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Evaluating Investments in Portability and Interoperability between Software Service Platforms

Listed author(s):
  • Netsanet Haile

    ()

    (Seoul National University, Seoul, Korea)

  • Jörn Altmann

    ()

    (Seoul National University, Seoul, Korea)

Within a closed ecosystem, end-users cannot interoperate with other platforms or port their software and data easily without a cost for interface integration or data re-formatting. The customers of these closed software service platforms are locked-in. Potential customers, who are aware of this lock-in issue, are hesitant to adopt a closed software service platform, slowing down the wide deployment of the software service platform. This paper applies an economic perspective to investigate the value creation for providers and users at different levels of interoperability. For the analysis, a value creation model for software service platforms within a software service ecosystem has been developed. Simulations of the value creation model show that, even if investments in interoperability and portability are aimed at addressing user requirements, their impact also drives the providers’ profitability. Furthermore, emerging providers require investing more than market leading providers, as they have less power to set de facto standards. The simulation results also show that there is an optimal level of investments, with respect to profit and return on investments. Overall, from these results, platform providers cannot only obtain an understanding on how investments in interoperability and portability impact cost, enable cost-effective service integration, and create value, but also design new strategies for optimizing investments.

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File URL: ftp://147.46.237.98/DP-136.pdf
File Function: First version, 2017
Download Restriction: no

Paper provided by Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) in its series TEMEP Discussion Papers with number 2017136.

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Length: 41 pages
Date of creation: May 2017
Date of revision: May 2017
Publication status: Published in Journal of Future Generation Computer Systems.
Handle: RePEc:snv:dp2009:2017136
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