Performance of Business Models: Empirical Insights from the Software Industry

This paper analyses business models of software firms. The underlying framework comprises eight variables derived from a comprehensive software industry business model conceptualisation. Using this framework, we classify the business models of the global top 100 software firms based on their annual reports. Then, we run clustering algorithms in order to identify business model patterns. Clustering allows comparing patterns within and between business model clusters on different levels of granularity. Based on the business model clustering, we then analyse the firms’ financial performance in three categories: market value, profitability, and operating efficiency. Our results demonstrate which business model elements can be retrieved from annual reports. Further, we identify unique and similar business models among the sample firms. Some business models are found to outperform others and have distinguishing characteristics. This paper contributes to practice and research. Both can benefit from a structured industry overview in terms of today’s business models and their performance. This can be used to analyse the software industry and its firms. Practitioners can align their firms with the characteristics of top performing business models. For research, we also contribute to the body of knowledge of empirical business model performance.