choudhary, 2008. "Research Note--When Is Versioning Optimal for Information Goods?," Management Science, INFORMS, vol. 54(5), pages 1029-1035, May.
    11. Shivendu Shivendu & Zhe (James) Zhang, 2015. "Versioning in the Software Industry: Heterogeneous Disutility from Underprovisioning of Functionality," Information Systems Research, INFORMS, vol. 26(4), pages 731-753, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joan Calzada & Tommaso M. Valletti, 2012. "Intertemporal Movie Distribution: Versioning When Customers Can Buy Both Versions," Marketing Science, INFORMS, vol. 31(4), pages 649-667, July.
    2. Preyas S. Desai, 2001. "Quality Segmentation in Spatial Markets: When Does Cannibalization Affect Product Line Design?," Marketing Science, INFORMS, vol. 20(3), pages 265-283, August.
    3. Amit Basu & Sreekumar Bhaskaran, 2018. "An Economic Analysis of Customer Co-design," Information Systems Research, INFORMS, vol. 29(4), pages 787-804, December.
    4. Joan Calzada & Guillem Ordóñez, 2012. "Competition in the news industry: fighting aggregators with versions and links," Working Papers 12-22, NET Institute.
    5. Maxim Sinitsyn, 2016. "Managing Price Promotions Within a Product Line," Marketing Science, INFORMS, vol. 35(2), pages 304-318, March.
    6. Terrence August & Duy Dao & Kihoon Kim, 2019. "Market Segmentation and Software Security: Pricing Patching Rights," Management Science, INFORMS, vol. 65(10), pages 4575-4597, October.
    7. Yogesh V. Joshi & David J. Reibstein & Z. John Zhang, 2016. "Turf Wars: Product Line Strategies in Competitive Markets," Marketing Science, INFORMS, vol. 35(1), pages 128-141, January.
    8. MATHUR Sameer & DEWANI Prem Prakash, 2015. "Market Entry, Product Quality And Price Competition," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 10(2), pages 62-82, August.
    9. Eric T. Anderson & James D. Dana, Jr., 2009. "When Is Price Discrimination Profitable?," Management Science, INFORMS, vol. 55(6), pages 980-989, June.
    10. Yonghong Sun, 2020. "Optimal service versioning for dating platforms," Information Technology and Management, Springer, vol. 21(4), pages 217-226, December.
    11. Qiu-Hong Wang & Kai-Lung Hui, 2017. "Technology Mergers and Acquisitions in the Presence of an Installed Base: A Strategic Analysis," Information Systems Research, INFORMS, vol. 28(1), pages 46-63, March.
    12. Palsule-Desai, Omkar D. & Tirupati, Devanath & Shah, Janat, 2015. "Product line design and positioning using add-on services," International Journal of Production Economics, Elsevier, vol. 163(C), pages 16-33.
    13. Steven M. Shugan & Jihwan Moon & JQiaoni Shi & Nanda S. Kumar, 2017. "Product Line Bundling: Why Airlines Bundle High-End While Hotels Bundle Low-End," Marketing Science, INFORMS, vol. 36(1), pages 124-139, January.
    14. Kai-Lung Hui & I.P.L. Png, 2005. "The Economics of Privacy," Industrial Organization 0505007, University Library of Munich, Germany, revised 29 Aug 2005.
    15. Arda Yenipazarli & Asoo J. Vakharia, 2017. "Green, greener or brown: choosing the right color of the product," Annals of Operations Research, Springer, vol. 250(2), pages 537-567, March.
    16. Julie Holland Mortimer, 2007. "Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(3), pages 1307-1350.
    17. George Deltas & Thanasis Stengos & Eleftherios Zacharias, 2011. "Product line pricing in a vertically differentiated oligopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 907-929, August.
    18. Zhang, Yibin & Hafezi, Maryam & Zhao, Xuan & Shi, Victor, 2017. "Reprint of “The impact of development cost on product line design and its environmental performance”," International Journal of Production Economics, Elsevier, vol. 194(C), pages 126-134.
    19. Kopalle, Praveen K. & Pauwels, Koen & Akella, Laxminarayana Yashaswy & Gangwar, Manish, 2023. "Dynamic pricing: Definition, implications for managers, and future research directions," Journal of Retailing, Elsevier, vol. 99(4), pages 580-593.
    20. José A. Novo‐Peteiro, 2023. "Product design with attribute dependence," Manchester School, University of Manchester, vol. 91(4), pages 361-385, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:infsem:v:19:y:2021:i:1:d:10.1007_s10257-020-00499-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.