onomical downturn this can be done by relocating these employees to other duties in which they can perform well due to their industry competence. Some of the software development professionals may also become self-employed by establishing micro ventures and capitalizing on their expertise with new types of systems, thus serving as agents of technology diffusion. In the second phase called Productization and standardization phase, the companies in the vertical industry improve their enterprise-specific software and copy best practices of their competitors to their in-house software thus standardiz- ing the information systems used in the industry. During a recession, the whole ICT department may be outsourced to a separate software service unit or to an IT house, P. Tyrväinen Department of Computer Science and IS, University of Jyväskylä, P.O. Box 35, 40014 Jyväskylä, Finland e-mail: Pasi.Tyrvainen@jyu.fr P. Tyrväinen and O. Mazhelis (eds.), Vertical Software Industry Evolution, Contributions to Management Science, DOI 10.1007/978-3-7908-2352-3_4, C Springer-Verlag Berlin Heidelberg 2009 P. Tyrväinen Innovation Productization and Service and variation phase standardization phase phase Renewal Spin-off phase Micro venture Spin- Spin- Joint Enterprise internal IT venture Outsourced SW BU Primary SWI service enterprise Fig. 1 Evolution of software development activity in a vertical industry enterprise. The horizontal axis represents time and the vertical axis total software spending while in a growing economy this kind of unit may spin off as an independent venture to serve multiple firms. Typically, the vertical market leader maintains independent software development activity, while the competitors often join forces to standardize a common interface or platform, to specialize their activities and to provide jointly a broader offering than the market leader. These standardized interfaces also enable independent software vendors of the primary software indus- try to provide standard product offerings for a customer b