Reference no: EM133170980
THE SOFTWARE INDUSTRY Uber Technologies often made the claim that it was not in the transportation industry as it did not own the vehicles and did not consider drivers to be its employees. Uber instead asserted itself as a technology company that supplied a software platform that allowed independent users to connect to facilitate ride sharing. The assertion that Uber was a technology company supplying software grouped it into a large and diverse industry of software developers and suppliers. The software industry was comprised of companies that design, develop, and publish software for computers, smartphones, and video games. Major industry products and services included system and application software publishing, custom application design and development, technology consulting and training, and re-sale of computer hardware and software. Total industry revenue in 2019 was $269.9 billion, but profit margins declined 28.6 percent. Annual growth from 2014 to 2019 was five percent and was projected to be 2.1 percent from 2019 to 2024. The number of businesses in the
software publishing industry rose 10.8 percent from 2014 to 2019.2 Major Challenges High competition was one of the major challenges of the software industry, although it had varied greatly from company to company. Because the industry was so large and broad, there has often been more external competition than competition with other companies within the industry. Competition has depended largely on the target market, with companies that produce software experiencing the highest competition.3 Uber's direct competition within its industry sector was Lyft, another ridesharing application that had a similar business model to Uber's, while the majority of Uber's indirect competition existed within the transportation industry. Rapid technological change was a consistent challenge for the software industry, not only in terms of changing industry standards, but also the increasing rates of adoption by and sophistication of customers. This required companies to invest significant capital in research and development for a new product. Companies had to constantly improve their performance levels while keeping prices as low as possible in order to stay competitive. Once a product was released successfully, in order to stay competitive, updates needed to be programmed and released regularly. One development that eased this stress for the industry was the trend to release software as a digital subscription rather than a physical product that must be installed on a computer. It thus became much easier for developers to provide updates that did not require the customer to return to a physical store.4 Uber's business model allowed users to use its application free of charge, paying only for the individual ride and related charges. Its smartphone application enabled Uber to constantly improve the app performance to better support drivers and riders via periodic releases of updates to its users. Data security was also a challenge for the software publishing industry. Many software companies retain their customers' personal and sensitive information, making them targets of cyber-attacks. With an increase in cyber hacking in the last decade, the way companies collect, store, and transmit customer data has been under scrutiny. The possibility of becoming a cyber-attack victim has been a concern for the companies' integrity and trust among consumers, not to mention the litigation and liability that comes with an attack. But it has also been a financial liability to prevent hacking, as companies must dedicate significant resources to ensure data security keeps them protected.5 Uber's business model has allowed users to store credit card information in the application so that Uber can charge riders directly to the card on file and pay the drivers through the app as well. This has placed great responsibility on Uber to protect user financial data, as a security breach could threaten user confidence in Uber and potentially result in users no longer using Uber's technology
Competition
Uber's main competition in the software industry were other gig economy companies like Lyft and DoorDash. Lyft has a seemingly similar business plan that facilitates ridesharing. Both companies have recently gone public, and currently are trading for similar prices as of January 2020, although Lyft has had a higher peak in the last year at $74.99 per share and Uber's 52 week peak is only $47.08 per share.19 Both companies' ridesharing apps offer relatively similar levels of ridesharing services that both advertise as hailing a ride with the touch of a button. Uber's meal delivery service UberEATS has competed with other similar companies like DoorDash, which offer a platform for drivers to pick up prepared food from local restaurants and deliver to the customer. Uber, Lyft, and DoorDash were facing the same controversy over how they classify their drivers, with all three gig economy companies maintaining that they do not hire employees, they have only provided the technology to facilitate the service. Uber has differentiated itself from other gig economy companies by offering a wide array of services. It has competed with Lyft in ridesharing, and its Uber Eats segment has competed with DoorDash, but as of January 2020, there are no other companies that offer the array of technology services that Uber does in every segment in which it competes. Outside of the gig economy, the majority of Uber's competition has come from the taxi and limousine industry. From the very beginning, the taxi industry has viewed Uber as a threat and has worked to push regulations regarding how and where Uber operates. For example, in Colorado regulators working to protect the taxi industry enacted laws prohibiting Uber from operating within 100 feet of local restaurants and hotels. Limo services have also attacked Uber over its business methods. Uber has refused to back down from competition. While Travis Kalanick led Uber as CEO, the company continued to operate in mass despite many cease-and-desist letters from numerous officials in markets Uber was operating in. Kalanick was a controversial leader, but his tenaciousness earned him a reputation among Silicon Valley's elite, and earned the company high profile investors, including Jeff Bezos and Bill Gurley.
- Using SWOT analysis, what are some examples of external and internal influences that have impacted Uber?