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Principles and Fundamentals for SW Commercialization

For years, companies have struggled to trying to expand their business software intellectual property direction. Large companies spend billions each year developing software without getting a real business value back via sold products. The many of these companies has realized that the software they build for running their businesses is valuable for monetization without giving it “free”. The many companies are still struggling how to build the most valuable SW business model for their purposes.

There are three main models for commercializing software. Each has benefits and drawbacks. The final decision for which model to pursue depends on the particular software technology and the inventing company's strategy, business and operational structure.

END USER LICENSING:

+ Controlling over pricing and profits
+ Controlling over which companies can obtain a license to the software

- Responsibility for all documentation, installation & maintenance
- A sales force must be retained
- Licensor must provide all warranties and service


JOINT VENTURE:

+ Potential to reap high return in case of new company will be sold in the future
+ Licensor is completely separated from the software and the new entity takes on all warranties and service requirements

- High initial costs
- Staffing/Resourcing
- Usually capitalized by the licensor and/or outside investors
- High profile failure rate


DISTRIBUTION AGREEMENT:

+ Sales, maintenance, support & warranty requirements are off-loaded to licensee
+ Leverages existing customer base
+ Licensee can integrate the software into its existing products/product suites

- Pricing flexibility to software vendor
- Dependent on execution by licensee
- Limited control over which end-users will buy licenses


PROCESS FRAMEWORK FOR COMMERCIALIZATION (by Vijay K Volly):
  1. Imagining
  2. Mobilizing Interest & Endorsement
  3. Incubating
  4. Mobilizing Resources for Demonstration
  5. Demonstrating
  6. Mobilizing Market Constituents
  7. Promoting
  8. Mobilizing Assets for Delivery
  9. Sustaining

The idea behind the process is that there are five key phases that all new ideas must pass through if they are eventually going to be adopted by a large number of consitituents. These phases are connected by “mobilization” bridges that help the entrepreneur move from one phase to the next.

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