Analysis of Software Services Industry
Analysis of software services industry
Q1 – Which industry is being analyzed?
The industry that will be a part of my analysis is the software services & consulting industry. I would simplify and constrict it further to consulting services based on a global development model – provide r procure services from anywhere in the world to any part of the world. I have been associated with this industry or business model for over a decade. As a business consultant I provide my services to my client & manage their IT operations, including large programs that align with their strategic needs.
Software services industry started gaining a lot of attention since the mid-80s. The reason was personal computing capabilities that democratized the digitized world from large companies to households. Since then advances in networking & technologies have catapulted the world we live in into different dimensions. Since the 90s, as the Eastern Europe & Asian countries opened post-communism, with decrease in network cost & high availability, software services made a paradigm shift.
Q2 – Barriers to Entry
Economies of scale
The software industry is highly competitive. First we will analyze the economies to scale.
Usually with all industries the overhead costs are spread with the scale of operations. However, the fixed cost in the software outsourcing industry is low. The only real fixed costs are those of buildings where industry workers sit and perform their work and sales. In comparison with the revenues, the required assets to perform the work being very low, software industry faces very low advantage related to economy of scale. Everything else, management costs, cost of administration, cost of equipment like computers etc are somewhat proportional to the number of resources employed. However, an entrant into this industry may need to pay higher salary to their employees being new in the industry, since the risk involved in joining a new company from the
Q1 – Which industry is being analyzed?
The industry that will be a part of my analysis is the software services & consulting industry. I would simplify and constrict it further to consulting services based on a global development model – provide r procure services from anywhere in the world to any part of the world. I have been associated with this industry or business model for over a decade. As a business consultant I provide my services to my client & manage their IT operations, including large programs that align with their strategic needs.
Software services industry started gaining a lot of attention since the mid-80s. The reason was personal computing capabilities that democratized the digitized world from large companies to households. Since then advances in networking & technologies have catapulted the world we live in into different dimensions. Since the 90s, as the Eastern Europe & Asian countries opened post-communism, with decrease in network cost & high availability, software services made a paradigm shift.
Q2 – Barriers to Entry
Economies of scale
The software industry is highly competitive. First we will analyze the economies to scale.
Usually with all industries the overhead costs are spread with the scale of operations. However, the fixed cost in the software outsourcing industry is low. The only real fixed costs are those of buildings where industry workers sit and perform their work and sales. In comparison with the revenues, the required assets to perform the work being very low, software industry faces very low advantage related to economy of scale. Everything else, management costs, cost of administration, cost of equipment like computers etc are somewhat proportional to the number of resources employed. However, an entrant into this industry may need to pay higher salary to their employees being new in the industry, since the risk involved in joining a new company from the