Pricing and contracting strategies for software products and services

The software industry is in a state of considerable flux. Rapid changes in technology enable firms to make a wide variety of product design and delivery decisions. This dissertation addresses two issues. The first is a product design choice: the frequent introduction of product upgrades. The second is a process design choice: the delivery of software as a subscription service over high-speed networks. The objective of this dissertation is to map the business implications of these technological configurations. Each product or process choice enables a particular pricing or contracting scheme. This dissertation analyzes the market segmentation and competitive equilibrium results that occur due to the implementation of such schemes. The specific pricing and contracting schemes that are studied are: upgrade pricing of software products, metered pricing of software services, and short-term rental contracts for software services. The analysis of competitive equilibrium provides some managerial insights on how these technologies may be deployed in a profitable manner.