orm vendor may bundle free software with the hardware. As a result, unless the market is large and attractive enough, the software market evolution may stop in the innovation phase. Typical examples of software market stuck to the innovation phase include markets dominated by strong globally operating companies producing equipment such as elevators, weather sensors and game consoles. Early console game vendors, for example, adopted this kind of strategy in the Innovation phase. They were competing primarily with new technology and plat- forms, while the process of playing remained unchanged. Game software applica- tions were developed in-house. This kind of vertical integration was useful for optimizing the performance of the game consoles, which was critical for the customer preference. However, later on, criteria other than the platform became important when choosing between competing game offerings. The game markets demanded more effort on developing software applications and thereby forced this vertical industry to shift to the Productization phase. This vertical dis-integration has resulted in an increase in the number of game software developers in Model for Evolution of a Vertical Software Industry independent game companies, enabled improved products to be offered to the customers, and increased industry market volume. The increasing market volume also attracts more vendors, creates thereby more competition and enables also spe- cialization. This further lowers the prices, thus attracting more customers, which again boosts the market. As soon as the productized offerings meet the requirements of the processes of the vertical industry companies, the market enters the Transition phase. In this phase, typically one of the competing ecologies or standards reaches a dominating position, and its offering becomes the dominant design (see e.g., Murmann and Frenken 2006) in the Service and Variation phase. Some alternative designs may fit better to certain specialized purposes; a Macintosh computer platform long p