Digital Ecosystems: Ecosystem-Oriented Architectures
Natural Computing: an international journal
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The Web services technology empowers a service-oriented architecture featured by “Just-in-Time” software integration and “on-demand” software provisioning. My objective is to study the impact of this new technology on firm strategies. To the best of my knowledge, mine is among the first studies of optimal strategies for offering Web services from an economic perspective. First I address the optimal market structure to provide complementary Web services. In particular, three market structures are compared: independent service vendors; strategic alliance; and marketplace. The optimal market structure with different integration cost and market settings is derived. The model incorporates the integration cost that was not considered in previous literature on physical product bundling. Results indicate that in the context of Web service integration, a Web service marketplace (which corresponds to a structure of mixed bundling of physical goods) is not necessarily always the best market structure. Next, I consider the optimal location and pricing problem of a Web services intermediary (WSI) that sells an integrated time-sensitive Web service. My study differs from previous research on facility locations in that I solve for the optimal location and price of the integrated Web service simultaneously. Two spatial models are analyzed, first a linear city model and then a unit circle model. I show that the integrated Web service is optimally located between the Web service vendors and the WSI should charge a penetration price if the delay cost is low. In addition, there could be multiple optimal locations for the WSI if the service vendors are located far away. Finally, I analyze the optimal subscription and listing fee for a WSI that provides value-added service, such as aggregation services and technical services. My study extends current research on information intermediaries by considering multiple groups of Web service vendors and consumers. Analyses suggest that the intermediary is best off by setting the listing fee such that all service vendors list on it. Further, the optimal subscription fee is determined by network intensity, value of technical services, and properties of Web services.