The Business of Software is an excellent read and growth tool for seasoned practitioners. Organized in three major sections it explores:

(1) Product vs. services vs. hybrid software organizations' strengths and weaknesses, and how they can change over time (think about your company...!).

(2) Software development strategies and outcomes. At first glance, this section seems less relevant - until you find yourself defending why your latest release is waaaaay late... There are some excellent ideas here that can apply to the creation and roll-out of "core" demos.

(3) Entrepreneurship - successes, failures, and ongoing question marks - the author explores what key factors contribute to the end result. The case studies at the end of this section can serve as virtual mirrors onto one's own organization.

This is good and useful reading, particularly for those who seek to move upwards in their organizations or are contemplating joining a new or emerging company.

The most useful sections for technology marketers are in Chapter 2 about strategy, where Cusumano asks provocative questions that will give you a new way of looking at your products, services and company direction.

Also useful is Chapter 4 on best practices, which will give you some benchmarks for comparing your operations and development activities to industry leaders.

Much of the book focuses on presenting detailed analysis of the rise and fall of companies during the technology boom and bust in recent years. The stories can be interesting, but it seems to me that information is getting dated given the challenges that face technology companies today.

I read Cusumano's book recently and was underwhelmed. It's an OK overview of the software business, but I certainly wouldn't put it ahead of a book like, "Four Steps to the Epiphany" by Steven Gary Blank. My sense is that if you are motivated sufficiently to buy a book like this, you proably already know this stuff.

In many ways this is the book I had been trying to find for years. There are many good books on starting up companies, and high-tech companies in particular but not much good literature specifically about the software industry as a whole. This books focuses on software as a business and how the industry really works.

I am managing a start-up software business and the information in this book is invaluable as it really changed my thinking about what the company is, how it operates, and what it takes to become a success.

If you come from a technical background, and starting or thinking of starting a business, then this book is a must-read.

This review is also available on my blog: DLS Thoughts.

I just finished reading "The Business of Software" from Michael Cusumano. Overall a well written book on the fundamentals of the software industry. The book focuses essentially on the analysis of the business model for a software company. There isn't really anything striking new in Cusumano's analysis of software companies' business model, but the author does a good job in outlining the choices offered to software companies and how their business model will have to mature as companies and technologies mature.

Essentially, there are 3 choices for a software company:

* A pure product play (Some would argue that with the advance of open source and the broad adoption that it has been getting lately, that pure plays are getting much more difficult).
* A mix of products and services.
* A pure service play.

I found very interesting Cusumano's analysis of a typical enterprise software company revenue over the course of a five year business lifecycle. For every 1 dollar of product license fees, $2.15 dollars can be derived from services and maintenance. That's more than 70% of the cumulated company revenue. In many cases, services on sold products end up being a life insurance against bad economic times. This brings some prospective to the Professional Open Source buzz. After all, a typical software company already ends up generating 70% of revenues from maintenance and services over a 5 year lifecycle. When put in this context, the changes of business model though important, appear less radical that one may have initially perceived. For those doubtful of the viability of the open source business model, I think we get some empirical data making the case for it right there.

Cusumano goes on with his analysis and show how as companies mature, they tend to move towards more of a services model and provides excellent data to illustrate his argument. As we look at the growth of companies like IBM and Oracle, more and more of their revenues are coming from services. This clearly justifies their strategy behind open source where they can capitalize on their strength in services while maximizing the use of their R&D resources.

Finally, I particularly enjoyed Cusumamo's analysis of the factors that make software startup companies successful, with great examples to illustrate his point. Cusumano basically identifies 8 key criteria for assessing software start ups:

1. The quality of the management team.
2. Whether the market is attractive and has strong potential.
3. How compelling is the offering?
4. How much interest is the offering getting from customers?
5. Is the company credible?
6. What is the business model?
7. How flexible is the management team?
8. What is the payoff potential?

A great list that applies to most business activity.