Economic Analysis of Integrated Software Development and Consulting Companies

The still growing use of Internet technologies and corporate software shape the structure of the software industry. While versions of the Computational Grid or service orientated architectures promise systems and environments where users merely access software in a plug-and-play-manner, experience and empirical results point at the installation and integration efforts for software rollout and integration projects. Also economic practice blurs the boundaries between software and service providers and different models of software vendor and software integrator relationships have evolved. This paper therefore addresses strategic issues of joint software vendor/software integrator companies with the aim to understand the underlying dynamics and complex feedback structures of such companies. With the help of a System Dynamics simulation model we analyze the complex interaction for different pricing, quality and timing strategies for the software production process in combination with several sales and software integration strategies.