Platforms, Markets and Innovation, Annabelle Gawer, ed., Edward Elgar: Cheltenham, UK, 2008
This paper asks when software platforms benefit by opening their technology to potential rivals.
Many platforms will choose to be partly open and partly closed as they mature, usually opting for control by one central group.
- Software “platforms” like Linux, the iPhone, or Microsoft’s Windows offer tools for several groups of users, including software developers and end users.
- Platforms can be “opened,” that is, structured to encourage outside developers to participate by making compatible products; or “closed.”
- Linux is mostly open; the iPhone is mostly closed except on rigorous terms. Microsoft’s Windows is closed in some aspects and open in others.
- Platforms can use compatible or incompatible technologies. Those who operate mature platforms sometimes choose to make their platforms interoperable. U.S. mobile text messaging services were incompatible for years, but became interoperable.
- The effect of interoperability on competing platforms depends on factors like their size, whether the market is mature or likely to grow, and the cost of conversion to technology that supports interoperability.
- A drawback of interoperability is that if negotiations among multiple firms are necessary, setting technological standards can be slow and cumbersome.
- Mature platform providers generally do best with closed systems, unless:
- They face pressure from rivals and users.
- Opening the system would increase its appeal.
- Dominant platforms might not insist on concessions from developers, to avoid discouraging future developers. For example, Sony’s game console was dominant, but Sony did not insist that game developers make games that would work only with its console.
- Platform owners can respond to competition by absorbing other platforms. For example, Microsoft developed its own browser, “absorbing” the function of Netscape within its Windows platform. Google might try to absorb Microsoft Windows, in turn.