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Software companies can make a product more valuable by combining related capabilities—or make one capability more attractive by separating it into a focused offer. That is the strategic idea behind Jim Barksdale’s famous line, not a literal list of every way software earns revenue. Whether bundling or unbundling works depends on what customers value, how products compete, and how the market is structured.
What Barksdale’s maxim means—and what it doesn’t
Jim Barksdale, former CEO of Netscape, is credited with the line: “There are only two ways to make money in business: One is to bundle; the other is unbundle.” The wording appears in INSEAD’s 2021 working paper, Bundling in a Symmetric Bertrand Duopoly, by Guillaume Roels, Araz Khodabakhshian, and Uday S. Karmarkar.
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In product strategy, bundling means offering multiple capabilities together, often as one product or package. Unbundling means separating a capability or group of capabilities into a distinct offer. The maxim captures two recurring ways to change what customers can buy. It does not establish that these are the only software revenue models: a company may charge by subscription, license, usage, transaction, or another mechanism while choosing either bundled or separate products.
It is best treated as a lens for decisions about product scope and packaging—not as a law, prediction, or guarantee of profit.
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How bundling and unbundling change the offer
| Decision lens | Bundling | Unbundling |
|---|---|---|
| Scope and integration | Combines capabilities into a broader offer. Customers may benefit when the components work together or are easier to acquire as one package. | Separates a capability into a focused offer. Customers can choose that component without buying the broader package. |
| Discoverability | A capability may be easier to find as part of a familiar, unified product, but less visible if it is buried among many features. | A dedicated product can make a specific capability clearer, but customers may have to find, evaluate, and manage an additional offer. |
| Customer preference and willingness to pay | Can suit customers who value several components together; the bundle’s appeal depends on how they value the combination. | Can suit customers who want a particular capability independently; viability depends on sufficient demand for that focused offer. |
| Differentiation and competition | May distinguish a broader offering, but can also alter price competition and market access in ways that depend on market conditions. | May let a focused product stand apart, but does not by itself guarantee differentiation or a defensible business. |
These are questions to test, not universal scores. A bundle that simplifies buying for one customer may feel bloated to another. A standalone product may clarify its purpose while adding friction for people who need the components to work together.
Why bundling does not always help—or hurt—competition
INSEAD’s paper models two firms competing on price with two product components. Under the paper’s stylized assumptions and market rules, bundling can have different effects: it may preempt entry, intensify price competition, or soften price competition. The model’s result is conditional; it is not a field test of software companies or a claim that every bundle produces one of those outcomes in every market.
The authors explicitly say bundling is not anticompetitive per se. Their qualification concerns circumstances such as coordination between firms or attempts to preempt entry by fully covering the market. The practical lesson is not that bundling is inherently pro- or anticompetitive, but that its effect depends on the competitive setting and how customers value the products.
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A 2021 essay from PayPal Public Policy and Research describes bundling and unbundling as patterns found in several industries, including software. Its survey of 4,000 people across the United States, Brazil, China, and Germany examined preferences for bundling financial services—not software products. It therefore illustrates that preferences can vary across markets, but it does not establish what software buyers prefer or whether software bundles perform better.
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For a software team, that distinction matters: broad observations about bundling cannot substitute for evidence from the intended customers and use case. A package that resonates in one market or segment may not do so elsewhere.
A practical way to choose what to bundle
- Start with the customer’s job. Identify the task or outcome the product is meant to support. List which capabilities customers need together and which they might reasonably want on their own.
- Check whether the combination adds value. Ask whether the components work better together, reduce purchasing or setup friction, or simply increase the feature count. More included functionality is not automatically more useful.
- Test the focused alternative. Consider whether separating a capability would make it easier to understand and buy. Weigh that clarity against the extra decision, integration, or management burden customers may face.
- Study willingness to pay by segment. Compare how different customer groups value the combined offer and its individual components. Avoid assuming that a single package fits customers with different needs.
- Assess competitive consequences. Consider how the offer changes price comparisons, rivals’ ability to compete, and potential entry. The INSEAD model shows why the result is context-dependent; it does not provide a universal answer for an individual product.
- Revisit the choice as the market changes. A bundle can later become a source of distinct products, while separate products can be recombined when customers value an integrated offer. Packaging is a strategic choice that can be reconsidered, not a permanent classification.
Read “bundle or unbundle” as a cycle, not a rule
A World Programming Society post dated September 5, 2026, presents bundling and unbundling as recurring cycles. Its author’s team builds AI infrastructure, an interest relevant to how the argument is framed. That makes the post a perspective on the pattern, not independent evidence that every software category follows it.
The useful conclusion is narrower and more durable: software firms repeatedly reconsider which capabilities belong together, which deserve a focused offer, and how those choices affect customer value and competition. The best answer is specific to the product and market—not dictated by the slogan.
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