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:
“Every woman who vacates a place in the teachers’ ranks and enters an unusual line of work, does two excellent things: she makes room for someone waiting for a place and helps to open a new vocation for herself and other women.”
—Frances E. Willard (1839–1898)
“We are closed in, and the key is turned
On our uncertainty;”
—William Butler Yeats (1865–1939)
“If one doesn’t know one’s own country, one doesn’t have standards for foreign countries.”
—Johann Wolfgang Von Goethe (1749–1832)