Technological University Dublin ARROW@TU Dublin Conference papers National Institute for Transport and Logistics 2009-04-01 Digital Supply Chains: towards a Framework for Software Distribution Colm Ryan Technological University Dublin Claudia-Maria Wagner Technological University Dublin, [email protected] Edward Sweeney Technological University Dublin, [email protected] See next page for additional authors Follow this and additional works at: https://arrow.tudublin.ie/nitlcon Part of the Business Commons, and the Other Engineering Commons Recommended Citation Ryan, C., Wagner, C., Sweeney, E., Esposito, E., Evangelista, P.: Digital supply chains: towards a framework for software distribution. Supply Management -Towards an Academic Discipline, Proceedings of the 18th International Purchasing and Supply Education and Research Association (IPSERA) Conference, Oestrich- Winkel, Germany, April 2009. This Conference Paper is brought to you for free and open access by the National Institute for Transport and Logistics at ARROW@TU Dublin. It has been accepted for inclusion in Conference papers by an authorized administrator of ARROW@TU Dublin. For more information, please contact [email protected], [email protected]. This work is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 4.0 License Authors Colm Ryan, Claudia-Maria Wagner, Edward Sweeney, Emilio Esposito, and Pietro Evangelista This conference paper is available at ARROW@TU Dublin: https://arrow.tudublin.ie/nitlcon/60 Dublin Institute of Technology ARROW@DIT Practitioner Journals National Institute for Transport and Logistics 4-1-2009 Digital supply chains: towards a framework for software distribution Colm Ryan Dublin Institute of Technology Claudia-Maria Wagner Dublin Institute of Technology Edward Sweeney Dublin Institute of Technology, [email protected] Emilio Esposito University of Naples Pietro Evangelista Recommended Citation Ryan, C., Wagner, C., Sweeney, E., Esposito, E., Evangelista, P.: Digital supply chains: towards a framework for software distribution. Supply Management -Towards an Academic Discipline, Proceedings of the 18th International Purchasing and Supply Education and Research Association (IPSERA) Conference, Oestrich-Winkel, Germany, April 2009. This Conference Paper is brought to you for free and open access by the National Institute for Transport and Logistics at ARROW@DIT. It has been accepted for inclusion in Practitioner Journals by an authorized administrator of ARROW@DIT. For more information, please contact [email protected]. DIGITAL SUPPLY CHAINS: TOWARDS A FRAMEWORK FOR SOFTWARE DISTRIBUTION Colm Ryan a, Claudia-Maria Wagner a, Edward Sweeney a, Emilio Esposito c, Pietro Evangelista b,c a National Institute for Transport and Logistics (NITL), Henrietta Place, Dublin 7 (Ireland) Ph: +353 1 669 0806 - Fax: +353 1 661 1943 e-mail: [email protected]; [email protected]; [email protected]. b IRAT-CNR, Via M. Schipa, 115 - 80122, Naples (Italy) c Department of Managerial Engineering (DIEG), University of Naples “ Federico II” P.le Tecchio, 80 - 80125 Naples (Italy) Ph: +39 081 7682493 - Fax +39 081 7682154 e-mail: [email protected]; [email protected] Summary This paper assesses the effect of non-physicality of a digital product - software - on SCM practice. A number of in-depth, one-on-one interviews were held in 8 software companies that predominantly supply to enterprise customers on a global scale. The aim was to explore distribution challenges within software supply chains and how companies are addressing these challenges. The research has identified three different classes of software distribution models: One, which tends to rely on traditional physical infrastructures and paradigms, and two others that better exploit the properties of the digital products. Educator and Practitioner Summary The Internet has an important impact on how software is distributed. By assessing the effect of such a non-physical good on SCM practice, this research elicited three major distribution concepts: One relying on traditional physical infrastructures, and two others that better exploit the properties of the digital products. Keywords: Digital product, Supply Chain, Software distribution Introduction Research in operations management, marketing and supply chain management has predominantly studied the relationships between upstream manufacturers and downstream retailers in supply chains for physical goods (Chellappa and Shivendu, 2003 cite Padmanabhan and Png, 1997). Physical goods are so defined because they obey physical laws. They possess mass and occupy volume. Over time, they can break down and degrade. It is not possible to create products without first sourcing appropriate materials. Energy (which also needs to be sourced) is expended in transformation and transportation. It could be said, therefore, that a large proportion of SCM has to do with overcoming the constraints imposed by physics on the products under consideration. However, with the rise of information and communication technology (ICT), many important products can no longer be considered physical in the traditional sense of word. An increasingly important class of products described variously as digital products, virtual goods or information goods (Shapiro and Varian, 1999) has emerged that cannot be considered physical in the traditional sense of the word. Surprisingly, little is known about digital product supply chains, where products such as software, movies, music and newspapers are created, stored and delivered in a digital form over a network (Chellappa, 2000). This paper attempts to develop a conceptual supply chain framework by exploring online distribution of one such digital good: software. The paper begins by outlining the research background and methodologies employed in this study. It will then describe the distinctive characteristics of digital goods and depict the changing landscape and challenges for software companies. An integral part of this paper represents how the Internet has transformed the supply chain for software and how the Internet has affected related software distribution models. Research Design The aim of this research is to discover and understand challenges of digital distribution and how organisations respond to them. A literature review evaluating traditional versus digital software supply chain models gives insights into digital distribution practices. To establish digital software supply chain designs, the exploratory research end of spectrum is perceived as the most appropriate method as it is open-ended in nature. It gathers preliminary information that will help define problems, may suggest hypotheses and areas for further investigation. Thus, semi-structured interviews with open-ended questions represent the most appropriate way to achieve this objective as they are looking for processes and patterns that explain "how and why" questions. In determining the nature of the transformation of (digital) music supply chains, Graham et al. (2004) utilised a model by Hardaker and Graham (2001) on the basis of four interrelated dimensions involved in the design of supply chains: (a) the structure of activities; (b) the choice of actors; (c) the governance mechanism; and (d) the co- ordination structure. This approach was found to be transferable to analysing (digital) software supply chain designs. Thus, a number of in-depth, one-on-one interviews were held with software distribution practitioners in 8 companies with a significant software business and that predominantly supply to enterprise customers on a global scale. Focusing on challenges in software distribution, the interviews were designed to elicit detailed, concrete stories about the subject’s experiences based on common themes that emerged from the literature review. Bias and error during the interview was minimised through open questioning, assurances of confidentiality and sending the write-ups back to the respondents once completed for their review and approval. All except one respondent worked in a major global company with revenues exceeding $1bn. Characteristics of Digital Products Before outlining differences of physical and digital supply chains, the nature of digital products by itself need to be defined. Digital products don’t have physical forms or structures and cannot be physically consumed (Choi et al., 1997). They are created, stored and delivered digitally and refer to any goods or services that can be digitised and converted into a binary format (Hui and Chao, 2002). They can be compressed without losing much information or quality and as such have a technical quality similar to the original (Peitz and Waelbroeck, 2003). Moreover, digital products can be described as experience goods as they have to be used first before their value to the individual customer can be determined (Nezlek and Hidding, 2001). Hui and Chao (2002) propose a framework for classifying digital products based on two dimensions: product category and product characteristic. There are three digital product categories in the framework, namely tools and utilities 1, content-based digital products 2, and online services 3. Each of these product categories possesses different product attributes and serves different purposes for buyers. The second dimension of Hui and Chao (2002) include intrinsic characteristics, which means the features that are “born” with the product and cannot be changed by the sellers. Those are delivery mode,