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Strategy for High Tech Companies-What to Think About

06/05/2004 10:00 AM Wong
Michael Cusumano, Sloan Management Review Distinguished Professor of Management

Description: If you are starting out in the software business, Michael Cusumano has some advice for you: think hard about whether to specialize in products or services, and take a serious look at trends in the industry. For the past 20 years, Cusumano has been consulting with and researching some of the top high technology companies worldwide. He has seen software companies enter the market with a "killer application," make some good profits, only to find their product "commoditized." In one case he describes, the price of a software license fell from $1.5 million in 2000 to $250k today. And, he cautions, "in bad economic times, product sales can fall off a cliff." So what works? "The only guaranteed revenues for software companies may be services and maintenance revenues," Cusumano says. In fact, his research shows one company after another (PeopleSoft, Oracle, SAP, for instance) transitioning from products to services in order to survive. Cusumano has graphed so many of these corporate "criss crosses" that he considers them "life-cycle models." Only one company, he says, has managed to stay exclusively true to product sales: Microsoft. To succeed, "most software products companies become services or hybrid companies 'where you've got the basic product and build some custom features or a special interface, so the solution you're selling becomes much stickier."

About the Speaker(s): Michael A. Cusumano specializes in strategy and technology management in the computer software industry, as well as automobiles and consumer electronics. Cusumano is the author of six books, including Microsoft Secrets (1995), and Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation (2002). He has also served as editor-in-chief and chairman of the MIT Sloan Management Review and has written for The Wall Street Journal, Computerworld, and The Washington Post. He has consulted for major companies around the world, and is a director of Infinium Software (ERP applications) and Investhink, Ltd. (financial services content and integration software), and an advisor to various companies including NetNumina Solutions (e-business software), firstRain (wireless and web services software), and H-5 Technologies (digital search technology). His book, "The Business of Software" is published by the Free Press. He received a B.A. from Princeton in 1976 and a Ph.D. from Harvard in 1984. He completed a postdoctoral fellowship in Production and Operations Management at the Harvard Business School during 1984-86. He is fluent in Japanese and has lived and worked in Japan for seven years. He received two Fulbright Fellowships and a Japan Foundation Fellowship to study at Tokyo University.

Host(s): Sloan School of Management, MIT Sloan School of Management

Tape #: T18786, 18787, 18788

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MIT World — special events and lectures

MIT World — special events and lectures

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