In this paper, we introduce an analytical model for maximizing
social welfare, which can be used for finding the optimal offering
of a set of software services. The analytical model also explains
the impact of service flexibility on customer’s selection of
business services and on the revenue of service providers. The
analytical model is based on a utility model and a cost model. The
cost model uses the number of lines of code as the basic measure
for cost and applies linear and polynomial cost functions. The
utility model is derived from a customer-provider relationship
model, which relates the user’s utility to the functionality of
business services. The result of the analytical model shows that
the distribution of functions of an existing business service to a
large number of new business services does not generate any
additional revenues for the service provider from existing
customers. Instead, additional revenue is generated through the
offering of business services with fewer functions at lower price.
This business services attract customers, which could not afford
the original software service of the provider. The result of the
analytical model also shows that there is an optimal number of
business services that maximizes the net utility of customers.