free html hit counter Time For A New Software Economy - John Battelle's Search Blog

Time For A New Software Economy

By - July 12, 2011

mc-vs-pc-vs-goog.jpegWay back in the day, before all this Interweb stuff made news, we had a computer hardware and software industry that was both exciting and predictable. I was a cub reporter in those days, covering an upstart company (Apple) as it did battle with two dug-in monopolists: IBM in hardware, and Microsoft in software. IBM was clearly on its way down (losing share to legions of hardware upstarts in Asia and the US), but Microsoft was an obvious – and seemingly unbeatable – winner.

Underdog Apple had a cult following (I was part of it), and its products were clearly better, but it didn’t seem to matter. Quality wasn’t winning, and as a young journalist that fact irritated me. But that’s only an orthogonal part of the story I want to tell today.

Back in the late 1980s, Steve Jobs wasn’t running Apple, but his DNA was very clearly still in the company (for those who don’t obsessively follow Apple, Jobs and Woz founded the company, then Steve’s board brought in John Sculley to run it in 1983. Sculley then fired Jobs from any operational role. Jobs returned to Apple’s helm in 1997.) Apple in the 80s and 90s was secretive, paranoid, full of extraordinary talent, and convinced it was being unfairly treated by Microsoft.

In the main, Apple’s fears were pretty well founded. And there was perhaps no greater battlefield to prove those fears than the battle for the hearts and minds of software developers. (Microsoft CEO Steve Ballmer has never really forgotten this lesson).

In the 1980s and 90s, developers were the most important class of value creator in the digital economy – they were the entrepreneurs and marketers leveraging the new platforms of Apple and Windows, building new businesses out of thin air. Borland, Oracle, Lotus, Intuit – I could list scores, if not hundreds, of successful developers from that time. Many still exist today.

As a reporter, developers were often my best sources, because Apple and Microsoft would show them early versions of hardware and operating systems. Developers would then talk to me about those new products, and I’d get my scoops. That was how the information ecosystem worked, and everyone knew it. Developers had a ton of power – they made the products which drove sales on the Windows and Apple platforms, and if they felt slighted, they could always go to the press and apply pressure as needed.

Fast forward to now, and substitute the Internet platforms of today (the open HTML web, Apple’s iOS, Facebook’s Platform, Android, and to a lesser extent Twitter and Google’s Chrome) for the ones of my fading yesteryear. How do they stack up?

Not so well, I’m afraid. While the early Internet was a paradise for a certain kind of developer – anyone who knew HTML and could figure out a way to create value on the nascent web – what’s emerged in the past five years of the new mobile web is not a very promising foundation for the creation of lasting value. I’m speaking, in the main, about the “app economy” – a fractured ecosystem lacking a strong economic and technological true north.

Of course, Apple’s current cult of followers would argue that there *is* a True North: iOS. But I’m not seeing great new companies born on Apple’s platform, as they were back 20 years ago. Angry Birds aside, am I missing something here?

One could argue Facebook is such a platform, and declare Zynga proof that great companies have been created thanks to Facebook’s platform. But last time I checked, Zynga was one company, not scores of them.

Android is Google’s answer (as is Chrome, to a confusing extent), but so far, Android seems to be taking the same route as iOS in economic terms – make an app, hope for a hit, where a hit is defined in tens of thousands of dollars in revenue (not exactly a business). And Twitter still has work to do before it becomes a true platform for economic value creation (though promising signs are in the air).

The HTML or open web is still the best and most robust platform for development of true value, to my mind. And hundreds, if not thousands, of developers and entrepreneurs have succeeded by leveraging it. But it lacks what that early Apple and Windows ecosystem had: a true software business, one that provided differentiating value such that consumers (and enterprises) would pay significant dollars to use that software. This may sound counterintuitive for an advertising-driven entrepreneur such as myself to state, but it’s time we had a robust paid software ecosystem on the web. There’s certainly room for both.

I think it’s coming. The table is set, so to speak. As consumers we’re getting used to paying for apps on our phones and tablets. And as consumers, we’re getting frustrated with the lack of value most of those apps provide us. As with Windows back in the day, quality isn’t winning right now. On the web, we’re wanting more robust solutions to problems that are only beginning to surface – I’d pay five bucks a month to someone if they’d solve my social presence problem, for example: I just can’t keep up with Facebook, Google+, Twitter, Tumblr, StumbleUpon, and newer services like Percolate. I’d probably also pay for someone to solve the deals space for me – it’s too confusing and I know I am missing out on serious savings. Same for music and media (an area of early and promising development), professional services of many stripes, and on and on.

But for such a quality software ecosystem to unfold, we need, as developers, a clearer sense of a platform roadmap, and some certainty as to what portions of the economic pie are open for competition. This is particularly true for the consumer space (enterprise is used to paying for value, and is already doing so at places like Salesforce and LinkedIn). Clearly, you shouldn’t develop a photo app for Twitter, or a music or communications solution for Facebook. And you’d simply be crazy to create a contacts manager for Apple products, even if the one they have is godawful once you pass about 1000 records.

Or would you be? Perhaps the solution is to create at a level above all of these services – software that lives above the level of a single platform, so to speak. Software in the cloud (passe as it might be, Mr. Benioff).

Isn’t that what the web is supposed to be? Isn’t that the promise of the cloud?

It is, but for that to work, all those platforms have to be willing to share data and APIs. I’m not holding my breath for that to happen in the next few years. But happen it will, I predict, because happen it must. Change will be forced downward, from consumers back into the platforms that, for now, are mostly closed to value creation. Mark my words….I hope they’re right.


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5 thoughts on “Time For A New Software Economy

  1. John says:

    I’m turning comments on again, hoping the spammers won’t come through. Facebook login seems to work…

  2. Peter says:

    I wonder if fundamental payoffs have changed that we might never get back to days of common standards.

    The life-cycle view would see a disruption followed by a burst of innovation. Historically, you see a multiplication of standards, which then contract. Radio, automobiles and trains are examples. If this is the case, we’ll get back to common standards for even valuable standards, and what I read as your frustration at the slow pace of a pre-determined evolution is warranted.

    I wonder, though, if the economics of platforms have changed. Scale may not be worth what it used to, perhaps because interoperability can be achieved cheaply ad hoc, particularly given path-dependent investments in proprietary standards. Without economies of scale breathing down their necks, it may take a very long time to negotiate which platforms have to kneel.

    Moreover, this automatic process of standard-emergence has to compete with the profitability of sculpting inter-operability. Walled gardens have their value, which creates constant tension with the economies of scale gained from common standards. Again, ad hoc inter-operability could conceivably beat scale.

    It seems to me the two competing metaphors are language and community. In language, the benefits to inter-operability overwhelm the benefits of nuanced inter-operability (pace dialects, cants, etc). In community, the benefits of refined inter-operability outweigh the benefits of scale. So you have family, friends, friends-of-friends, strangers, people who ride the same bus, etc. All have different levels of ‘claim’ on you, and that works better than everybody being undifferentiated comrades (ie common standards).

    Personally, I would bet on the community model, not the language model. Meaning we may continue what we’re seeing today – common standards where inter-operability sculpting is not monetized (Apache, Linux) and negotiated operability pairings when valuable networks want compatibility (Twitter-Google).

  3. Brian says:

    Happen it will. Thanks for some insights into the history of platforms. It’s always good to look back at where we’ve been to decide where we should go. I completely agree that open standards and APIs are the way forward, but having worked with hundreds of developers over the years, I know they won’t abide by a universal language. I’m amazed HTTP still rules.

    I think the key is to allow developers their autonomy and use the power of the crowd to link everything together. Create an API clearing house of all other APIs so your app can talk to any other app – or user – in any language you desire, all based on common data attributes.

    I’ve started work on specifications for one possible solution, but it’s not going to be easy. In order for something like this to succeed you need a large player to open up their data in a share-alike environment.

    If you’re interested, here’s what I’m working on: http://palmettoapi.com – completely crowd-sourced and not-for-profit. Also check out the Locker Project…. although I think requiring software is too heavy a burden. This all needs to happen in the cloud as you said.

  4. Brian says:

    Only an idiot builds their business model in front of a speeding train.

    Since technology is now moving faster than women’s fashion (thank you, Mr Ellison), it seems to me advertisers will have a role to play in the new economy. I envision an updated version of the upfront marketplace in the TV industry where advertisers invest their money in technology concepts in exchange for preferential access.

  5. Sérgio Paim says:

    Great analysis John!!

    I believe it might first go through the privacy & confidentality challenge so as to enable a new context-based software platform that mixes virtual and real worlds into a full-fledged experience (http://bit.ly/LCJdeP).This (http://bit.ly/Ly4VSk) is a likelly subscription-and-advertising business model that could boost other developers as well (http://bit.ly/K1EUH6).

    Cheers!