|Lesson 12||Results of Technology Trends |
|Objective || Discuss the results of the technology trends. |
Results of Technology Trends
Three Market Trends have emerged
(ASP) Application Service Providers
The increase in network bandwidth, the growth of computing server performance, and the growing acceptance of the Internet as communication medium has given rise to a new software distribution model:
1) application outsourcing and 2) software leasing.
Application outsourcing refers to the emerging trend of deploying applications over the Internet, rather than installing them in the local environment. Application outsourcing shifts the burden of installing, maintaining, and upgrading an application from the application user to the remote computing center, henceforth referred to as application service provider or ASP.
Software leasing refers to the emerging trend of offering applications on a subscription basis, rather than through one of the traditional software licensing models. In the ASP model, system administration and application management is performed entirely by the provider.
It thus becomes possible to charge a user on a pay-peruse basis, differentiable on a very fine-granular basis. This fine-grained differentiation can go as far as taking the specific functionality required by individual customers into account and metering, for computation consumed, the resources for exact billing. Thus, rather than selling a software license—giving a user "all-or-nothing" of a product—the software may be leased to the user, offering a "pay-by-need" and "pay-on-demand" model.
The customer only pays for the actual functionality used and resources consumed.
|Pricing Strategies are under pressure||
- Growing competition will continue to force the average selling price of a business PC down by 25% by 2002
- With manufacturer costs remaining flat, and market expenses rising, PC margins will be cut in half to 4%
- eTailers are subsidizing product margins with market cap and advertising revenue
|Channel Structure is fragmenting|
- eCommerce is having a dramatic effect on channel structure and creating significant efficiencies for channel participants
- Manufacturers are communicating directly with channel users and end-users
|End-User and channel relationships and the data they generate are the focus of competitive advantage|
- "Competitive advantage is driven less by WHAT you sell and more by HOW you sell,
Michael Dell, Founder of Dell Computer Corporation
- "HOW you market has become more important than WHAT you market"- George P. Orban, CEO Egghead