Competing through Services: Service Migration of Information Technology Product Vendors

The provision of services has become an increasingly important component of the economy of industrialized economies and the revenue stream for many traditional product companies. This is especially true for companies offering information technology (IT) products, as service revenues are often several times the initial purchase or licensing fees, making the development of a successful services business both a strategic area for growth and a way to diversify revenue streams. This paper examines factors that influence the extent to which IT product companies are able to utilize services as a source of revenue. Drawing literatures from evolutionary economics, service diversification, and organizational decline, we identify architecture knowledge of IT systems, information asymmetry of service offering, and previous performance as key drivers of the percentage of revenues associated with services.