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Software companies often make a consequential product decision: combine capabilities into one offer, or separate a focused capability into its own product. Jim Barksdale’s famous line—“There are only two ways to make money in business: One is to bundle; the other is unbundle.”—captures those recurring strategies, but it is a heuristic, not a literal list of every way software earns revenue.
What the bundling and unbundling maxim means
INSEAD’s 2021 working paper attributes the line to Jim Barksdale, former CEO of Netscape. The paper and a PayPal Public Policy and Research essay use it as a statement about making money in business. It is memorable because it names two common ways to shape what a company sells:
- Bundling: combine two or more products, features, or services into a single offer, such as a software suite that includes several tools.
- Unbundling: separate a capability from a broader product or suite and offer it on its own, often to serve a more specific need.
These are product and packaging choices, not an exhaustive inventory of revenue models. Software businesses can earn revenue through subscriptions, usage-based charges, licenses, advertising, services, or other arrangements. Those models can also be used with bundled or unbundled products.
Why bundling can help—or hurt—a software business
Combining products can make a suite easier to buy and use, while separating a component can make a focused offer easier to understand or differentiate. Neither approach is automatically superior: the result depends on what customers value, how the products fit together, and how competitors respond.
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Scope and integration convenience
A bundle can reduce the effort of evaluating and buying several related tools. When components work together, one offer may also simplify workflows. But a broad suite can include capabilities that some customers do not need, making the offer less attractive to them.
An unbundled product gives buyers a narrower choice and may suit a specific workflow. The trade-off is that customers may need to find, buy, and connect separate tools themselves.
Discoverability and willingness to pay
Bundling can expose customers to capabilities they might not have found or selected separately. Yet customers who value only one component may prefer to pay for that component rather than a larger package. A standalone product can make a specific capability more visible, but its success depends on customers valuing it enough as an independent offer.
Competition and market structure
Bundling changes not only the customer offer but also the competitive choices available to firms. In its stylized model of two firms competing over two components, the INSEAD paper finds that bundling can preempt entry, intensify price competition, or soften it. Which outcome occurs depends on the model’s assumptions and market rules; the paper is not a field test of software companies.
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The authors also state that bundling is not anticompetitive per se. Their qualification concerns circumstances such as coordination or attempts to preempt entry by fully covering the market. A bundle’s competitive effect therefore cannot be inferred from the fact of bundling alone.
What customer-preference evidence can—and cannot—show
In its 2021 essay, PayPal Public Policy and Research describes bundling and unbundling as trends seen in software and other industries. The essay reports a survey of 4,000 people across the United States, Brazil, China, and Germany, but the survey examined preferences for bundling financial services—not software products. It can illustrate that preferences vary across markets, but it does not establish what software buyers prefer or prove that one packaging strategy is generally more profitable.
Likewise, a September 5, 2026 post from the World Programming Society frames bundling and unbundling as recurring cycles. Its search-result excerpt discloses that the author’s team builds AI infrastructure. That is the author’s argument, not independent evidence that the cycle applies universally or predicts which software strategy will succeed.
How to use the maxim when deciding what to sell
Use bundling and unbundling as options to investigate, not as a command to package every product one way or the other. Start with the customer problem and examine the trade-offs:
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- Bundle when customers commonly need the capabilities together, integration adds meaningful convenience, and the combined offer remains attractive to buyers who value different parts of it.
- Unbundle when a capability solves a distinct problem, customers want to choose or pay for it separately, and a focused offer can be understood and supported on its own.
- Check competitive effects as well as product fit. Consider whether the packaging changes entry opportunities or price competition; the INSEAD model shows those effects can point in different directions.
- Test customer value in the relevant market. Do not treat evidence about financial services, another country, or another product category as proof of software-buyer preferences.
The practical question is not whether bundling or unbundling is the one true way to make money. It is which combination of product scope and pricing makes the most sense for the customers and competitive conditions a software business actually faces.
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