Analysis of IT-Business Models
Towards Theory Development of Business Model Transformation and Monitoring
Christina Di Valentin, Dirk Werth and Peter Loos
German Research Center for Artificial Intelligence (DFKI), Stuhlsatzenhausweg 3, Saarbrücken, Germany
Keywords: Business Models, Performance Management, Business Processes, IT-Industry, Business Model
Transformation.
Abstract: Companies in fast evolving industries like the IT-industry are continuously confronted with external
influences on their business model. For these companies, it is crucial to be able to react rapidly on external
and internal influences on their business model to prevail over competitors in the long term. So far, business
model research mainly focused on static concepts like taxonomies, ontologies or components, not taking into
consideration the dynamic relationships between the strategic business model layer and the layer of business
processes. This paper presents the conceptual development and the implementation of a top-down and a
bottom-up approach in terms of business modelling. The top-down approach describes the influence that IT-
business models have on their underlying value creating activities on process layer, whereas the bottom-up
approach shows how value creating activities in the IT-industry can be used as feedback indicator for the
quality of the current business model. The goal of the presented research is to come one step closer towards a
holistic theory development in the field of dynamic business model research by focusing on the interrelations
between business model layer and the layer of business processes.
1 INTRODUCTION
Fast changing business environments like the IT-
industry often force companies to continuously
rethink and renew their current business model
(Chesbrough 2007). Particularly for companies in the
IT-industry, it can have drastic consequences when
decisions about required changes on their current
business model are made too late. The right business
model is crucial to establish successfully in the
marketplace as factors like changing customer
preferences, new business partners, new technologies
as well as new regulations continuously influence a
company’s business model (Cavalcante et al. 2011).
A breakthrough about how a business carries out its
operations can come along with an innovation of its
whole business model (McGrath 2010). Thus,
decision makers must be continuously aware about
the threats to their company’s business model in order
to be able to react in time (McGrath 2010).
A business model provides an abstract view on a
company’s organizational structure as well as on its
value creating activities (Al-Debei and Avison 2010;
Demil and Lecocq 2010). It is commonly viewed as a
mediator between strategy and business processes,
which reflects in different granularity levels of the
concepts from operational to tactical and to strategic
level (Al-Debei et al. 2008). One way to overcome
the challenge of rethinking and renewing a business
model is to continuously monitor business processes
in operations and to adjust the business model
according to changes on process layer (Bonakdar et
al. 2013; Bouwman et al. 2012). An analysis of the
current business model helps companies to
understand why certain firms can establish
successfully on the market while the competitiveness
of other companies declines (McGrath 2010).
Although, business models have already been
discussed in many different ways (Markides 2006;
Teece 2010; Zott et al. 2011), the focus so far has
been mainly on static aspects like business model
components (Afuah and Tucci 2004; Hamel 2002;
Mahadevan 2000; Osterwalder and Pigneur 2004;
Petrovic et al. 2001) or taxonomies (Mahadevan
2000; Tapscott et al. 2000; Timmers 1998), not taking
into consideration dynamic aspects.
This paper focuses on the development of a
holistic concept that depicts the transformation from
IT-business models into business processes (top-
down) as well as the feedback loop from business
processes back to the business model (bottom-up).
The software industry business model framework by
171
Di Valentin C., Werth D. and Loos P.
Analysis of IT-Business Models - Towards Theory Development of Business Model Transformation and Monitoring.
DOI: 10.5220/0005886701710177
In Proceedings of the Fifth International Symposium on Business Modeling and Software Design (BMSD 2015), pages 171-177
ISBN: 978-989-758-111-3
Copyright
c
 2015 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

Schief and Buxmann (2012) forms the basis for
representing aspects related to business model layer
whereas process related characteristics of the IT-
industry are depicted by means of the software
industry value chain of Pussep et al. (2012). The
research questions we address in this paper are:
R1: “How can the existing relationships between
the layer of business models and business processes
be transferred into a theoretical construct?”
R2: “How can IT-Business Models be improved
by means of an information system that provides
recommendations for business model adaptation
based on its underlying business processes?”
We used both concepts to describe the influence
IT-business models have on value crating activities
on process layer and vice versa by carrying out a
mapping of both concepts and integrating relevant
key measures to monitor business processes and their
corresponding business model elements. As a
business model connects strategic layer and the layer
of business processes (Al-Debei and Avison 2010),
several stakeholders such as strategic decision
makers, business developers, company founders and
controllers of companies in the IT-industry benefit
from the developed concept and its implementation.
The research method follows a design science-
oriented approach. According to the design science
methodology an artifact is being created within a
prototypical approach in order to meet collected
requirements fitting to a specific problem description
(Hevner et al. 2004). The presented research is based
on several artifacts. The basis for depicting the
business model layer is represented by the software
industry business model framework of Schief and
Buxmann (2012). The software industry value chain
with its value creating activities for IT-firms is used
on process layer (Pussep et al. 2012). Based on these
artifacts we analyzed the relationship between the IT-
business model elements and the elements of the
software industry value chain.
The goal of the presented research is to provide a
basis for theory development in the area of dynamic
business model research by depicting the relationship
between process layer and business model layer in
form of a reference framework. The presented work
builds upon previously carried out research in the
field of IT-business models regarding the top-down
approach from business model transformation into
business processes (Burkhart et al. 2012).
2 RELATED WORK
2.1 Term Definitions
The concept of business models is often described as
closely related to the concept of strategy (Magretta
2002; Morris et al. 2005). In contrast to business
models, business strategies specifically deal with
competitive struggle by revealing possibilities to
outperform competitors, while business models
describe the collaboration of all participating business
resources (Magretta 2002; Porter 1996). For this
reason, business models are often described as a way
of implementing a company’s strategy (Bouwman et
al. 2012). Osterwalder, Pigneur and Tucci (2005)
describe business models as a ‘…conceptual tool
containing a set of objects, concepts and their
relationships with the objective to express the
business logic of a specific firm’. Hence, business
models provide a view on a company’s logic of value
creation (Al-Debei and Avison 2010; Demil and
Lecocq 2010), whereas business processes describe
the implementation of a concrete scenario into
executable process steps (Hammer and Champy
1994; Scheer 1994). Thus, business processes
describe which input factors are needed to produce a
certain output (Hammer and Champy 1994).
Misleadingly, in literature and practice the terms
business model and business process are often used
interchangeably (Magretta 2002).
The design of business processes usually begins
with the determination of a company’s business
model and its strategic goals (Harmon 2009). Hence,
a clear understanding about the scenario to be realized
on process level can be achieved, as changes on a
business model have an influence on the underlying
business processes (Al-Debei and Avison 2010). This
relationship can be also described inversely from
process level back to the business model: The
consideration of all relevant factors that are involved
in the activities of business processes can be used on
business model layer as analysis unit during the phase
of planning business models. Thus, meaningful
information for the design of business models can be
obtained from process layer. Particularly business
processes in the IT-domain are mainly ICT-enabled
(Buxmann et al. 2012; Pussep et al. 2011). Hence, the
successful implementation of a business model is
largely dependent on the ability of an organization to
successfully match their business processes to their
supporting IT (Petrovic et al. 2001).
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2.2 Business Modeling and Performance
Measurement in the IT-Industry
Daas, Hurkmanns, Overbeek and Bouwman (2012)
present a tool that supports the evaluation of
alternative business models by incorporating market
analysis data. Furthermore the tool weights the
implications of business models on the partners of a
company’s value network. e
3
value editor (Gordijn
and Akkermans 2006) allows business model
designers to capture and evaluate business models
from a financial point of view. Business Model Tool
Box offers methods for designing business models. It
is based on Osterwalder’s (2010) ‘Business Model
Canvas’ and supports the configuration of business
models according to nine predefined building blocks
(Osterwalder and Pigneur 2010; Osterwalder 2015).
However, the tool only supports business model
configuration not taking into consideration dynamic
aspects related to business processes. The EA
Performance Reference Model of the Federal
Enterprise Architecture enables companies to link
their strategy and their goals to the underlying
process-KPIs. However, the focus of this framework
is on aspects about modeling and strategic alignment.
A positioning of companies within a certain industry
branch according to their maturity of performance
measurement and resulting implications on strategy
and on business model level is not offered by this
reference model (Camarinha-Matos and Afsarmanesh
2008). CMMI (Capability Maturity Model
Integration) consists of five levels of process maturity
(Staples et al. 2007). Beginning from process level,
specific process KPIs like for instance ‘ability to
remove defects’, ‘costs of defect removal’ or ‘process
capability & maturity’ are assigned. These KPIs
support assessing the quality of the software
development process and the resulting software
product. However, there is no link between process
layer and the strategic aspects of the running business
such as e.g. the needs of a software company’s
customers (Staples et al. 2007).
2.3 Requirements Derivation
The state of the art analysis shows that, so far, there
neither exist a holistic methodology nor a tool that
supports all phases from business model
configuration, its transformation into business
processes (top-down) as well as the way back from
business processes to the business model (bottom-
up). Based on the results of the state of the art analysis
we derived the following requirements:
Req. 1: IT-firms must be able to describe their
business model in a standardized manner. To simplify
the process of business model configuration,
companies must be able to choose from predefined
building blocks the business model elements that are
most relevant for their company.
Req. 2: IT-firms must be able to transform their
business model into executable business processes
(top-down). Req. 2.1: Therefore, an interface to
business process layer has to be provided. Req. 2.2:
In order to provide a mapping to process layer,
industry-specific business processes have to be
considered.
Req. 3: IT-firms must have the possibility to
continuously monitor their business model in form of
a feedback loop from process layer back to the
business model (bottom-up). Req. 3.1: In doing so,
process related KPIs must be defined that take into
consideration the characteristics of business models
in the IT industry. Req. 3.2: A standardized control
dashboard should offer a permanent overview of the
current business model. Whenever the company
reaches critical thresholds the right contact persons
have to be informed through the dashboard.
3 TOP-DOWN AND BOTTOM-UP
BUSINESS MODEL CONCEPTS
3.1 IT-Business Model Framework
The software industry business model framework of
Schief and Buxmann (2012) forms an important basis
for the developed and implemented top-down and
bottom-up concepts. It covers generic aspects about
business models as well as economic principles that
are characteristic for the software industry (Req. 1)
(Kontio et al. 2005; Schief and Buxmann 2012;
Rajala 2012). The constitutive elements of business
models in the software industry have been derived
through an identification of the most prevalent classes
of software business models (Kontio et al. 2005; Popp
2011; Schief and Buxmann 2012). Moreover,
performance implications are considered in the
framework (Rajala and Westerlund 2012; Schief and
Pussep 2013; Schief et al. 2012). The concept consists
of 25 business model elements that are classified into
the five categories Strategy, Revenue Model, Product
Manufacturing, Product Distribution and Usage.
Each business model element can be described
according to several characteristics. The business
model element Investment Horizon for instance can
be described according to the characteristics
Analysis of IT-Business Models: Towards Theory Development of Business Model Transformation and Monitoring
173

Subsidence Model, Income Model, Growth Model,
etc. (Schief and Buxmann 2012).
3.2 Business Model Transformation into
Business Processes (Top-down)
Each business model has an impact on business
process layer in terms of required resources, process
steps and involved organizational units like e.g.
employees (Al-Debei and Avison 2010). During a
company’s start-up phase when companies create
their business model, they often do not adequately
consider the business processes that are triggered by
the business model (Al-Debei and Avison 2010).
However, with an increasing size of the company the
consideration of the underlying business processes
and their impact on business models becomes
increasingly important. Therefore, we apply the
indication of KPIs for specific business model
elements and correlated process steps to measure the
effects of business model transformation into
business processes as well as to carry out adaptations
on a business model. To establish a relationship
between business model elements and operative
business processes it is important to integrate BPM-
tools. Business processes (Req. 2.2) are represented
by the software industry value chain of Pussep et al.
(2011, 2012) consisting of ten value chain activities.
To each of these activities several specific business
processes are assigned to (Pussep et al. 2012). We
developed a connection between the derived business
model elements and the business processes that are
assigned to the activities of the software industry
value chain by means of the ARIS methodology
(Scheer 2002) through Event Driven Process Chains
(EPCs). EPCs are flowcharts that can be applied in
terms of depicting a company’s business processes
(Scheer 1994). An interface to the ARIS database
enables to carry out this connection from business
model to business process layer (Req.2.1). The ARIS
method describes business processes according to
four views: The Organizational View describes the
organizational structure that is needed to carry out
specific process steps. Concepts within the
organizational view are depicted as organizational
units. The Implementation View focuses on the
performing aspect of a business process, i.e. its
execution. The Performance and Information Views
contain the required and produced resources within a
process (e.g. intermediate products like software code
or project plans) as well as the actions of process
execution (e.g. a software product as output of the
software development process or billing of the
developed software product). Each of the 25 business
model elements adheres the requirements for the
transformation from business model into business
process. Depending on the selected characteristics of
each business model element, several business
processes with different resources are triggered.
Details, about how the top-down concept has been
implemented can be found in Burkhart et al. (2012).
If, for instance, a company decides to distribute its
products not only on national level but also on
international level, this change on the business model
will have an impact on the corresponding value chain
activities and its assigned business processes. Hence,
the tool provides anytime an overview about how
business processes are affected by the business
model.
Figure 1: Bottom-up Concept: Feedback loop from process layer back to the business model (bottom-up).
Fifth International Symposium on Business Modeling and Software Design
174

3.3 Business Model Monitoring and
Adaptation (Bottom-up)
In a next step, a methodology has been developed,
which enables to measure a business model’s quality
based on its underlying business processes to which
we also refer as feedback loop from business
processes back to the business model. The goal of this
method is to be able to continuously monitoring the
quality of an IT-business model and to carry out real-
time adaptations in order to improve the business
model’s performance. Figure 1 shows how the
structural dependencies between a company’s
business model and its underlying enterprise software
on process layer are considered in our bottom-up
concept. The software industry value chain with its
EPCs is classified to the application layer. Here,
software modules, functionalities of the EPC as well
as events can be mapped with KPIs to the
corresponding business model elements. Therefore,
users can select for each step of a certain business
process relevant KPIs which will be mapped to the
corresponding business model elements. The process
KPIs have been derived in form of expert interviews
with representatives from the software industry in
order to identify the most relevant KPIs for each
activity of the software industry value chain
Bonakdar et al. (2013). We integrated the derived
KPIs in our tool in form of a dropdown menu. By this
means, users are free to select the most relevant KPIs
for their company, such as ‘cycle time’,
‘implementation time’, etc., (Req. 3.1). After
selection and import of the KPIs in the Business
Process Monitoring Component, the current values of
the KPIs are continuously monitored and sent to the
business model. As soon as a certain threshold is
passed, the tool sends this information from business
process execution layer to the Business Model
Configuration Component, where this is information
is displayed in form of a control dashboard (Req.3.2).
The concept has been evaluated in form of expert
interviews with decision makers in the IT industry.
Regarding the concept of business model
transformation, 9 of the interviewed companies stated
that there still exists neither a concept nor an
implementation of a company-wide mechanism
which allows companies to estimate the impact of
strategic decisions on process layer. Thus, all of the
surveyed companies confirmed that it would be a
benefit to have a tool, which is tailored to the
processes and business model of their company in
order to support to transform strategic aspects into
executable business processes. Furthermore, the
interviews have shown, that most of the surveyed
companies do not use a company-wide performance
measurement system in order to carry out internal or
external benchmarking. Most of the interviewed IT-
companies were not able to assign relevant key
measures to specific activities of the introduced
software industry value chain, but most companies
are still in the process of identifying the most relevant
KPIs for their companies. In most cases, KPIs are not
yet related to the specific value creating aspects of the
surveyed companies, they rather have a generic
character. Hence, most of the companies stated that
particularly our proposed bottom-up concept would
provide a benefit in terms of linking performance
measurement to the strategic aspects of their business
model as many of the interviewees stated that they
have significant problems in connecting their KPIs to
specific elements of their business model
4 CONCLUSIONS
This paper presented a concept of business model
transformation and analysis with a focus on IT-firms.
Motivated by the lack of research regarding the
interdependencies between business models and
business processes we derived a top-down as well as
a bottom-up concept to describe the relationship
between IT-Business Models and value chains in the
IT industry. The top-down concept describes how
strategic decisions in business models can be
operationalized and transferred into business
processes whereas the bottom-up concept describes
how information from business processes in form of
KPIs can be automatically considered on business
model layer to be able to monitor the quality of the
business model. In future business model research,
the developed top-down and bottom-up concepts
serve as a basis for theory development, particularly
in terms of the analysis and development of an
automated tool support for business model
configuration, transformation and analysis.
So far, the focus of our research has been on the
IT-industry. However, the developed top-down and
bottom-up concepts serve as blueprint for other
industries. In order to apply the developed concepts
in other industries, business model components and
value chain activities of the respective industry sector
have to be developed in order to depict the influences
between business model and business process layer.
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