A Proposal for an Econometric Analysis of Switching Costs in the Software Indsutry
نویسنده
چکیده
I. Research Problem The total cost of ownership to implement a software package typically is much higher than the purchase price of software, sometimes as high as twelve times the price. Integrating software with the pre-existing technical architecture, changing business processes, training new users on the system, and maintenance costs for the software make it difficult for customers to replace software products. These high switching costs can lock customers in and increase the value of the installed base. As a result, the size of the installed base is an important performance measure for the software industry. The installed base, in turn, impacts competitive strategy. A firm such as Microsoft with a significant installed base may deter entry from new firms. Or, the value of an installed base may influence product strategy, pricing, and technology adoption.
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