Open Versus Closed Standards
In communication and information technologies, open standards and interfaces are often developed through the participation of multiple companies and are usually perceived to provide mutual benefit. But, in cases in which the relevant communication protocols or interfaces are closed standards the network effect can give the company controlling those standards monopoly power. The Microsoft corporation is widely seen by computer professionals as maintaining its monopoly through these means. One observed method Microsoft uses to put the network effect to its advantage is called Embrace, extend and extinguish.
Mirabilis is an Israeli start-up which pioneered instant messaging (IM) and was bought by America Online. By giving away their ICQ product for free and preventing interoperability between their client software and other products, they were able to temporarily dominate the market for instant messaging. Because of the network effect, new IM users gained much more value by choosing to use the Mirabilis system (and join its large network of users) than they would using a competing system. As was typical for that era, the company never made any attempt to generate profits from their dominant position before selling the company.
Read more about this topic: Network Effect
Famous quotes containing the words open, closed and/or standards:
“All deep, earnest thinking is but the intrepid effort of the soul to keep the open independence of her sea; while the wildest winds of heaven and earth conspire to cast her on the treacherous, slavish shore.”
—Herman Melville (1819–1891)
“With two sons born eighteen months apart, I operated mainly on automatic pilot through the ceaseless activity of their early childhood. I remember opening the refrigerator late one night and finding a roll of aluminum foil next to a pair of small red tennies. Certain that I was responsible for the refrigerated shoes, I quickly closed the door and ran upstairs to make sure I had put the babies in their cribs instead of the linen closet.”
—Mary Kay Blakely (20th century)
“In full view of his television audience, he preached a new religion—or a new form of Christianity—based on faith in financial miracles and in a Heaven here on earth with a water slide and luxury hotels. It was a religion of celebrity and showmanship and fun, which made a mockery of all puritanical standards and all canons of good taste. Its standard was excess, and its doctrines were tolerance and freedom from accountability.”
—New Yorker (April 23, 1990)