1. Business Models
in the Software Industry
Dr. Karl Popp
Corporate Development
SAP AG
karl.michael.popp@sap.com
http://www.drkarlpopp.com
Dr. Karl Popp at ICSOB 2010 1

2. Background information
http://www.drkarlpopp.com/BusinessMod
Business Models elsintheSoftwareindustry.html
in the software industry
Profit from Software
Ecosystems
ISBN-13: 978-3842300514
Business Models, partnership
models and ecosystems in the
software industry
Examples from over 50
software companies
Dr. Karl Popp at ICSOB 2010 2

3. Agenda
• About SAP
• A simple model for business models
• Business models in the software industry
– Usual and unusual
– Disruptive business models
• Business Models of large software
companies
• Summary
Dr. Karl Popp at ICSOB 2010 3

4. 47,598 SAP EMPLOYEES
WORLDWIDE
ANNUAL REVENUES
EXCEED €10.7 BILLION
OVER 97,000 COMPANIES IN
OVER 120 COUNTRIES RUN
SAP SOFTWARE
© 2010 SAP AG. All rights reserved. / Page 4

5. 35 YEARS OF INDUSTRY EXPERTISE
TRADING
INDUSTRIES
CONSUMER FINANCIAL
INDUSTRIES SERVICES
PROCESS DISCRETE
MANUFACTURING MANUFACTURING
SERVICES PUBLIC
SERVICES
© 2010 SAP AG. All rights reserved. / Page 5

6. A BELIEF THAT INNOVATION CAN
COME FROM ANYWHERE
Customers Academic Partners
Industry Partners INNOVATION SAP Employees
SAP Innovation Council Research Labs
Development Labs
© 2010 SAP AG. All rights reserved. / Page 6

7. Researching the tree of life of
software companies
Dr. Karl Popp at ICSOB 2010 7

8. Business Model
Business
model
consists
of
Type of Business
Revenue
Goods and model
Model
Services* Archetype*
*Source: Weill et al., Do Some Business Models Perform
Better than Others? A Study of the 1000 Largest US Firms,
MIT Center for Coordination Science Working Paper No. 226,
2005.
Dr. Karl Popp at ICSOB 2010 8

9. Types of goods and services
Type of
Goods and
Services
financial physical intangible human
Dr. Karl Popp at ICSOB 2010 9

10. Business Models
Type of Goods/Services offered
Financial Physical Intangible Human
Creator Entrepreneur Manufacturer Inventor n/a
Distributor Financial trader Wholesaler, Intangibles n/a
Retailer distributor
Lessor Financial lessor Physical lessor Intangibles Contractor
lessor
Broker Financial broker Physical broker Intangibles HR broker
broker
Source: Weill et al., Do Some Business Models Perform Better than Others? A Study
of the 1000 Largest US Firms, MIT Center for Coordination Science Working Paper
No. 226, 2005.
Dr. Karl Popp at ICSOB 2010 10

11. Common Business Models in the
Software Industry
Type of Goods/Services offered
Financial Physical Intangible Human
Creator Entrepreneur Manufacturer Inventor n/a
Distributor Financial trader Wholesaler, Intangibles n/a
Retailer distributor
Lessor Financial lessor Physical Intangibles Contractor
lessor lessor
Broker Financial broker Physical broker Intangibles HR broker
broker Most Software
Software vendors offering hosted vendors have
solutions or Software as a service a consulting
provide hardware usage to business
Dr. Karl Popp at ICSOB 2010 11 customers

12. Other Business Models in the
Software Industry
Type of Products/Services offered
Financial Physical IntangibleSoftware vendors
Human
Software trade intellectual
vendors property and do
have retail
Creator Entrepreneur Manufacturer Inventor OEM and resell
n/a
Software stores agreements
vendors
Distributor Financial trader Wholesaler, Intangibles n/a
lend
Retailer distributor
money
Lessor Financial Physical Intangibles Contractor
lessor lessor lessor
Broker Financial broker Physical broker Intangibles HR broker
Software vendors broker
are matchmakers
for partner
solutions
Dr. Karl Popp at ICSOB 2010 12

13. Business Model and Operations
Model
Type of Business
Goods and model
Revenue Business
Services Archetype
Model Model
is is is is
imple- imple- imple- imple-
mented mented mented mented
by by by by
Revenue
Production
Business
generation
Operations
Operations Model
Model /collection
Model
model
Dr. Karl Popp at ICSOB 2010 13

14. Disruptive Business Models
• Disruptive Business Models
– Undermine the business models of existing
companies in an industry
• Are mostly hybrid business models
– i. e. a new combination of several types of
products/services, archetypes and revenue
models
• Example: Google
– Revenue mostly comes from advertising
– other products/services don´t create revenue
Dr. Karl Popp at ICSOB 2010 14

15. Disruptive Business Operations
Models
• Disruptive Operations Models
– Undermine the business operations models in
an industry
• Mostly are new forms of Production Model, Business
Operations model or Revenue generation model (or a
combination thereof)
• Examples
– Amazon for bookshops
– Docmorris for pharmacies in Europe
– Dell for computers
Dr. Karl Popp at ICSOB 2010 15

16. SAP Business Model
Type of Products/Services offered
Financial Physical Intangible Human
Creator Entrepreneur licenses
SAP Manufacturer Inventor n/a
software for on
premise use to SAP provides
Distributor Financial trader Wholesaler,
customers Intangibles n/a
hosted and
Retailer distributor software as a
service solutions
Lessor Financial Physical Intangibles Contrac-
lessor lessor lessor tor
Broker Financial broker Physical broker Intangibles HR broker
broker SAP has a
SAP lends consulting
money to business
SAP´s ecohub is
customers matchmaker for
partner solutions
Dr. Karl Popp at ICSOB 2010 16

17. SAP Revenue Model (excerpt)
Revenue
Revenue Revenue Revenue
Stream
Stream from Stream from Stream from
from
subscription ecosystem reselling
services
consists of
SAP
Revenue
model
consists of
Revenue Revenue
Revenue Revenue
Stream from Stream from
Stream from Stream from
commercial adaption/
support maintenance
licenses extension
Dr. Karl Popp at ICSOB 2010 17

18. Microsoft Business Model
Type of Products/Services offered
Financial Physical Intangible Human
Microsoft
Creator builds and
Entrepreneur Manufacturer Inventor n/a
sells
hardware and Microsoft has
Distributor Financial trader Wholesaler, Intangibles n/a
appliances numerous
Retailer distributor
OEM deals
Lessor Financial Physical Intangibles Contrac-
lessor lessor lessor tor
Broker Financial broker Physical broker Intangibles HR broker
Microsoft is broker
matchmaker for
partner solutions
and partner
services
Dr. Karl Popp at ICSOB 2010 18

19. Google Business Model
Type of Products/Services offered
Financial Physical Intangible Human
Creator Entrepreneur Manufacturer Inventor n/a
Google provides
Distributor Financial trader Wholesaler, Intangibles n/a
software as a
Google offers Retailer distributor
service (Gmail,
appliances
Google Apps)
Lessor Financial lessor Physical Intangibles
lessor lessor Contractor
Broker Financial Physical Intangibles HR broker
broker broker broker
Google is matchmaker between customers
and advertisers based on customer inquiries
Dr. Karl Popp at ICSOB 2010 19

20. Google Search Services and
Compensation
Search customers
compensate for the search
service with data about
their search interest, their
location etc.
Advertising Search
payments Compensation
Advertising PPC Search Search
Google Service
Customers adver- Customers
tising
service
Products,
Assets or
Compensation
Services
Dr. Karl Popp at ICSOB 2010 20

21. Summary
• A Business Model Concept is the first step
to research the tree of life of software
companies
• It shows ways to analyze existing and to
create new business models
• Further research needed on
– the different business models as they are
used in the software industry
– Which partnering strategies make sense for
different business models and business
operation models
Dr. Karl Popp at ICSOB 2010 21

22. Background information
http://www.drkarlpopp.com/BusinessMod
Business Models elsintheSoftwareindustry.html
in the software industry
Profit from Software
Ecosystems
ISBN-13: 978-3842300514
Business Models, partnership
models and ecosystems in the
software industry
Examples from over 50
software companies
Dr. Karl Popp at ICSOB 2010 22

23. Video lessons
• Get your education online at
mindbites.com:
• http://www.mindbites.com/lesson/13903-
software-business-model-basics
• http://www.mindbites.com/lesson/13904-
software-revenue-models
Dr. Karl Popp at ICSOB 2010 23