The Strategic Role of Software Customization:Managing Customization-Enabled Software Product Development

Over the past decade, the software industry has developed three types of business logic: (1) the software product business, (2) the software service business and (3) the hybrid business. Firms following software product business logic develop highly standardized software products that are sold to a mass of customers in the market with limited or even without additional services. Firms that follow a software service logic develop software in the form of projects for one specific customer, which is implemented for that customer's IT landscape. However, the distinction between the software product and service businesses is not exclusive. Many companies that develop professional software products for the business-to-business market usually apply a hybrid business logic. They develop a core product that encapsulates common functionalities for their customers' businesses and also offer additional customization services to adapt their product to customers' needs. These software companies are challenged with specific issues from the software product and software project business logic. Although existing research contributes to explaining software development and customer-specific adaption mechanisms, it largely neglects to explain the influence of customer-specific adaption on software product development and how product development companies can benefit from customization activities. This thesis aims to close this gap by developing a deeper understanding of software customization and its strategic role for software product development. Thus, the main objective of this dissertation is to expand and deepen research in the software product management domain and, more specifically, to explore the influence of customization activities on the development of product software to provide recommendations that help vendor companies to manage knowledge transfer between functions and to benefit from this transfer. Therefore, the primary research question of this dissertation is as follows:How do software vendor firms align their software product management and customization activities?To address this question, two qualitative investigations first draw on the conceptual foundation of the resource-based view of the firm, such as resources and capabilities as well as the dynamic capabilities theory. At its core, the resource-based view states that the resources or bundles of resources possessed by a company are the basis for superior firm performance. However, because the achievement of long-term competitive advantage is harder in high-velocity environments, dynamic capabilities aim at building successive advantages by effectively responding to environmental shocks.The first study includes a qualitative investigation within vendor and customer firms to develop an in-depth understanding of the value of customization as well as the vendor resources and capabilities necessary to successfully provide customization services. This investigation can be regarded as a pilot study that aims to develop an in-depth understanding of software customization as provided by vendor firms. The findings from this study contribute to three main areas and help to better understand how such firms can organize customization activities professionally and benefit from them in their innovation activities.The second qualitative investigation builds on the results from the first investigation and focuses on the dynamic capabilities necessary to generate a temporary competitive advantage from customization processes. This investigation can be regarded as an elaborative study that centers on software customization as an important innovation driver for software product management. The key contribution of the second study is the identification of four distinctive micro-foundations for each capability within the dynamic capability framework.