Unbundling as a strategy (Infosys)

Abstract

“Bundling refers to the sale of two or more separate products/services in a package. This strategy is pervasive in markets today in one form or another. In the past decade, bundling has received growing attention in the marketing field. Examples of bundles that come to mind readily are opera season tickets (tickets to various events sold as a bundle), luggage sets (various luggage items sold as a bundle), and Internet service (bundle of Web access. Web hosting, e-mail, personalized content, and an Internet search program). Unbundling, which can be probably considered as the flip side of the bundling coin, is a neologism to describe how the ubiquity of mobile devices, Internet connectivity, consumer web technologies, social media and information access in the 21st century are affecting older institutions (education, broadcasting, newspapers, games, shopping, etc) by breaking up the packages they once offered, providing particular parts of them at a scale and cost unmatchable by the old order. Unbundling has been called "the great disruptor". In their landmark 2001 Harvard Business Review article, “Skate to where the money will be”, Clayton Christensen, Michael Raynor and Matthew Verlinden outlined the process by which evolving industry value chains unbundle, and the wrenching challenges and turmoil that this process causes for industry incumbents. Unbundling phenomenon dates back to the 1970s, when the computer industry was dominated by huge vertically integrated companies such as IBM, Burroughs, and Digital Equipment. With their vast scale advantages and huge installed bases, they seemed unassailable. Yet just ten years later, power in the industry had shifted: the behemoths were struggling to survive while an army of smaller, highly specialized companies was thriving. The industry's sea change can be traced back to 1978, when a then-tiny company, Apple Computer, launched the Apple II PC. The Apple IFs open architecture unbundled the computer business into specific hardware and software components. Published studies are fuzzy about basic terms and principles of this phenomenon of bundling and unbundling, and do not provide a comprehensive framework on the economic optimality of bundling. As a result, businesses do not always appreciate the meaning of unbundling and the variety of strategies encompassed by the term. Managers may not appreciate the ups/downs involved in this strategy and fully exploit the advantages of unbundling in various markets.