Shift of Software Development Activity During the market evolution, the focus of a vertical market shifts inevitably from the use of internal resources to an extensive use of software products and profes- sional software services provided by the primary software industry. In Fig. 3, this is shown by dividing the IT spending on software related activities to internal software development, external software services, and software products. The form of the increasing share of the spending going to the primary software industry resembles a horn and thus this model is also called as the Trumpet Model. In the Innovation phase, a major part of the activity takes place within the enterprises. As the market develops, the share of software products and services increases. Some verticals may remain in the early phases for years (such as several manufacturing segments with insufficient volume for software productization), while most of the verticals proceed further. This development is visible also in the total figures of software spending. According to EITO (EITO 2004), 52-59% of Innovation Productization Adoption Service & variation Software (incl. products) embedded to services Vertical industry enterprise internal automation of service processes Implementation service (Stand-alone) for customer-specific software systems OpenSource software products + SaaS Vertical industry enterprise internal product development (Hardware) embedded software products Fig. 3 The shift of vertical industry software spending from in-house development to use of external products and services Model for Evolution of a Vertical Software Industry IT spending in Europe, Japan and USA went to internal software development in 1993, while purchased services and software packages took 14-32% and 10-29% of the spending, respectively. Ten years later these three segments were roughly equal indicating a major drop of internal spending in respect to purchased services and software products (Tyrväinen et al. 2004, 2008). There are still industries where la