[By Alistair Fairweather]
There’s a wave coming. Its first eddies were felt almost a decade ago, and by now it has already engulfed some outlying regions. But the general public has been largely unaware of its approach. Until now.
I’m talking about the arrival of fully integrated digital ecosystems. For years, technology companies have pursued a holy grail — the platform. Akin to owning the land on which a city is built, a solid platform allows a company to reap vast passive incomes and exert control over a market’s direction. Microsoft’s Windows is perhaps the world’s most ubiquitous technology platform, although Intel’s x86 architecture is a close runner-up.
A digital ecosystem is a much grander affair, of which platforms form only one component. It’s best explained by a topical example: Amazon.com’s recently launched tablet computer, the Kindle Fire.
Amazon already had the world’s most successful e-commerce platform, and it had used the skills gleaned from running that platform to push into cloud (utility) computing. It had also established a successful e-books platform with the Kindle — now the top selling item of all time on its e-commerce platform.
But the Kindle Fire puts it into a whole new league. Not only does it give Amazon a direct channel to sell (and rent) video and music content via the Internet, it also provides a built-in Web browser named Silk that will give it unparalleled insights into what its customers care about. How does it do this? Silk routes all browsing traffic through Amazon servers to optimise it for the Fire — the behavioural insights are just a nice bonus.
On top of this, the Kindle Fire also gives its users access to a whole universe of Android applications. And so Amazon is now selling software as well as content — neatly connecting itself to the growing army of independent developers who write apps for the platform.
So now we have Amazon, which used to be a boring old online bookseller, hooked up to every part of the technology value chain. You can buy an Amazon device which will serve you Amazon controlled content, from Amazon’s vast server farms. You can augment this device with software downloaded from Amazon. How do you pay for all this? Oh yes, via Amazon’s payment system. And all the while Amazon is collecting priceless data about your preferences and habits.
What makes this an ecosystem is the tendency of usually separate components to work together in unison. The device drives content consumption, which gives the content platform more market power and draws in more content publishers and app developers. This in turn drives more device sales and so the cycle repeats. And all the while the owner of the ecosystem is earning money at every link in this chain.
In May this year, Eric Schmidt started talking about a new “Gang of Four” that would dominate the next wave of technological innovation: Google, Amazon, Apple and Facebook. At the time that might have seemed a push, but now Schmidt looks prescient.
Look, for instance, at Google’s recent acquisition of Motorola’s mobile phone business. What was missing from the Internet search giant’s ecosystem? It had the cloud computing services, the content platforms, the e-commerce system and the Android platform. What else could it possibly need? Oh, yes, control of a device manufacturer. Ka-ching!
How about Apple? Already king of the device manufacturers, Apple created content and application platforms to make its beautiful hardware even more enticing. This is the mirror image of Amazon’s strategy, but they are converging on the same point. And now, with the launch of its iCloud service, Apple is playing in the same utility computing market as both Google and Amazon.
Facebook might seem like the odd one out here, but they have a stranglehold on the one component largely missing from the other three: identity. Sure, Amazon knows a lot about its customers, but those customers don’t use their Amazon identities as part of their social lives. No one checks out your Amazon profile after they meet you at a party.
And yes, Google is making some headway in that sphere with Google+, but it has a long way to go to wrestle even 10% of Facebook’s social media power away. Apple has hardly dipped a toe into the identity market. Its only significant foray, Ping, has been a quiet failure.
Facebook is, in essence, a form of utility computing with a built-in payment system and an app platform that has attracted literally millions of developers. It doesn’t need to create or source content, its 750m users do that work for free. And every device manufacturer in the world knows you need to include easy access to Facebook on your platform or you won’t be able to compete.
Schmidt’s quote also contains an unspoken jibe. Who is missing from the gang? The world’s largest software company: Microsoft. Google has never been cosy with the giant of Redmond, but since Microsoft started suing Android customers such as HTC over patent infringements it has been all-out war.
But, sour grapes aside, Schmidt has a point. For all its power and momentum, Microsoft is nowhere near to having an ecosystem of the quality or magnitude of the gang of four. It may still catch up — hence its frantic deal with Nokia — but the road will be steep.
So where does all this leave us ordinary mortals? In rather a good spot, actually. The next decade will give us unprecedented access to fantastic content and services via increasingly powerful, friendly and affordable devices. And, unlike the 1990s, we aren’t stuck with a near monopoly in Microsoft — we have choices. The approaching wave is warm and friendly. Get ready to get wet.
- Alistair Fairweather is digital platforms manager at the Mail & Guardian
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