SWOT Analysis in the software industry

Introduction In the past twenty to thirty years many changes and developments have taken place in the software industry which started off during the ass mainly in the United States f America and experienced a revolutionary boom since the sass (Steindler, 1995). There are many different ways and methods of developing software and planning the strategy of a software development company and as It Is shown In many recent research projects.

Most of these projects are usually concerned with the way that software is developed and not the way that the strategy of the company as a whole is planned (Cushman, McCormick, Skimmer, & Crandall, 2003). Another important factor is which techniques and methods are used to analyze company’s environment and how the strategy is formulated and implemented. In this paper we will try to analyze in detail a very popular method for strategic planning which has been mostly used for product portfolio planning and/or strategic planning on an abstract level (Hobbes, Lenin, & Ivanhoe, 1999).

We will focus our interest in the software industry and base our research on the case study of the Austrian software industry as it is presented in (Broodier, 2002). Additionally, we will try to present certain guidelines, in order to carry out a successful SOOT Analysis for any software velveteen company. This is the method of SOOT Analysis, which was developed University.

In the following sections we will try to elaborate on SOOT analysis in Section II, show an example for a software development company in Section Ill and finally present the background of the method and related literature in Section IV. II. SOOT Analysis: method description The initials SOOT stand for Strengths, Weaknesses, Opportunities and Threats. These are the basic elements SOOT analysis which is usually presented as a matrix with four main blocks; one for each element of the SOOT analysis.

Figure 1: A basic SOOT Analysis matrix As it is quite visible in Figure 1 we also have some other categorization within matrix of SOOT Analysis; elements concerning the organization itself which are called Internal (Strengths and Weaknesses ), elements which are about the company and its relationship with its environment, named External (Opportunities and Threats), elements which are Helpful for the organization (Strengths and Opportunities) and elements which are Harmful for the organization (Weaknesses and Threats).

First of all we have to define the four main building blocks of our diagram; Strengths: The strengths of an organization are the core competencies of the company, the key factors which enable it to excel in certain aspects and gain all kinds of profit, whether that is purely economical, organizational or other. Weaknesses: As weaknesses we define the flaws that an organization has, something which means that these weaknesses might lead to serious problems in the company’s strategic planning and might even lead to worse situations, such as becoming a serious threat for the organization’s existence.

Opportunities: These are certain steps which will help a company to perform better, generate more profits etc. The opportunities can be of many different perspectives, such as entering a new market, or in creating a new business unit and etc. Threats: As threats we name the potential reasons which might harm a company, such as a new entrant in the main market of operation, a big economical recession and other reasons which might threaten the current position of an organization.

Having defined the main blocks of the SOOT analysis matrix, we can continue and try to dig deeper into these elements and try to link them with certain aspects of an organization. The two main aspects of this effort were already mentioned above and two most important ones are the Internal and the External an important step in formulating a business strategy is the so called ‘Situation Analysis’, which if put into words answers to the question “Where are we now ? “.

This is where the Internal and External analysis of an organization really come into play and help managers realize the different dimensions of their business Internal analysis: The internal part of an organization can vary, depending on the size, but the main principles on which we focus our interest remain the same and according to Broodier, 2002) these are the following; Resources, meaning the available resources which are enabling the company to develop and deliver the software which it sets out to provide to its customers.

Capabilities, that is the critical success factors which the company possesses and that give it a competitive advantage. Quality, which is quite clear as a term, referring to the quality of the products / services provided by the company and to the quality of the internal organization of the company, such as the quality of the business processes.

Efficiency, meaning how efficient the company is having a solid structure where all different departments, units and processes are properly organized and communicate well, in order to have a smooth operation of the company. Customer responsiveness, which is not only referring to the obvious, that is how many customers does a company have, but also to how extensive is the diversification of a company’s products, what different price levels exist and how satisfied are those customers.

Innovation, which is about the level of a company’s desire to invest in new technologies, follow technological roughhouses, keep up with the emerging business trends and in which extend is part of the profits re-invest in research & development. External analysis: The external analysis of an enterprise is a task which is a bit more complicated (see Background and related literature), but it mainly is an analysis of the current competition and of the market in which the company operates.

In order to give an example of external analysis factors we will mention some external barriers and drivers as they are mentioned in (Broodier, 2002): Marketing / distribution in foreign countries Culture, which refers to certain restrictions or difficulties in communication that might arise due to different languages and other cultural aspects. Trade / commerce law issues, which are sometimes different from country to country and might cause problems when trying to enter new markets.