hey start acquiring software products from primary software industry ventures. From the technology perspective, innovative enterprises that develop new tech- nologies strive to secure beneficial technologies by filing patents and by using closed proprietary interfaces for software development. Leading hardware vendors are typically reluctant to share their knowledge with software companies and hence P. Tyrväinen Table 1 Changes in vertical industry processes and technology available set the pace for vertical software industry evolution Drivers and Innovation phase Productization Transition Service and features phase phase variation phase Process Process innovation, SW supported Process Process drivers competitive processes, standards optimization, (vertical advantage process adopted IT process cost industry) (differentiation / harmonization, optimization costs), enterprise- repeatability specific processes between enterprises Software Customer-specific Productization, Market share New development business services, integrated competing race, on the dominant HW/SW products, standards, micro Competing SW platform, one application per ecologies, ecologies open source enterprise network development Technology Technology Technology Technology drivers innovation, standardization technology dominance, competing with within vertical adoption, bulk hardware IPRs and closed market segment, market with standard interfaces, multiple strong expansion interface and equipment vendors vendors large user base dominating SW market create entry barriers for competitors: they implement software for operating their systems internally, thereby creating a unified hardware/software system. The software business in this phase is limited to company internal or external software services. Independent software vendors cannot compete with the vendor who fully controls the technology platform needed for operating the software. Even if such software by independent software vendors appears, the proprietary interface can be changed, or the platf