SB Program

University of Jyväskylä

Basics of Software Business

ITK260

Fall 2003, Rauli Käppi

In cooperation with Oulu and Helsinki SB-programs

Special thanks to Oulu SB-line, who has been the major contributor for this material

SB Program

University of Jyväskylä

Additional credits for the course

Total of 7 more lectures (including guest lectures) Attending 6 lectures gives you +0,5 to your final grade Attending 4 gives you +0,25 to your final grade Passing the exam is mandatory to earn Any extra credit –

failed exams will not be added with any credits

SB Program

University of Jyväskylä

Schedule for the rest of the courseTime Place

Friday 3.10. at 14-16 Agora

Thursday 9.10. at 14-16 Agora

Tuesday 14.10. at 14-16 Agora

Friday 24.10. at 16-18 Agora

Thursday 30.10. at 8-10 Agora

Thursday 6.11. at 8-10 Agora

Wednesday 12.11 at 10-12 Agora

Exam 14.11 at 12-16

Second exam 1.12. At 12-16

Agora

SB Program

University of Jyväskylä

Focus for the rest of the course

European, Nordic and Finnish perspective Emphasis on Tailoring (projektiliiketoiminta) and product

businesses Interest in smaller companies and their challenges Comparison to the lectured issues in U.S. perspective Some consideration to legislative issues Guest speakers

SB Program

University of Jyväskylä

Motivation…

SB Program

University of Jyväskylä

Analysis of the situation

Software industry is already the most significant industry segment in U.S.

The SW industry is forecasted to rise to be the fourth main industry segment in Finland in 10 years time

The SW business area has been growing in Finland even during the past few years (of slow growth)

Even stronger growth is expected as the overall economic situation improves

SB Program

University of Jyväskylä

What is the aim of software business education in JYU / Finland?

Still a relatively new and a growing field The education of software engineering / programming

does not alone provide sufficient skills and knowledge for this area

The education in economics does not offer enough substance in the area of IT

The aim is to offer education to be used in marketing and product development of SW companies

SB Program

University of Jyväskylä

JYU SB-focus Merging with EC? Vision update in

progressSESEHi-Hi-

Tech Tech mgmmgm

ttECEC ISISDD

SBSB

SW-product bus.-in start-ups-In established-components/families

SW-tailoring bus.-project bus.-turnkey solutions-contracting

SW-related services-augmented product-edu, maint. support-service contracting

SB Program

University of Jyväskylä

Multiple skills are required in a SW product company

Product development and technology transfer Technical productisation Business models and revenue logic Planning and monitoring of finances Legislative issues (of IT) Marketing Sales and distribution Exporting Management

SB Program

University of Jyväskylä

Then to business…

SB Program

University of Jyväskylä

Lecture focus

It is assumed that you are already familiar with different classifications of software business (Secrets of Software Success, etc.)

The lecture focus moves from the world market to European market and finally to the Finnish market

You should be able to form a picture of key market areas for each of the previous

Software product business has been given some emphasis

SB Program

University of Jyväskylä

SB Program

University of Jyväskylä

SB Program

University of Jyväskylä

Total ICT spending 2001 by country 2001 (WITSA and IDC 2002)

SB Program

University of Jyväskylä

SB Program

University of Jyväskylä

SB Program

University of Jyväskylä

European IT vertical market, 2001 (EITO 2002)

SB Program

University of Jyväskylä

A short look on selected countries

Sweden– like Finland, strong electronics industry

Denmark– like Finland without Nokia, small and developed software industry

Germany– applications for industry are central, interest in developing business

processes, a few internationally known software applications Austria

– a passage of software products and hardware to east-European countries Ireland

– specialised in localisation, the European base for large U.S. software companies, has a growing own SW industry

Israel– spin-offs from the military industry, security- and encryption software,

good connections to U.S. financers and markets

SB Program

University of Jyväskylä

Software company survey in Finland 2003Helsinki University of Technology, Software Business and Engineering institute, Institute of Strategy and International Business

Finnish software product industry 2001 = 900 mill. € 2002 = 1+ billion €

Growth 14% from previous year mostly achieved from domestic markets (domestic market growth 20%)

Export is some 40% of the total revenue and remained on the same level as earlier

Currently tight economical situation

There are expectations of faster future growth

SB Program

University of Jyväskylä

Personnel of software product business

Employs some 10 000 professionals

Companies estimate only modest increase in personnel

By average 34% of the personnel works in Product Development (PD)

Sales and marketing is the second biggest personnel group

80% of the companies stated that the personnel know-how is aligned with the needs of the company

SB Program

University of Jyväskylä

Company age and development focusThe situation has normalised during past years – the relative amount of start-ups has gone down

Starting completely new products has become less common

Improving existing products’ level of productisation is seen important

SB Program

University of Jyväskylä

International software business

46 % carried out international SW business (37% 2001)

A large portion of the companies were in the early phase of their internationalisation

Export activity to 8,1 countries by average

Export revenue 6,5M€ by average (median 0,8M€)

Total value of export 400 million €

The expectation for annual growth for export 42% and domestic expected market growth 24%

SB Program

University of Jyväskylä

The process for internationalisation31% of the companies started their export at the age of 0-2 years

First export sale - median at 6 years

Most common markets in order: Sweden, USA and Germany

Average time to reach the market was 10 months

Most common approaches were direct sales and using a foreign reseller / agent

A small amount went international very late

SB Program

University of Jyväskylä

SB Program

University of Jyväskylä

Summary

The majority of Finnish (and other European) SW companies are small in the international business context

The internationalisation process as a whole is still in an early stage

The growth of the business came from domestic market year 2002, export business had almost no growth

The centers of IT-business are Helsinki (some 50%), Tampere, Turku, Jyväskylä and Oulu

The level of productisation is still relatively low

SB Program

University of Jyväskylä

Summary cont.

Product business is still a relatively small part of the whole IT business

Tailoring and hardware market are both bigger than software product business in terms of revenue

Product business has interesting qualities from the viewpoint of academic research (markets, processes, alliances, strategies, etc.) and is (often) a strong interest and focus area