Commoditization indeed. Notes From OSBC 2004.
Yesterday, I hosted a panel on software commoditization, with some of the top minds in the open source world. They all made some interesting points and I just wanted to recap what they said. Since I was moderating, I think most of the recap is from scribbles on the back of a single sheet of paper. So there maybe some missing elements here. One of the questions I asked the panel was which companies or what products were at most risk to commoditization pressures. Interesting answers:
- Rob Page: Microsoft Office Suite
- Ian Murdock: EMC Corp.
- David Anderson: x86 Unix (SCO & Solaris)
- Anthony Awtrey: High End Middleware like BEA Systems & IBM’s middle ware properties.
It was widely held assumption that MySQL will eat Oracle & Access for lunch, Sun will continue to dwindle and Cisco’s routers business will come under pressure.
What gets commoditized?
David Anderson said: Products that don’t change much and have low margins get commoditized. Such as operating systems. Palm got into this business, when they should have gone into selling applications built on their OS. As Clay Christensen says, when something gets commoditized the profits move elsewhere in the value chain.
Rob Page said: Commoditization starts at the bottom and then moves up the stack.
How to Stay ahead of the commoditization curve?
Ian Murdock said: Since every company needs a proprietary advantage of some kind, though, we’ve chosen to focus on proprietary advantage through process, not technology—in other words, how we can leverage our expertise in distribution building to help other companies assemble commodity software components from disparate places into cohesive wholes, and to do so in a scalable and flexible way. Note that this is not too far from Dell’s strategy, and they have thrived in a commoditized hardware market while the proprietary technology vendors have receded.
How to differentiate in a commoditized market place?
Anthony Awtrey said: We could also point out that the value of a commodity good is not only how useful it is as a product, but its value is also in the associated value network that is created by its wide-spread use. Sometimes tapping the value network that exists around a functional commodity is actually the real value, for example:
- Commodity = Cell Phone // Real value = Convenient communication
- Commodity = Free / Open Source operating system // Real value = Control over how it can be used
Currently listening to Dj Spooky’s Abstrakt Blowback Mix
[Om Malik on Broadband]
Marc's commentary,,,,,,,
This is a really important lesson to learn.
As soon as I saw Ryze and Friendster - my instinct immediately told me that a) there would be 10,000's of these things that b) they'd soon turn into a new commodity and finally I extrapolated that c) this would be a FINE area to plant a stake in the ground and lead an open source effort.
That's called PeopleAggregator.com - an open source social network - built on FOAF. [Marc's Voice]
8:12:45 AM 
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