MODELING THE IMPACT OF SOFTWARE DEVELOPMENT AND INTEGRATION COSTS ON THE SOFTWARE MARKET SIZE

Software systems are commonly used in a variety of industries as a means of automating organizational business processes. Initially, such software is developed in-house by the vertical organizations; however, in many cases, internally developed software is eventually replaced with the software products provided by independent software vendors. For these software products to appear, the customer's costs of software acquisition and integration should not exceed the costs of internal development and maintenance of the software. Furthermore, for the above condition to be met, the software vendor should have a sufficient number of customers, and sufficient degree of software reuse across the customers. The paper introduces an analytical model which defines the minimum number of customers and the minimum degree of reuse that the software vendor should have for its software to be less expensive as compared to the in-house software. The minimum number of customers is then used in order to estimate the maximum number of vendors in the market. The model is applied to analyze the telecommunications billing mediation software. The minimum number of customers and the maximum number of software vendors in this market are evaluated, and the results are compared against the realworld market database. Based on the results of comparison, a preliminary conclusion is made about the plausibility of the proposed model.