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This business plan was sent to several
(large) computer distributors. "X" is the name of the
company which was sent the plan.
This is a business plan about capitalizing
software distribution which, if implemented, would bring only
advantages to X.
Introduction
The present business plan describes the
capitalization of software distribution. If implemented, the plan
would bring advantages to: X, X's customers, software developers.
The plan is a software implementation of the
iTunes music business model. Apple has been able to capitalize
digital music distribution by pooling customers' money in order
to compensate authors by sheer volume instead of item price. So,
why not follow the same path with software instead of music?
Underlying concept
The underlying concept behind the present
business plan is for X to, initially, bring together a large
number of software applications, publish them on physical support
(CD / DVD), and distribute them bundled with its computers.
X would provide its customers a collection of
software integrated in a single platform which would be used by
computer users to search for the software applications they need.
X's advantages
X's would extract profit from the market by
selling the software collection.
X's reputation would increase as customers would
be more and more satisfied by the high quality applications
reviewed and published by X in a single integrated solution, and
who would thus be grateful to X's efforts.
X's reputation would increase as customers would
not have to waste time reviewing software applications which
would suit their needs, and who would thus be grateful to X's
efforts.
X's reputation would increase as software
developers are better compensated for their efforts, and who
would thus be grateful to X's efforts.
X's computers would more sought by potential
customers since they would come with a rich, high quality
software collection.
X's customers'
advantages
X's customers would rely on X's long established
reputation to provide them with high quality software, without
the strenuous reviewing process they would have to perform in the
absence of X's integrated solution.
X's customers would not have give their personal
details to various online companies, for purchasing software from
the Internet.
X's customers would have a physical product, the
CD, which would give them a feeling of increased stability and
trust in the developers and publishers of the included software
applications.
Developers'
advantages
Software developers would be compensated
according to the popularity of their software.
Software developers would face very low
publishing and distribution costs, since X would pool all these
costs and thus decrease all associated expenses.
Software developers would not have to waste time
marketing their applications, thus gaining more time to improve
the quality of their software.
Detailed plan
X would be responsible for gathering high
quality freeware and shareware software, publish them all on a
single CD and bundling this CD with each X computer. A computer
could actually be a: workstation, desktop, notebook, and even
printer and photo camera.
X would want to create two distinct software
collections, one for home users and one for corporate users
because of their different software needs. The corporate
licensing model is automatically covered by this business model
since a CD is bundled with each computer, which in turn would be
used by a single person at a time.
X would create a CD which, once inserted in the
CD drive of the user's PC, would start an application which would
help the user browse the software collection, by providing
detailed X reviews, descriptions, and screenshots of each
included application.
The user would also have the possibility to send
feedback, to X, about the software collection and about this
service.
One very important feature, which would help
this business method develop, is the voting system. Users would
be able to vote the software applications they use, and also
suggest new applications, thus providing X with two advantages:
X would understand what users like and
need. Future releases of the CD would be updated to reflect the
requirements of X's customers, thus adding to their
satisfaction.
X would be able to negotiate better
compensation plans with the software developers.
Users could also vote the compensation for each
program they use.
Separate CD sales
The software collection CD can also be sold to
X's customers without being bundled with computers.
Once a customer has purchased a CD bundled with
a computer, he has the ability to create an account with X's
online software sales department. This account would allow users
to be notified of updates of the software collection and receive,
by mail, the updates on CD.
X could, at some point, start selling online the
CD to customers, in addition to those bundled with its computers.
X could also, in the future, extend this service
by offering online access to the software collection, to those
customers who purchase a yearly subscription.
Profit plan
The price of a CD has to be low enough so that
the market could accept it, and high enough to minimalize the
share engulfed by expenses, and to maximize the profit gained by
X and by software developers. We will assume a simple price of 20
USD per CD; an initial price of up to 30 USD allows X to decrease
it during competition, down to 20 USD.
We will assume, for simplicity, that X sells one
million computers per year, each having a CD bundled with it. The
total capital extracted from the market would be 20 millions USD
per year. From this, X would reserve half for software
developers, and half for its expenses and its profit.
Although, at a glance, a few millions USD per
year seems little for X, it has to be considered that X benefits
from an increased perception of its brand, and that this business
model represents only the beginning of the capitalization of
software distribution.
Compensating developers
Software developers would have reserved by X
half of the price of each sold CD, 10 USD per year. This amount
would be divided among developers according to the negotiations X
would carry with them, and according to the voting X's customers
cast for the software they use.
In average, 10 USD would be enough to compensate
several hundreds software developers. If we assume that each
developers is compensated with 5 cents per sold CD, there would
be room for two hundred software applications in the software
collection. For 1 million sold CDs per year, the developer of a
single software application would receive 1 million * 10 USD /
200, that is, 50'000 USD.
This amount would strongly motivate many
independent developers to create software of a quality high
enough to be accepted in X's elite software collection. Once
again this translates into higher customers' satisfaction, and
therefore in an increased perception of X's brand.
X's effort
People use software. People like to compensate
low cost, high quality services in order to benefit again from
them. The market needs solutions. If X is there to cut the costs
of CD production, packaging, distribution, marketing, sales, and
also cut the price of the software, customers would rather buy
X's integrated solution than waste time looking elsewhere for the
more expensive applications they could find.
X would be required to take little effort into
implementing this business plan. X's computer distribution
network is well established and can support the bundled CD with
virtually no additional expenses.
The present business plan has huge potential for
future development, just as the iTunes model proved to be
profitable in the music business.
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