Decommoditization: The failure of open systems

The impact of Sun’s decision was the first to be felt. Open systems quickly became popular because of the compatibility they offered—a completely foreign notion at the time. Users adopted systems based on open standards because doing so allowed them to move freely between products from different vendors, avoiding the lock-in common in the proprietary world. Soon, numerous companies—including some of the mainframe and minicomputer vendors—launched UNIX-based workstations to compete with Sun’s, and UNIX became big business.

As the UNIX market grew, the competition for customers became fierce. “Compatibility among products,” which helped the UNIX vendors win converts from the proprietary world, turned from an asset to a liability. In an attempt to imitate the lock-in strategies that had served the mainframe vendors so well for so many years, the UNIX vendors themselves began adding incompatible features to their respective products. This ultimately fragmented the market and alienated customers. By the late 1980s, UNIX was no longer a lingua franca for the workstation market, but a veritable tower of babel.

Meanwhile, IBM’s decision to use off-the-shelf parts in the IBM PC inadvertently created the industry’s first open hardware platform. It was not long before a new wave of entrants such as Compaq, Dell, and Gateway realized they could build products that were 100% compatible with the IBM PC, thus gaining access to a large base of applications and users, much as Sun had done by adopting UNIX. On the component side, two companies experienced the biggest windfall from IBM’s decision: Intel and Microsoft. As the clone market emerged, both companies found an entire market to sell to, not just a single company—a much larger opportunity, even if that single company was IBM.

It was at this point the events set in motion by IBM and Sun first intersected. As the UNIX vendors were competing vigorously with each other through the introduction of proprietary extensions to UNIX, thereby “decommoditizing” the lowest level of the software stack, the fully commoditized PC waited in the wings. As PCs became more powerful, they began to replace workstations, and as PCs continued their march upmarket, the market power of the PC vendors (and, thus, the vendors of their constituent components) increased dramatically. In particular, the new ubiquity of the PC helped Microsoft’s Windows operating system replace UNIX as the lingua franca of not just the new PC-based workstation market, but of the entire computer industry.

Why did UNIX fail while the PC has succeeded beyond anyone’s wildest expectations, particularly those of its progenitor, IBM? Both began life as open systems—as ecosystems of sorts—and both grew enormously popular because of their open nature. On the UNIX side, though, each vendor tried to own the ecosystem all to itself, and in the end, all they collectively managed to do was destroy it. Meanwhile, on the PC side, the ecosystem won out in the end, for the betterment of all who embraced that ecosystem; and, most importantly, the existence of that ecosystem enabled the creation of other ecosystems above it. For example, without a truly open platform in every office and den, the Internet would not have been able to take root, and it too evolved into an ecosystem that has spawned countless products, services, industries and ecosystems that were previously unimaginable.