If there is one thing I noticed this past year, it is that companies seem to be tripping over themselves more than ever before to claim the mantle of openness. Openness is now a marketing mantra. Facebook kicked things off in May by opening up its social network to outside developers through a comprehensive set of APIs. Google responded by trying to “out open” Facebook with the launch of its own platform for social networking apps, OpenSocial (which was more open than Facebook’s APIs, but still not open enough for some people). Google also introduced its open-source mobile operating system, Android, which prompted even old-school, closed-network mobile carriers like Verizon and AT&T to play the open card. And in the face of the success of open-source blogging software WordPress, Six Apart finally made its rival Moveable Type open source as well. These are just a few examples.
Building a product or service on top of open standards is held as one of the highest virtues in technology. It is certainly one of the easiest ways for a company to score points with consumers, developers, or other companies. And for good reason. The Internet, after all, is built on open standards. Open-source technologies such as Linux, Apache, MySQL, and others have lowered the cost to start a Web company.
More importantly, open standards (whether or not they are technically open-source) are inherently more attractive to work with for startups and other companies. The best way to build a technology platform is to make it as open as possible so that the risk of proprietary lock-in is taken off the table for other contributors. Also, compatibility can be baked right in. On the Web, everything needs to be compatible, which is one of the main drivers behind the widespread adoption of open standards. It is no coincidence that we are beginning to see a bigger push for openness in mobile networks as we start to use our phones more and more as Web devices.
But don’t be fooled. Companies are very selective about the areas where they choose to be open, and they very rarely open up their core source of profits voluntarily. For all the fascination with the iPhone, for instance, one of the big knocks against Apple is that it is taking its traditional closed, controlling approach when it comes to opening up the device to outside applications. (Although, the company has promised to open up the iPhone to developers soon). And when Amazon copied Apple’s iPod business model with its closed Kindle Reader (it is the only e-reader that can download digital books from Amazon), there were similar calls on Amazon to open up the device.
Just because industry pressures and increased interconnectedness are forcing companies to embrace open technologies, don’t confuse openness with profitability. Open standards tend to be good for spurring the adoption of new technologies, but not so good for generating profits directly. That is why companies choose to be open along axes where they don’t compete. Google, for instance, is a big proponent of open standards in social networking, mobile networks, Web applications, and practically everywhere —except the one place it makes money. Its advertising system is a black box. You also never hear any talk coming out of Google about opening up the search algorithms that drive all of those advertising revenues. In contrast, Google has no problem championing open standards in industries that it is hoping to disrupt (by commoditizing existing business models with open standards, and making money with advertising instead).
It is no surprise that, in general, startups tend to like openness more than larger, more established companies. Open standards lower barriers to entry and make it easier for multiple industry players to participate (and cooperate) in the same market. Bigger companies with more to lose tend to resist openness. Apple is being extra careful about how it opens up the iPhone precisely because it doesn’t want random third-party applications to ruin the consumer experience it has worked so hard to perfect by crashing the iPhone. The reason the iPhone is so successful is arguably because of Apple’s insistence that it control every aspect of how it works. Openness and control, though, don’t really go together.
I don’t mean to suggest that big companies cannot learn how to ride the momentum that openness creates. IBM is a great example here, championing Linux and other open-source technologies in markets where it does not compete or dominate (operating systems) in furtherance of businesses where it does compete that are built on top of those open technologies (enterprise software and IT consulting). Again, the point is that companies need to pick and choose.
Take Amazon and the Kindle. Amazon has more to gain from opening up the Kindle than Apple does from opening up the iPhone. Unlike Apple, which makes money from selling the device itself, Amazon makes money from the digital book store that comes with its device. (This is the exact opposite of Apple, which makes barely no money from its equivalent iTunes store). The appeal of the Kindle is the service behind it, not the $300 device itself (which is probably subsidized). Also unlike Apple, Amazon is not very good at industrial design. If it were to create an open-source reference design for the Kindle Reader, another company could make one that is less clunky. More electronic readers would be sold, and more digital books would be purchased from Amazon.
So the next time a company touts how open it is, ask yourself how that will help it make more money. Don’t confuse openness with altruism.
(Image via j/f/photos).
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