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Ecosystems, Critical Mass, Companies and the Open Source Initiative
April 16, 2003

According to Bob Metcalfe's law on communication networks, power of a network is proportional to the square of its users.

We can see that some companies and trends are more successful than the others. Inevitable issues like field of operation, capabilities and quality of the management, capital invested, operational effectiveness and the added value generated are among the main reasons of such a difference. By means of trends, being at right place at the right time is a key issue.

What I want to emphasize here with an analogy to Metcalfe's law is; None of those companies or trends are sitting alone in the universe. There many different organizations around every company that are some how related to that company's operation.

When we think about manufacturing we see many actors like suppliers, logistics providers, distributors, resellers, PR and marketing agencies, technology partners, training companies and end users around the manufacturer.

Companies whose core business is Information Technology (IT) have similar actors around themselves too. When the number and the depth of those relationships increase (or the size of the ecosystem gets larger) this means that, that company is becoming indispensable for those ones around it just like a vendor lock-in.

As long as being around such a chain of wealth brings money, fame and trade relations to those organizations, none of them would even think about of shifting to other companies or trends that would not bring the same impact.

If we apply the above hypothesis to some of the well known IT companies like Microsoft, IBM, Oracle and Sun, we realize that all of these companies have globally well known brands, they have high penetrations among users in various fields, they are providing added benefits like consultancy, education and certification fees to their business partners in addition to reselling options. Business partners gain enormous marketing power by visiting potential and existing customers with executives from those companies.

Due to those facts, many companies are willing to be business partners with those big players not because that they always provide the best and the most effective solution but the deep pockets they have and the value chain they provide to their partners (by the end of 2001, size of the global software market was around 79 Billion USD).

When we shift our focus to trends and movements from companies, we realize that instead of being around a trend or a movement merely for financial reasons, there are other motivators like objection, desire and role models that are driving those movements.

One of the best examples of such a movement is the Open Source Initiative. Software developers from different sides of the world spend days and nights coding, testing and exchanging results within their communities knowing that they won't be able to make much money most of the time, with a primary motivation of making cheaper, more secure and efficient open source software that can well compete with rival proprietary systems sold for 10Ks to end users.

Open Source Movement was mostly ignored by major technology companies until it was realized that it could have been an enormous opportunity of selling more hardware and services by capitalizing around the ecosystem created by the open source movement and today, almost every major technology player (except one:) is somehow in this movement.

At this point, there comes an other parameter related to the effectiveness of those activities which is the Critical Mass (very well known among marketers and business developers :)

It is possible to describe critical mass very briefly as the minimum number of users required to own or use a service or a product inorder for that product or service to gain enough marketshare and be lasting. This number of course depends on many factors like fields of operation, needs, quality of the product or service and the actual market dynamics.

A very basic example is the telephone. When it was first invented it wasn't indispensable for people because just a minority owned one. But today, it is indispensable for almost all of us.

This situation is also applicable for the Open Source Initiative. In fact, the Open Source Initiative has been around for many years and due to the fact that it reached its critical mass during the last couple of years, many people is lately aware of that fact and nowadays it's more frequently pronounced. May be the most well known example is Linux which was invented in 1991 and today, it's the flagship of the open source movement.

Most of the time, one of the hottest topics debated in technology forums is the use open source products by totally embracing that initiative and replacing the commercial counterparts with it. These commercial products have been around for many years and there are huge ecosystems built around them so it wouldn't be very realistic to think of discarding those products at the very begining.

According to my humble opinion Open Source Initiative has reached its critical mass. As more and more commercial value is created around this ecosystem, it would be a reality instead of being a hype for many of those commercial players.
When this starts to happen, we will see that many PR and marketing agencies will start to accumulate around this initiative most of which today are working for big players like Microsoft, IBM and Oracle :)


© 2003 İlker Atalay

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