Subba’s Serendipitous moments

May 29, 2007

Open versus proprietary — Who wins?

Filed under: Business,Competition,Model,Strategy — Subbaraman Iyer @ 6:49 pm
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There’s always this interesting and never ending debate on what wins in the high tech software industry — the open model or the proprietary model.

The prevailing view is that the proprietary model not only wins, but is necessary when the industry is in a stage of shaping up. It becomes necessary because there is so much uncertainty in terms of the various parts working satisfactorily and also in terms of giving the consumer the necessary experience for it to get acceptance. There is enough anecdotal evidence right from the days of mainframes to even personal computers.

However once the industry matures and industry standards emerge, there begins a value chain and different players begin to focus on different areas and we get new and different value propositions based on price, value, usability, reliability, convenience, aesthetics etc. Again, the PC industry provides clear evidence with companies like Compaq and then Dell changing the industry model and acquiring industry leadership.

It is also common wisdom that once the industry becomes mature, sticking to the proprietary model may become suicidal. Apple which invented the personal computer continued with the proprietary model as opposed to the Wintel model and ended up just having 3% market share.

Now, what does this portend for the mobile phone industry?

Recently, RIM makers of BlackBerry made an announcement that is likely to have a significant impact on the high end mobile devices. It is introducing a software application that can make Palm Treos and other Windows-based mobile devices made by rivals work like a BlackBerry.RIM already offers a BlackBerry Connect e-mail application that can run on devices with other platforms, including Windows, Symbian and the Palm-based variation of the Treo from Palm Inc. The company is developing the new BlackBerry virtualization software to run on multiple platforms as well but declined to say which one would be released next.

All this goes to show that RIM is now adopting openness as part of its business and technology strategy as part of its pursuit for dominance.

Apple on the other hand has achieved success with its proprietary model. Apple made the iPod and together with iTunes provided the consumer with the reliability and ease of use. Now, despite the market having matured, Apple has been steadfast with the proprietary model which has been instrumental in Apple’s dramatic turnaround during the last few years.

Now, here’s where the battle gets interesting. With the launch of the iPhone (an iPod with phone features and more) and Blackberry being able to check not just email but also play the MP3s, the ideological battle becomes interesting.

RIM has taken the first step by abandoning its proprietary model and making their email service available to users of other devices. While Apple continues with the proprietary model spurred by the success of the iPod+iTunes combo.

Who is likely to win?

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  2. […] deny that Apple can be counted as amongst the top innovation companies, they have been using a proprietary innovation model right from the beginning to their most recent product — the iPhone. Clearly a lot of […]

    Pingback by Innovation at Apple « Serendipitous moments — June 13, 2007 @ 11:04 am | Reply

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