ssions for such estimates are provided, and are then applied to the context of the OSS/BSS software market. Estimating the Maximum Number of ISVs in the Market Let us compare the costs (1) in case the customer (the CSP) develops the software in-house, and (2) in case the software is provided by an ISV subject to a license fee. The customer's costs in the case of buying the software include: O. Mazhelis (X) Information Technology Research Institute, University of Jyväskylä, P.O. Box 35, 40014 Jyväskylä, Finland e-mail: Oleksiy.Mazhelis@jyu.fr P. Tyrväinen and O. Mazhelis (eds.), Vertical Software Industry Evolution, Contributions to Management Science, DOI 10.1007/978-3-7908-2352-3_11, C Springer-Verlag Berlin Heidelberg 2009 O. Mazhelis and P. Tyrväinen The costs of acquiring a license for the software product (Cprod) The costs of integrating the acquired product with the other deployed systems (Cintegr) The software license fee, on the other hand, depends on the ISV's costs which are proportional to: The costs of designing, implementing, testing, and configuring the initial version of the software ordered by or otherwise aimed at the first customer (Cinit). The average costs of implementing added functionality demanded by each customer, including the costs of reorganizing the software architecture when necessary (Cadd). The average costs of configuring the software to work in the operational environment of the customer (C conf). It is assumed that additional functionality (or interfaces to new systems) need to be implemented for each new customer, and therefore Cadd > 0. Together, Cadd and C conf comprise the customer-specific costs. The above ISV costs, along with the margin, determine the price of the software license: where nis the number of customers, and m is the cumulative margin. Let us assume that, for the customer to opt for acquiring the software, the costs of buying and integrating a product should not exceed the costs of in-house develop- ment, i.e.: Cprod Cintegr Cintdev, where Cintdev are the costs