Two Ways to Make Money in Software: Bundling and Unbundling

This quote captures a fundamental cyclical pattern in software business models that has profound implications for product strategy.

Core Meaning

• Strategic oscillation: The software industry continually swings between periods of consolidation (bundling) and fragmentation (unbundling)
• Value creation through reorganization: Both bundling and unbundling create opportunities to deliver new value to customers
• Timing as the critical factor: Success depends less on which approach you take and more on whether your approach aligns with the current market cycle

Why This Matters In Product

• Market evolution awareness: Understanding where your market sits in this cycle helps inform your product roadmap and positioning
• Strategic flexibility: Recognizing this pattern helps you anticipate when to pivot your product strategy
• Competitive positioning: Your bundling/unbundling approach directly impacts how you compete with both established players and new entrants

How To Apply

For product leaders:

• Market timing analysis: Regularly assess whether your market is trending toward bundling or unbundling
• Portfolio management: Consider maintaining both bundled and unbundled offerings that can be emphasized as market conditions shift
• Acquisition strategy: Look for opportunities to acquire point solutions during bundling phases

For individual contributors:

• Feature prioritization: During bundling phases, focus on integration and consistent experience across the suite
• User research: Study how customers perceive the value of integrated versus specialized solutions
• Pricing models: Develop pricing that reflects the current bundling/unbundling reality while preparing for the inevitable shift

The quote reminds us that neither bundling nor unbundling is inherently superior—they're simply different strategies whose effectiveness depends on market timing. The most successful product teams recognize where they are in this cycle and position accordingly.