Development of the IT industry is changing our society rapidly, and corporations are also creating new profit systems according to the change. At the center of this change there are software platforms. Let me introduce you to the world of software platforms.
The first thing people picture in their mind is the subway station when they hear the word ‘platform’. This is a place where people can conveniently get on and off trains. A software platform plays a similar role. It is an operating system designed to assist software’s operation, which determines and provides the source code required for software development.
Though the term itself may sound unfamiliar, we’re already using platforms through applications on our smartphones. Why are software platforms so important then?
New Business Paradigm
Professor David S. Evans from Chicago University stated in his book, called Invisible Engines, that software platforms can be compared to invisible engines as it is constantly creating value. We can understand his metaphor once we learn about various roles that software platforms play.
Due to accelerated technological revolutions and varying demands from clients, product life cycles are getting much shorter. Companies now have to produce diverse products and reduce costs for such diversification. We’ve entered into an age of small quantity batch production. Also, as barriers between industries collapse, the combination among different industries has become mandatory for better value, and, as a result, increased the demand for software platforms.
Software platforms have the potential to become the assistant for multi-sided businesses where diverse interests are intertwined. Multi-sided businesses are to create various added values by connecting multiple providers to services and users within a single platform.
Besides, software platforms can create new business models like the popular mobile messenger used by most Koreans, called Kakao Talk. When Kakao Talk was first launched, it was nothing more than a simple messaging app. However, after gaining a large number of users, it was able to become a platform where KaKao Pay(mobile payment system) and Kakao Games were integrated to create new value.
Also instead of keeping their separate statuses, software platforms design the common ground of different components into a platform and add other demands from clients to provide an environment for development and connectivity while cutting costs.
From B2C to B2B
Software platforms can be divided into two types of transactions called B2C (Business to Customer) and B2B (Business to Business).
The best examples of the B2C business are Microsoft Windows for PCs, Google Android, and Apple iOS for the mobile market.
As we see from applications we commonly use, the entry barriers in the mobile market are quite low. However, the market is going through a plateau due to intense competition resulting from the rapid popularization of IT devices and falls in profit caused by price wars.
On the other hand, B2B business provides a large-scale service such as manufacturing or public safety to corporations. The existing process can be innovated based on technologies. Unlike B2C, which has already become “the red ocean,” B2B still has a lot of potential, and many companies are showing interest in the B2B market.
Apple, the leader of B2C, also announced that they were going to increase their sales for B2B over 15% by 2016, while Microsoft is expanding their in-company software sales such as Office 365. This means that they will not miss the large market and strong growth possibility that B2B markets have.
Unlike, B2C with its fast changing trends and preference, many companies are also impressed by the fact that providers can keep their place in the market by designing new businesses, once they pass over the high entry barriers.
As mentioned earlier, however, B2B has higher entry barriers compared to B2C.To overcome this, the providers are advised to have accumulated experience as well as capital.
Clients of B2B have both the comprehensive needs that create the best result at a minimal cost by applying software with various added values and individual needs that reflect specific requirements. It is important to have enough experience and the development capability to support it, so that they can understand and satisfy both needs.
LG CNS developed a software platform called SGP (Smart Green Platform), in order to satisfy both needs for clients.
By connecting various devices and systems, SGP can save expenses and the amount of time spent on development. It’s also able to have other various services added according to the client’s specific demand, and is now being used in 50 different sites.
In the next posting, we will learn about what SGP is and how it can be applied step by step.
Written by Nuri Lee, senior researcher at LG CNS Smart Green Solution Lab