Steam is a digital distribution company that engages in the sale and distribution of online gaming content. The company works by buying online digital gaming content from small software game developers and selling the content through larger business franchises (Valve Corporation, 2013).
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Steam’s digital marketing platform mainly works through a software distribution system. This software distribution system allows users to install and play games from any PC. Through the expansion of its business divisions, Steam now provides its customers with a selection of over 2000 games (Heyman, 2011).
Observers consider Steam to be a market success as it has attracted millions of users around the globe. Moreover, the company commands about 70% of the digital distribution market (Halfacree, 2012).
This report analyses Steam’s digital software distribution system by examining how its internal competencies and external market dynamics affect the company’s performance.
This report especially focuses on evaluating the business social network services, enterprise systems, information technology (IT) planning and processes, business intelligence and support systems of Steam’s digital software distribution system.
This report also analyses these key business components, viz a viz the underpinnings of key management theories, and the relevance of such theories to Steam’s business processes. However, before embarking on these tasks, it is crucial to understand Steam’s main business pressures.
Like most successful businesses, Steam has to contend with competitive pressures. Based on the success of its online digital platform, many companies have tried to emulate Steam’s business model. One such company is GOG.com. The company operates as a subsidiary of its Cyprus-based parent company, Project Red.
Such companies provide online gaming contents that are similar to Steam’s products and services. Such companies pose a threat to Steam’s market share because their activities may erode Steam’s dominance in the market.
The relative successes of such companies create a competitive pressure for Steam as they either force the company to re-invent its products (product differentiation), or forces the company to consider reducing the price of its products, thereby eroding the company’s profitability.
Besides competitive pressures, Steam has also had to experience security challenges regarding its online digital platform. For example, in a recent publication, one of Steam browser protocol caused serious concerns among experts about its ability to cause security threats (Orland, 2012).
Such security threats stemmed from the protocol’s ability to enable malicious exploits when people clicked on suspicious links. Another security problem that characterises Steam’s operation is its attachment of sensitive information with gaming products.
This issue caused a lot of concern regarding the exposure of sensitive information as was demonstrated in the disagreement between Steam and a German IT platform, Ubisoft. This issue birthed the recommendation that Steam’s gaming products should be isolated from sensitive information (Orland, 2012).
The above concerns are a shadow of the security pressures that Steam has undergone. In 2011, for example, the digital market platform had to shut down temporarily after the affirmation of fears that some hackers would attack the site.
Steam later established that the hacking threats targeted customer information (Halfacree, 2012). Such threats have permeated through most of Steam’s business divisions. Comprehensively, competitive pressures and security threats define Steam’s business pressures.
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The business characteristics of Steam Digital Software premise on the provision of gaming products and services. Sometimes, the company offers these products and services simultaneously (Halfacree, 2012).
Since Steam’s digital software distribution system provides an online gaming platform where users interact with other gamers around the world, it is crucial to understand the business as a service.
In this regard, it is correct to say that one characteristic of Steam’s digital software distribution system is intangibility, since the business produces intangible services instead of a tangible product. However, this characteristic makes it easy for competitors to replicate the services of the company.
From this backdrop, it is also crucial to mention that timelines pose a key feature of the company’s software distribution platform because since the company relies on its service provision expertise as a key income generating division, it is often difficult to engage human resource services in advance.
Therefore, it is equally difficult to merge demand and supply, unlike the provision of tangible products. The scalability of the business is limited in this same manner.
The provisions of gaming services provide a networked-based access to the company’s products and services.
However, a distinguishable factor about the company is its ability to allow customers to save their products on the company’s cloud, thereby easing the hassles of saving their products in vulnerable compact discs (Halfacree, 2012).
Moreover, Steam’s business model provides a multi-tenant efficiency where the company’s website functions share the same software platform, thereby limiting the server resource use (Cusumano, 2004). This characteristic helps to save on the cost of maintaining the company’s servers.
Through this platform, the company may also provide its customers with real updates, when they occur, as opposed to the customers openly going out and seeking these updates by themselves.
Lastly, Steam’s digital platform uses scalability as a key characteristic where a multi-tier architecture is always employed as a load balancing system between the server and the demand (Cusumano, 2004). Steam employs this strategy to match the servers with their demand, without straining the initial software architecture.
Steam’s business characteristics may also be heterogeneous because most of the services that it provides its customers are very specific to the needs of the customers. Therefore, because of the difficulty in standardising products, it is difficult to standardise and produce different gaming software for all its customers.
Through this understanding, it is also correct to say that the company’s software distribution system is difficult to scale as well. Software companies that engage in software development as a subcontracting venture also easily share the above business characteristics.
Relevance or Potential to New technologies
The nature of Steam’s business makes it vulnerable to existing and new technologies that may affect its business dynamics in several ways. For example, the proliferation of web-based user technology has significantly diminished the importance of having the traditional client-server application.
The same outcome is true regarding the proliferation of associated practices (such as web design) because this development has diminished the importance of having the traditional client-server application as well (Halfacree, 2012).
These developments have changed the traditional model of investments in the software distribution system.
Some technological developments like the standardisation of webpage technologies and the acceptance of web development practice as a viable technological practice has reduced the costs associated with developing software as a service.
Indeed, the standardisation of web-based technologies, such as HTML and Java Script, has made this outcome very practical (Halfacree, 2012).
Similarly, the introduction and ubiquity of web application frameworks have also enabled new solution providers to come up with competitive digital software solutions that have challenged the traditional dominance of Steam’s digital software distribution system.
Such web-based application frameworks may include Ruby on Rails or PHP languages (Heyman, 2011).
The standardisation of HTTPS protocol has also led to the mitigation of security concerns that have traditionally affected steam’s operations. Such security solutions have however been minor.
The development of integrated protocols, such as REST and SOAP, has also enabled the integration between the gaming services that Steam offers and its internal applications that may be privy to the organisation (Heyman, 2011).
An increase in the growth of broadband internet access has also provided new opportunities of improving Steam’s gaming experience, as it provides high-speed gaming experiences that are compatible with on-premise software.
Comprehensively, the above dynamics show the relevance of new technologies to Steam’s business processes.
Information Technology Planning and Processes
Approach to IT Planning
IT planning and processes are ideally supposed to complement a business’s overall corporate strategy. Aligning a company’s business strategy with the IT strategy is therefore of utmost significance, but it is still a very complex process (Turban & Volonino, 2011). Steam’s IT strategy spans through several IT functions.
The main approach to Steam’s IT planning is the strategic issues approach. This strategy contrasts with the comprehensive approach, which often clouds the functionality of different departments, as opposed to focusing on the issues that have a strategic significance to the working of the organisation.
The main factors that make the strategic approach strategy to be unique from other strategies, pursued by Steam’s competitors, are selectivity and pragmatism (Turban & Volonino, 2011).
This strategy works by restricting the number of issues that Steam may engage in by focusing on only those issues that are of utmost significance to the company’s bottom-line (Bryson, 2011).
For example, through such an approach, Steam has preoccupied its IT strategy with identifying what issues make it stand out from the competitors and developing the areas that give it a competitive advantage.
The main advantage of pursuing this strategy is that it has prevented the organisation from pulling in many directions, thereby improving the effectiveness and timeliness of its strategies. Perhaps, this efficiency explains the overwhelming market share, which Steam commands.
Methodology Adopted In IT Planning
The progression of Steam’s digital software distribution system shows that the company adopts the iterative and incremental development methodology for IT planning.
The basic nature of this system is the opportunity it gives companies to develop their software platforms through small iterative cycles that mature slowly (Turban & Volonino, 2011). Therefore, companies that use such systems build on previous knowledge to develop better versions of their systems.
The incremental development methodology works by combining iterative designs and incremental building models to develop new software.
Indeed, since the inception of Steam’s digital software distribution system, the company’s digital platform has undergone several “evolutionary acquisitions,” which have been characterised by several iterations of the software development cycle.
This cycle has also mirrored the incremental build approach, which has allowed the company to improve its software development methodology and software development process. There are numerous evidences of the adoption of this approach. For example, Steam has changed many of its IT planning processes.
For example, Steam Company normally saves its games as single non-compressed archive files for easy access by its customers (Heyman, 2011).
The files were previously stored as non-compressed extensions of gaming software. The company allocated enough space for each user to store their gaming software to reduce the incidence of fragmentation. Fragmentation may easily occur when the users download large files.
Another example of the evolutionary IT processes of Steam’s digital platform arises from the company’s introduction of a game cache to prevent users from overwriting important data in their hard disks – an incident that used to happen often (Halfacree, 2012).
Steam also changed its digital rights management system to provide its customers with an opportunity to share their online content.
However, the company allows its customers to do so when they have access to the internet, at least initially before starting the game. Alternatively, users may use the company’s offline accounts to play their games without any limitation.
Steam also changed its IT payment medium by introducing a storefront/steam-front feature. Customers now make their payments using a web-money service (Halfacree, 2012). Many developing and developed markets use this service.
Steam also adopted a very flexible gaming structure that allows its customers to use non-steam games on their online platform. Many more examples show how Steam has used the incremental methodology to improve its IT functions.
Indeed, experts expect the next phase of Steam’s growth to follow the incremental methodology by building on existing competencies for better outcomes (Halfacree, 2012).
For example, experts expect Steam to improve on its gaming success to develop other successful IT platforms in the non-gaming industry. Relative to this assertion, Halfacree (2012) says,
“Traditionally, Steam served one purpose: to sell and distribute games, both from Valve and from third-party publishers and developers. It does so extremely successfully, helped along by regular bargain-basement sales of older stock, but Valve has clearly been looking beyond the games market for its next injection of growth” (p. 3).
Certainly, the incremental methodology will guide the next phase of Steam’s growth.
Bryson, J. (2011). Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement. London: John Wiley & Sons.
Cusumano, M. (2004). The Business of Software. New York: Free Press.
Halfacree, G. (2012). Steam Branches Out Into Software Distribution. Web.
Heyman, G. (2011). Steam: Digital Cross-Platform Game Distribution System Done Right! Web.
Orland, K. (2012). Steam Vulnerability Can Lead To Remote Insertion of Malicious Code. Web.
Turban, E., & Volonino, L. (2011). Information Technology for Management: Improving Performance in the Digital Economy (8th Edition). Hoboken: Wiley.
Valve Corporation. (2013). Steam Digital Software. Web.