Economic Inevitability of Openness

Umair Haque [1]:

"The www is the platform - and every site or widget on it is also an open platform. Why?

In yesterday's platform economy, scale in complements + technological specificity drove huge switching costs.

But today, there is no hard technological lock-in - and it's very, very hard to create it. Let's say we create a closed standard. And we gain demand-side scale.

What happens? The same thing that happened to software players over the course of two decades - but it might happen to us over two months.

Radical innovators realize that by shifting to open models, all players can realize enormous efficiency and productivity gains. From an economic point of view, everyone's better off complementing everyone else, than a single monopolist capturing all the value.

Now, what does this outcome depend on? Cheap information. We can't open up standards when info is expensive.

Does this sound familiar yet? It should - it's exactly what's happening across micromedia today.

Let's think about Facebook more carefully. Yes, it has built a pseudo-platform.

But this platform creates no real entry barriers. Yes, Facebook enjoys switching costs - but, unlike yesterday's platform leaders, it can't limit entry.

And so new competitors are always pushing innovation - but more, importantly, they will always and everywhere create enormous, structural pressure for openness.

Just like yesterday's open source players, they can always and everywhere nearly costlessly pool their resources, unlocking relatively large economic gains - and radically shifting the balance of market power." (http://www.bubblegeneration.com/2007/09/research-note-rethinking-platform.cfm)