Posts tagged Software-as-a-Service

In 2006, the concept of platforms moved into the mainstream business conscience. The emergence of SalesForce.com’s AppExchange, Amazon’s e-commerce platform and Google’s APIs has stirred the imagination of industry pundits and entrepreneurs alike. Despite the recent hype, open product architectures are not a new concept. In 1993, the Harvard Business Review ran an article explaining “How Architecture Wins Technology Wars” (purchase required). Although many of the examples are dated, there are a few concepts in the article that are timeless. In introducing the concept of open systems, the authors (Charles Morris and Charles Ferguson) assert that:

In an “open-systems” era, proprietary architectural control is no longer possible, or even desirable. In fact, the exact opposite is true. In an open systems era, architectural coherence becomes even more necessary. While any single product is apt to become quickly outdated, a well-designed and open-ended architecture can evolve along with critical technologies, providing a fixed point of stability for customers and serving as a platform for radiating and long-lived product family. Proprietary architectures in open systems are not only possible but also indispensable to competitive success — and are also in the best interest of the consumer.

As far back as the early-nineties, the Morris and Ferguson suggested that “good products are not enough”. In their view, point-product vendors are at the mercy of the platform vendors and there is a significant risk when the architectural leader “changes the rules of the game”. In the beginning, “products distribute architectures”. However, over time, architectures become the become the distribution channel for additional products and services. Although a familiar story now, the authors suggest that this is how Microsoft beat Lotus in the spreadsheet wars. While Lotus was developing a “grab-bag” of applications, Microsoft focused on building out the platform (i.e. Windows). In the end, Microsoft was better able to leverage its own platform to push Excel and Word.

The above-mentioned article also contends that “successful architectures are proprietary, but open” because “closed architectures do not win broad franchises”. As discussed in the previous post, Apple has used a platform approach to the development of the iPod, but it is not an open product architecture. It does seem that they have won a broad franchise though — at least for the moment. However, the article points out that Apple made the same mistake in the early nineties by bundling the Mac OS too closely to its own hardware. If they are right, iTunes/iPod will ultimately end up with single-digit market share as well as customers and innovators migrate to more open options.

The authors go on to suggest that “general purpose architectures absorb special purpose solutions”. We see this all the time in the open source world where someone makes a cool modification that ultimately gets rolled into the core product. I think that this is going to be a real challenge for the open, but proprietary, platform vendors such Salesforce.com. It is only a matter of time before they begin to roll some of the functionality provided through AppExchange into the core product — it will be interesting to observe how the partners react and how they are compensated for their innovative efforts. Lastly, the article also suggests that “low-end systems swallow high-end systems”. Although they started out as a SMB application provider, over the past two years there has been plenty of evidence that Salesforce.com is heading up-market. And over the past couple of days, Google has announced that it is going to market its previously free individual productivity applications to SMBs. These low-end systems are definitely evolving to address previously higher-end needs.

In a future post, I’ll look at phases of architectural competition and strategies for platform dominance.