Purchasing software components at the dawn of market

Abstract

This study explores the role and nature of purchasing and supplier relationship management in the specific, complex industry setting. The purpose is to develop concepts to describe, conceptualise and analyse the emerging software component market from the point of view of the industrial buyer. The theoretical discussion on the market is concluded with a framework consisting of two parts; one describing the main elements of the market from the buyer's perspective and another describing the dynamism of the market. The theoretical framework suggests that the elements of the market from the buyer company's perspective are (1) the own needs, (2) the industry demand, (3) the object of exchange, (4) the exchange mechanism, (5) the exchange counterpart and (6) the industry supply. In the dynamic part of the framework, the development of the software component market, i.e. the progression of the market process is understood through change of heterogeneity of supply and demand. The empirical part of the study includes an embedded single-case study where a buyer perceived COTS software component market is analysed. First, the elements of the case market are studied and variables describing these elements are identified. Following this, the dynamic part of the framework is used as basis for identifying alternative types of markets for the development of the COTS software component market. This is resulted in a typology of four market types from the purchasing perspective; (1) Co-operation projects, (2) Ideal market, (3) Competitive supply management and (4) Horizontal competition. It is argued that all these represent a different type of situation from the industrial purchasing perspective. Finally, it is suggested how the different elements of the market process represent themselves and how they can be used in managing purchasing and influencing the markets in each of these possible market types.

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