SPLC 2006’s opening keynote was given by Carliss Y. Baldwin of Harvard Business School and looked specifically at the Option Value of Software Product Lines. This was a talk that touched upon Software Product Line economics and so it is worth being familiar with the topic matter when considering the business case for Software Product Line adoption or evolution. (NB I am not an economist so check out Carliss’s slides here or her book with Kim Clark, Design Rules: The Power of Modularity v. 1, for a definitive version.)

Carliss began by noting an important historical distinction between the computer industry and the automotive industry. Between 1980 and 2004 the computer industry switched from a market dominated by vertical organisations that produced everything from chips to systems to software to a market dominated by horizontal organisations that produce a subset of solutions that need to be combined to produce a total solution. In contrast, the same 20 year period saw little change in the organisation of the automotive industry with most of the major players being (nearly) vertical organisations, at the start and finish of the period.

Carliss and her fellow researchers attribute this in part to the modularity that is inherent in the computer industry i.e. the degree to which the architectures of computer systems (in the largest sense) are partitioned into components that are (mainly) independent.

The differences between the two industries is explained by noting that design activities (such as modularisation) create option value (money or the promise of money) and such value works as a force in the wider economy. Given sufficient option value, such designs can change an industry as they did in the computer industry by making it easy and profitable for new entrants to come to market and capture value.

To further explain this Carliss introduced the terms manageable designs and unmanageable designs. Unmanageable designs are modular but, importantly, have very high option potential i.e. have a high option value of redesign. Manageable designs have low option potential and so value stays within the supply chain; with unmanageable designs however, value escapes from the supply chain into other organisations. Furthermore, the situation is unstable, since it is easy and profitable for other new entrants to come along and change the market further.

So, what’s all this got to do with Software Product Lines? Well, the answer is that a move to Software Product Lines may create an unmanageable design architecture. If you modularize a previously integrated system some of the modules may end up having high option potential and there will then be an incentive for new players outside your supply-chain to capture value by redesigning those modules. On the other hand, if you’re already in a domain that behaves like the computer industry then you should note that the economics of the situation mean that there will be a shift from integrated solutions to platform-module systems and so you should plan for that shift.

So, how do you make money when unmanageable designs are the name of the game. Carliss identified several strategies including:

1. Own the platform, not the modules – e.g. Ebay.

2. Use Mergers and Acquisitions to be the Lead Firm – buy or merge with the winners after they’ve emerged.

3. Use Design Architecture to reduce your footprint – create a lean organisation and product set.

4. Use open source to replace platforms you don’t own – e.g. promote Linux, Eclipse.

One final thought – The AUTOSAR initiative aims to create an open standard for automotive electronics. Given the increasing value of electronics in modern vehicles will the automotive industry go the way of the computer industry if this initiative is successful?

A full report, including this tutorial report, will appear on the Software Acumen website shortly.

BCS SPA has put together the First international conference on postmodern programming - PoMoPro - to take place on Saturday 25th November.

“Lots of software is already written and can solve your problems, if you can only get it to do what you need. Postmodern programming is about using code that already exists, and not writing much code yourself.”

The day will begin with a keynote by James Noble and Robert Biddle but will largely be taken up with a Scrapheap Challenge style workshop where small programming tasks will be set and teams will compete to assemble the best solutions through mixing their own hand-written code with software found on the Internet. But note - “This conference involves programming. It’s for software development practitioners, not for the post-technical.”  Sounds like fun.