STANDARDS
AND NETWORK EFFECTS
Today’s
enterprise infrastructure and Internet computing would be impossible—both
now
and in the future—without agreements among manufacturers and widespread
consumer
acceptance of technology standards
• Technology standards:
specifications that
establish the compatibility of products and the ability to communicate in a network
• Unleash powerful economies
of scale and result in price declines as manufacturers focus on the products
built to a single standard
< Without these economies of scale, computing of any sort would be far more
expensive than is currently the case>
some important standards that have shaped IT infrastructure
Beginning in the 1990s, corporations started moving toward standard
computing and communications platforms.
The Wintel PC with the Windows operating system and Microsoft
Office desktop productivity applications became the standard desktop and mobile
client computing platform. Widespread adoption of Unix as the enterprise server
operating system of choice made possible the replacement of proprietary and
expensive mainframe infrastructure. In telecommunications, the Ethernet
standard enabled PCs to connect together in small local area networks, and the
TCP/IP standard enabled
these LANs to be
connected into firmwide networks, and ultimately, to the Internet
Network effects are sometimes referred to as Metcalfe’s Law, or Network Externalities.
Basics of Network Effects
network effects: The utility of some goods depends on the number of
people using these goods. We distinguish between direct and indirect network effects
§ Direct network effects
result from compatibility between system elements.
For example, the utility of an e- mail system is increasing with the number of users also using it
Further examples are Internet as well as mobile phone standards.
§ Indirect network effects
assume a positive dependency between the spreading of a technology or a standard and appropriate offers of complementary goods.
For example, the spreading of an operating system plays an important part in determining the supply of compatible application software.
Another example is the extensive variety of application programs for Windows.
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Definition of 'Network Effect'
A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example. Initially, there were few users of the internet, and it was of relatively little value to anyone outside of the military and a few research scientists. As more users gained access to the internet, however, there were more and more websites to visit and more people to communicate with. The internet became extremely valuable to its users.
Network effects are sometimes referred to as Metcalfe’s Law, or Network Externalities.
Metcalfe’s Law:
Basics of Network Effects
network effects: The utility of some goods depends on the number of
people using these goods. We distinguish between direct and indirect network effects
§ Direct network effects
result from compatibility between system elements.
For example, the utility of an e- mail system is increasing with the number of users also using it
Further examples are Internet as well as mobile phone standards.
§ Indirect network effects
assume a positive dependency between the spreading of a technology or a standard and appropriate offers of complementary goods.
For example, the spreading of an operating system plays an important part in determining the supply of compatible application software.
Another example is the extensive variety of application programs for Windows.
refrans
Technology Drivers of Infrastructure Evolution>>1
Technology Drivers of Infrastructure Evolution>>2
NETWORK EFFECTS>>3
STANDARDS AND NETWORK EFFECTS>>4
NETWORK EFFECTS>>5
