Business Model and Aspects
The software development business model is a strategic model used by software development companies, product owners, startups, and others to sell, promote, develop and grow software products in the most efficient way that helps attain the expected revenue and competitive advantage.
The concept of a business model for software development encapsulates the next aspects:
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Business Idea
The Business Idea tries to answer the following questions: What is the product? Who is the target audience? What problems do we resolve? What benefits do users get? After the answer is understandable, your business idea becomes complete and ready to move to the next stage.
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Business Strategy
The Business Strategy defines mission, vision, goals, and objectives. This is the development plan for a certain time which envisions a particular way of product growth. If you define your priorities in a distinct and legible method, less important things will step into the background on your way to success.
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Business Plan
The Business Plan divides the strategy into smaller activities in different directions. These can be your marketing steps to achieve great product sales on the Internet or technical development to deliver the product of top-notch quality, etc. Planning becomes a crucial step to execute a business, you need a team and other resources like finances, time, technology expertise, and so on. Without pre-planned needs, you will experience holes from different directions. And it is best to cover these holes beforehand than to mend them on your way and lose valuable resources. They say, it’s better to learn from your mistakes, but when you are a business owner it’s better to plan everything because planning is essential.
Business Model: Things to Consider
Software development business models focus on how the product will operate in practice. It’s important to identify the value it will bring to all stakeholders and in what way exactly. Respectively, identifying the value means understanding and predicting the revenue. How the business will gain money depends on some factors which should be discovered and analyzed. These are:
- Market capabilities
- Value proposition
- Competition strategy
- Sources of revenue
- Cost structure
- Network effects
There are even more factors that should be taken into account. But the enlisted ones are the most important to get started with.
Types of Business Models
So, software development business models are designed to describe the product within three streams:
- Value stream – from the viewpoint of benefit it creates
- Business stream – from business operations, business actors and their roles
- Revenue stream – from the sources of revenue
A well-developed business model for software development helps achieve profitable investment, offer excellent service for users, and build a strong organizational structure.
What to take into account while building a business? Factors that can influence the software business model, of course. These are:
- market and competition environment
- customer needs and portraits
- stakeholder possibilities and financing environment
- resource environment
The distribution business model describes marketing channels, defines vendors, and sales processes. Software distribution model consists of:
- Cloud – combines the best cloud transition solutions
- On-premise – relates to infrastructure
- Hybrid – infrastructure and cloud systems
Product strategy is a high-level objective plan which describes how the product will achieve its mission and vision.
Revenue stream contains the next aspects:
- Advertising
- Subscription
- An-app purchases
- License based model
- Freemium model
- Code licensing: Proprietary software and Open-source
The software revenue model describes the way a company will generate revenue with the product. If the product is an online application, the example of a software revenue model can be a subscription through which a business obtains earnings. It can also be a Freemium model that offers users free accounts or buying premium packages. Grammarly is the application based on the Freemium revenue model.
License models define what software should be used for, conditions, restrictions of usage, and distribution under official authorization. Proprietary software is known as non-free software that never occurs in open sources and is defined as one that retains intellectual property rights. In contrast, open-source software is designed for collaboration and communication across the public and related domains.
Advertising is a well-known widespread practice of promoting the product and encouraging people to purchase. Different types of advertising can be used to increase the presence of a business on the Internet. The only thing to remember is that advertising is moving with unexpected speed and new uprising approaches in marketing have to be used to impress users constantly.
The services and implementation model describes how the product will be used by customers as a ready-made solution.
B2B model refers to a business that is conducted between companies (for example, wholesaler and retailer) rather than between a company and consumers directly which is a B2C model.
You can also find out the hourly wage for software engineer here!
Final Note
Creating your software business model and then following it will sound extremely challenging and overwhelming. However, think outside the box. Every challenge is a lesson to learn. Get to know every type of business model inside out and choose the one, which meets your business idea, strategy, and plan best.
