Commoditization, in business, is a term used when branded and unique software or goods, in general, become simple commodities in the eyes of the market or consumers (source: wiki). As the market matures, commoditization tends to increase.
Opportunities stemming from Software Commoditization
‘Necessity is the mother of all inventions’ is a well-said proverb that fits precisely to this argument. Now-a-days, prominence is given to integration of various hardware or solutions rather than programming a new. There is no necessity for fresh solutions right now. We have been benefited by hardware commoditization. There is a rise of PC clones, replacing integrated proprietary systems with interchangeable parts available from multiple sources. Novel solutions are rather needed, when cohesive solution works well in the market. The rise of middleware and operating systems help commoditize many software layers and components. Increase in free and open source software fuels commoditization.
Price of software and hardware solutions has reasonably reduced. These solutions have become affordable to common man, encouraging them to discover various prospects in this software industry. This has given rise to many entrepreneurs in this profession and numerous solutions that have been able to build on these open source commodities.
There is a significant increase in technology convergence and standardization. For example, bundling is a common aspect of software solutions. A proprietary solution is often bundled with a commoditized solution and gains popularity in the market. There is a steady increase in the usage of many Linux distributions – Red Hat, Ubuntu, etc.
Commoditized solutions act as a baseline for many other software solutions and are a point of reference. Innovations are still there, may not be traditional ones, but commoditization has geared up many companies by revolutionizing new ideas fabricated upon these commoditized components.
Limitations stemming from Software Commoditization
Low priced software often compromise on quality of software. Numerous bugs are identified and a constant need for enhancement exists.
There is a deficiency of funding in research and development in many companies. Innovations are not often from the scratch. Software professionals definitely need to design their approach to make use of existing free solution to maintain low cost.
Competitions in market are an obvious fact of commoditization. Almost everyone is trying to grab the market and scale well by quoting low prices. Disruptive technologies are evolving due to commoditization.
Strategies to adapt to Commoditization
- Bundling software is a very effective strategy. Proprietary software can be bundled with commoditized component to gain prominent status in market and win customers.
- Patents are often used as a strategy against commoditization. Trademarks, registered software and copyrights are some approaches used by companies to an advantage in market.
- Knowledge of middleware can facilitate opportunities for better growth in this era of software industry.
- Building a brand using commoditized components and leaving the rest to customer decision is often a safe approach. Example: using YouTube and blogs, or providing evaluation copy of software to demonstrate the power of our software can work well in this market.
Time has to be given to this trend to downsize. Many approaches and strategies can be listed here to adapt to commoditization. Software industry is maturing fast. Time changes drastically in this industry. There are no fixed set of rules. Every software professional must decide and analyze their stratagem to actualize their approach to acclimate to commoditization.