In order for ProfitLogic to capture a more prominent role in the growing market of the retail IT sector, ProfitLogic should transform into a licensed software company. Market needs are shifting away from the ASP model to more user-friendly licensed software model. Customers are not willing to commit to high amounts of monthly maintenance fees, while having their own internal software team at the same time. Moreover, the ASP market is not growing as expected and product implementation process is less scalable, slow and costly. Even though data shows that the ASP model will provide higher profit in the short term, with the licensed software product, ProfitLogic will increase its market share and, in the long term, earn higher profits. Therefore, switching to a licensed software model is necessary for ProfitLogic's success in the long term.
Expanding into New Market Areas
As Kirk points out, switching to a licensed software model will increase ProfitLogic's market share by adding other software tools such as planning, buying, allocating and replenishment. By including various software tools to its product offering, ProfitLogic can expand its customer base and serve a bigger market. Moreover, ProfitLogic will be more efficient in configuration and will be able to serve more customers simultaneously. While software developers will work on writing the licensed software product, small group of PhD scientists can focus on developing innovative