Optimal Timing for Software Functionality Additions by Internet Portals

Managerial decisions regarding software functionality additions at Internet portals are interesting to senior managers involved in e-commerce. Portals can leverage software functionality additions to improve their sites’ capabilities to create value for the consumers and improve their profitability. Current examples include Internet portals’ launch of desktop search engines, new mass-storage email services, and implementation of instant messaging services. We present decision models for an Internet portal to determine the appropriate launch time for a software functionality addition. We assume the portals have heterogeneous costs and value latencies for market acceptance of their functionality additions. A portal’s decision to be a leader in adding functionality depends on its launch cost and the latency of the benefits flow. Low-cost portals may choose to follow, if revenues are sufficiently slow to materialize. If high-cost portals expect to achieve rapid acceptance of the capabilities associated with the new functionality, they will choose to lead.