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Strategy for High Tech Companies-What to Think About

Michael A. Cusumano: June 5, 2004; Running Time: 55:12

About the Lecture

About the Lecture

If you are starting out in the software business, Michael Cusumano has some advice for you: think hard about whether to specialize in products or services, and take a serious look at trends in the industry. For the past 20 years, Cusumano has been consulting with and researching some of the top high technology companies worldwide. He has seen software companies enter the market with a “killer application,” make some good profits, only to find their product “commoditized.” In one case he describes, the price of a software license fell from $1.5 million in 2000 to $250k today. And, he cautions, “in bad economic times, product sales can fall off a cliff.” So what works? “The only guaranteed revenues for software companies may be services and maintenance revenues,” Cusumano says. In fact, his research shows one company after another (PeopleSoft, Oracle, SAP, for instance) transitioning from products to services in order to survive. Cusumano has graphed so many of these corporate “criss crosses” that he considers them “life-cycle models.” Only one company, he says, has managed to stay exclusively true to product sales: Microsoft. To succeed, “most software products companies become services or hybrid companies…where you’ve got the basic product and build some custom features or a special interface, so the solution you’re selling becomes much stickier.”

Lecture Details

Location: Wong Auditorium

About the Speaker

Michael A. Cusumano

Sloan Management Review Distinguished Professor of Management

Michael A. Cusumano specializes in strategy and technology management in the computer software industry, as well as automobiles and consumer electronics. Cusumano is the author of six books, including Microsoft Secrets (1995), and Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation (2002). He has also served as editor-in-chief and chairman of the MIT Sloan Management Review and has written for The Wall Street Journal, Computerworld, and The Washington Post. He has consulted for major companies around the world, and is a director of Infinium Software (ERP applications) and Investhink, Ltd. (financial services content and integration software), and an advisor to various companies including NetNumina Solutions (e-business software), firstRain (wireless and web services software), and H-5 Technologies (digital search technology). His book, "The Business of Software" is published by the Free Press.

He received a B.A. from Princeton in 1976 and a Ph.D. from Harvard in 1984. He completed a postdoctoral fellowship in Production and Operations Management at the Harvard Business School during 1984-86. He is fluent in Japanese and has lived and worked in Japan for seven years. He received two Fulbright Fellowships and a Japan Foundation Fellowship to study at Tokyo University.

Michael A. Cusumano

Cusumano's home page

About the Host

About the Host

MIT Sloan School of Management

The MIT Sloan School of Management, based in Cambridge, Massachusetts, is one of the world’s leading business schools — conducting cutting-edge research and providing management education to top students from more than 60 countries. The School is part of MIT’s rich intellectual tradition of education and research.

MIT Sloan began in 1914 as engineering administration curriculum in the MIT Department of Economics and Statistics. The scope and depth of this educational focus have grown steadily in response to advances in the theory and practice of management to today’s broad-based management school.

A program offering a master’s degree in management was established in 1925. The world’s first university-based executive education program — the MIT Sloan Fellows — was created in 1931 under the sponsorship of Alfred P. Sloan, Jr., an 1895 MIT graduate who was then chairman of General Motors. A MIT Sloan Foundation grant established the MIT School of Industrial Management in 1952 with a charge of educating the “ideal manager.”