Commoditizing Your Complements: Why XML Web Services is Like Java

September 2, 2002

@ 12:58 AM

The Value of the Complement Commoditization Strategy

In the Platforms article Joel berates Groove Networks which makes a product which he'd like to build his application upon. I can see why Joel would like the Groove folks to make their development platform free since it means his CityDesk application gets enhanced functionality with less development costs for him and probably no price increases passed on to his users. However, what Joel fails to do in the article is explain why besides increasing adoption rates this benefits Groove's bottom line.

Since we are no longer in the Dot Bomb Era simply telling a company that giving away a product for free will garner them more users sounds like poor business sense. After all, I'm pretty sure Macy's would get more customers if they charged $1.00 for everything they sold regardless of cost to themselves but it would be a disastrous business plan.

In Joel's article he uses Sun's behavior with Java as a positive example of how to make a successful development platform while using Apple's behavior as a negative example. However, even Joel himself admits that Sun's Java strategy is full of mistakes. Specifically, Sun created a kickass development platform by improving on already existing concepts thus commoditizing hardware and operating systems in a single blow. Although the platform became widely adopted, Sun really didn't have a sound strategy for making money from Java except as a very expensive ad campaign for selling over priced servers. At the height of the dot bomb boom, sales people could say "Java is the best development platform and Sun's expensive hardware/software is the best way to run it" even though this was never absolutely true it sold servers. However, now that people actually carefully scrutinize their purchasing decisions in the wake of the economic downturn they've realized that they don't need Sun's expensive server/OS combo to run Java and now the Java Big Two are IBM and Bea.

The most telling part of the Apple/Sun comparison is that although Apple pulled in $1.43 billion in revenue in the third quarter of the fiscal year versus Sun who pulled in $3.1 billion in revenue it turns out that Apple posted a net profit of $.09 per share against Sun's net loss of $.01 per share. Looking at it from that perspective, it does seem that Apple is making smarter business decisions than Sun and Joel's case isn't as open and shut as he presents it.

Now for the part of the discussion that reflects the title of this diary. Yesterday afternoon while contemplating walking over to Bumbershoot while sipping on a fine beverage I couldn't help but consider the similarities between XML Web Services and Java. Both marginally improve upon existing technologies but in key ways that favor simplicity, improved developer productivity and wide spread interoperability. Both also reduce the likelihood of vendor lock-in and in fact tend to favor real competition. I find this comparison interesting because the primary proponent of Java ended up not being able to leverage the technology into profits as much as its competitors and has been relegated primarily to stewarding the technology while others make money hand over fist. Now substitute Java for XML Web Services in the previous sentence and instead of certain Santa Clara, CA based company think Redmond, WA.

So it looks like we are headed for interesting times and however it turns out, most likely developers and end users will get cool technology at less cost than before with fewer headaches. The only question is who (if any) will end up making money from it. Knowing my employer, you know where I've made my bet but it isn't a given that I picked the right horse. Interesting times indeed. :)

Disclaimer: The above comments are my opinions and do not reflect the opinions, plans, strategies or intentions of my employer

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Nightclub Encounter

I deleted the full version of this after considering how nothing on the Internet is private and some people have already emailed me in the past about writing about conversations with them without their permission. Thus what follows is the capsulized version.

Last night. My girl friend is out of town so given a choice between going out dancing or working I picked dancing. Later on I'm dancing with this girl and she mentions that I'm dancing too close then points at her ring finger. I immediately oblige and she follows up with a statement about she's a geek anyway and works at the same place that I do. Now, one of my worst work-related fears is one day attending a meeting or giving a presentation and being asked by an attendee, "Weren't you the drunk bastard I was bumping and grinding with last night at club foobarbaz?". So you may understand why my blood ran cold upon hearing this.

Anyway, once she announced her affiliation I nervously asked if she knew me from work. She didn't but once I mentioned being a co-worker she began to act like we were old friends. This was after a barrage of questions to acertain my honesty; "Are you a blue badge?", "Who's your VP?", "What building do you work in?", "What product unit?", "Are you an SDE?", ad nauseum.

It became downright spooky when she began to rhapsodize about how cool BillG & Paul Flessner are then about how people like me rock because we keep her stock price up.

She may have said more but I couldn't hear it given that I sprinted away.

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