Examining the purchased software selection decision: The role of network effects

Software users have played an increasingly important role in software purchase decisions in recent years. At the same time, IT operations are under increased scrutiny due to Sarbanes-Oxley and other legislation. Thus, the software selection decision has become an area of sensitivity and conflict between users and IT professionals (Aaron, 2002; Beynon 2006). This research examines the role of demand-side economies of scale, also known as "network effects" in the software selection decision and how these effects may influence the decision of software users and IT professionals differently.; Network effects have been proposed as a mechanism whereby the product with the larger installed base will be perceived as offering more value to the software purchaser. The purchaser may infer that the product with the larger installed base will offer a better service network, will be less likely to go out of business, will have more complementary products available, will be of higher quality, and that the benefits of learning the software will have a more positive impact on the purchaser's career. In this study, a general software selection model was specified based on previous IT and marketing literature. The role of network effects was incorporated into this model. An experiment was developed to test the Selection model across both users and IT professionals across two risk scenarios (high and low). The results were examined for differences between IT and user groups. Finally, this research also makes use of a mental models approach to the selection decision. Using a semantic differential approach and Pathfinder software, software selection models were developed for users and IT Professionals and compared for differences. The results of these models were also compared to the proposed model.; This study has found that a significant interaction between the subject's profession (IT Professional or User) and the risk scenario (high or low) directly impacts the subject's selection decision. Users chose the product with stronger network effects over a more functional product in both the high risk and low risk scenarios. IT Professionals chose the more functional product under the low risk scenario, but chose the product with stronger network effects under the high-risk scenario. Users' choice decisions were significantly influenced by their product preferences and learning effects, while IT professional's product choice was more significantly determined by network stability effects. Both groups were equally influenced by the products overall functionality, but users were more consistent in their evaluations of a product's functionality.