Why e-Service Development is Different: A Literature Review <s> Low Marginal Costs of Service Delivery <s> From the Publisher: ::: The Economics of Electronic Commerce applies standard microeconomic analyses to an entirely new industry - laying the foundation for the development of radically new business models. With detailed analysis to those involved in the actual production, marketing, and distribution of digital information products as well as professionals doing business in the electronic marketplace, this valuable reference demonstrates that businesses that achieve early success from applying these theories will enjoy a distinct competitive advantage in this newly defined world of business. <s> BIB001 </s> Why e-Service Development is Different: A Literature Review <s> Low Marginal Costs of Service Delivery <s> Markets play a central role in the economy, facilitating the exchange of information, goods, services and payments. In the process, they create economic value for buyers, sellers, market intermediaries and for society at large. Recent years have seen a dramatic increase in the role of information technology in markets, both in traditional markets, and in the emergence of electronic marketplaces, such as the multitude of Internet-based online auctions. <s> BIB002 </s> Why e-Service Development is Different: A Literature Review <s> Low Marginal Costs of Service Delivery <s> The article reviews the book “Blown to Bits: How the New Economics of Information Transforms Strategy,” by Philip Evans and Thomas Wurster. <s> BIB003 </s> Why e-Service Development is Different: A Literature Review <s> Low Marginal Costs of Service Delivery <s> Abstract The management of new service development (NSD) has become an important competitive concern in many service industries. However, NSD remains among the least studied and understood topics in the service management literature. As a result, our current understanding of the critical resources and activities to develop new services is inadequate given NSD’s importance as a service competitiveness driver. Until recently, the generally accepted principle behind NSD was that “new services happen” rather than occurring through formal development processes. Recent efforts to address this debate have been inconclusive. Thus, additional research is needed to validate or discredit the belief that new services happen as a result of intuition, flair, and luck. Relying upon the general distinctions between research exploitation and exploration, this paper describes areas in NSD research that deserve further leveraging and refinement (i.e. exploitation) and identifies areas requiring discovery or new study (i.e. exploration). We discuss the critical substantive and research design issues facing NSD scholars such as defining new services, choice in focusing on the NSD process or performance (or both), and specification of unit of analysis. We also examine what can be exploited from the study of new product development to further understanding of NSD. Finally, we explore one important area for future NSD research exploration: the impact of the Internet on the design and development of services. We offer research opportunities and research challenges in the study of NSD throughout the paper. <s> BIB004
The economics of information have been recognized as being dramatically different from the economics of physical items BIB003 . This leads to a unique cost structure both in comparison to physical products as well as to other non-electronic services. The typical cost structure of an information technology supplier involves high fixed costs for developing the infrastructure and applications, and very low, sometimes near zero, marginal costs for actual service provision BIB001 BIB002 . Once an e-service has been developed and the infrastructure is in place, they are almost infinitely scalable with minimal effort BIB004 . Further, through the use of electronic intermediaries, the search and transaction costs of e-services are reduced BIB002 . This further reduces variable costs of service provisioning and service use. Contrary to non-electronic services that are sometimes very labor intensive (e.g., hospitality services), the costs for e-service delivery is marginal. and the main costs accrue during service design, as opposed to service delivery. This difference should explicitly be addressed during service development.