Mark Pickavance discusses how technology ecosystems evolve, and their role in our purchasing choices
The concept of an ecosystem is one that we all learn early in our education, often following a school day out to a local pond.
A hierarchical arrangement of species is presented in the context of their habitat, and how this creates a stable and sustaining environment for those living things within it.
Man has long emulated these structures within our societies, as we moved from largely nomadic existence to cultivation and animal husbandry. As the industrial revolution took hold, many companies realised that a superior plan to selling individual products was to provide a collection of related ones.
One of the first to consider this was Samuel Colt, who in 1855 founded Colt’s Patent Firearms Manufacturing Company At that point, he’d been making firearms for nearly 20 years.
In the early days of revolver manufacturing, ammunition was custom made for each weapon, and it was uncommon for weapons to share bullets or any components even from the same company.
Colt realised that a degree of standardisation would allow him to provide cheaper ammunition and also share complex elements, like the revolver cylinder.
This paid off when the transition from percussion loading to cartridge ammunition came along, as Colt weapons could have their cylinders exchanged and convert to using more convenient and quicker-to-reload brass rim fire cartridges. This level of interchangeability and the supporting of very specific calibres contributed to the success of Colt, and they paved the way for other equipment makers to consider their products as a range or ensemble.
At the same time that Samuel Colt was arming the western pioneers, furniture and fabric makers were also developing the notion of collections and promoting them to potential customers through the new concept of the printed catalogue.
By the time that computers came along more than 100 years later, the idea of locking customers into a product ecosystem was an old one, and it readily embraced by those that made them.
IBM did it with its mainframe hardware, and Apple did it with its personal computers. The idea, of course, is that the initial purchase doesn’t need to be the end of the selling opportunities.
The Classic Ecosystem
When you think about a technology ecosystem, the company that immediately comes to mind is Apple, because of the enormous success it’s had using this business.
Long before Mac OS X and iOS, Apple had been delivering ecosystem solutions by using proprietary connectors to support its computers. If you wanted a printer for your Mac, you could only use one that was approved by the Apple, and it made money on every one – even those it didn’t make.
But the real innovation came when Apple launched the iPod and its associated selling channel, iTunes. If you wanted music on your iPod, you needed iTunes, and the only concession that Aple made to the world on that point was to release iTunes for Windows.
Once iTunes was established, it evolved into the iPhone App Store, a complete control and exploitation system for all software and content that would be put on Apple phones and tablets.
This model is often described as a ‘walled garden’, where Apple decides what can be on the App Store and what can’t.
That a developer spent a year of his working life on a project is irrelevant to Apple if it decides that it would like to make a similar app itself or add that type of functionality to iOS. It’s Apple’s ecosystem and Apple’s rules, which it can change at any time it likes. That’s not great for the developer, but it delivers a highly controlled and consistent user experience that many customers like.
Alongside this services ecosystem, it’s also flouting global initiatives on standardisation by using proprietary connectors. That means third-party hardware makers can’t make peripherals without paying ‘Apple Tax’.
These policies have helped Apple to become one of the most profitable companies on the planet, as it’s retained a large market share by binding its customers into a system that’s rigidly controlled in terms of what it embraces and what it doesn’t.
It also tries at every opportunity to create an extra layer of convenience for those who own all the Apple gadgets, by allowing them to work in a seamless fashion. This comes from being in total control of the hardware design and software upgrades.
However, it is worth pointing out that on a number of occasions, Apple’s complete control has actually been counterproductive, when it’s released updates that have bricked devices or disconnected people from their products. In one infamous instance, it mistook the musical preferences of its own CEO for every one of its paying customers.
Being king of your specific castle is great until you make choices that negatively affect everyone and that can’t be easily blamed on anyone else.
The success of the Apple ecosystem has spawned many imitators, all intent on creating their own isolated markets, where they makes the rules and everyone pays them for the privilege of being inside the walled garden.
The Advantages
As I’ve already eluded to, the primary advantage of a product ecosystem is for the company/brand in question. It gets to sell you multiple related products and effectively lock you into its business model.
Once you’ve invested lots in one ecosystem, it’s hard and expensive to suddenly switch to an entirely different one, especially with companies actively working to scupper interactivity outside their product range.
However, there are a few advantages that the customer gets with the deal, a bonus for sticking with a particular company and dancing to its tunes.
One of these is generally superior interoperability, as represented by Apple’s assertion with some of its products that they ‘just work’. Being able to completely control hardware at some level enables interactions to be fully tested before product launches, and for the on-board software to be tweaked to get the very best out of the unchanging hardware.
This was one of the arguments that Apple put forward for why the Macintosh was always better than the PC. Windows was designed to run on a remarkably wide selection of hardware, and most of the combinations had never been tested. It could never be as slick as Mac OS X on a device built just to run that OS.
In the same way, Apple battery life on its devices has always been considered a strong point, because it’s tweaked iOS to get the most out of the hardware and designed that hardware for iOS to tweak.
The counter argument to this is that you can build a PC that’s much more powerful than anything in the current Apple Mac range. Apple doesn’t make many models, and it doesn’t use some of the more exotic processors that Intel or AMD make, or the best video cards.
By its very nature and philosophy, Apple hardware isn’t designed to be as flexible as a PC, so you can’t combine it with third-party hardware in the same relaxed way.
In this respect, the PC ecosystem is a wider church and able to embrace smaller niche markets through third-party accessories and software, with little or no control over who comes to the table and no revenue link back to Microsoft.
In the Apple world, while it supports external devices in respect of Thunderbolt and other port technologies, the only significant accessories it actively supports are software ones.
And through the App Store, Apple has managed to take a slice of every sale when, other than the ecosystem, it’s contributed little to its creation other than to define an API and maybe contribute some development tools.
According to Apple, there’s a reason for its restrictive practices in deciding what can and cannot be sold in the App Store. It means the products are of a higher quality, and you get a standard of ‘user experience’ that wouldn’t be possible in an open environment, like Android.
These are well worn arguments, and regardless of whether you agree, they’ve helped Apple to become one of the most profitable companies in the world. However, there is a significant flip-side to this arrangement.
The Disadvantages
Once an ecosystem has been created, or as it’s evolving, usually those behind it start creating a legislative structure that says what those who enter it can or can’t do. That includes any company wishing to interact with ecosystem technology or customers, and the customers themselves.
At the heart of these relationships are EULAs (end user license agreements), patents, trademarks and commercial contracts.
If you’ve ever taken the time to actually read a EULA and understood any of it, you’ve probably mused at the wide scope of limitations that are imposed on the implicit signatory.
Some of this is unique to technology products and services, because if you buy a shoe and use it as a hammer, then that’s generally your choice, but buy an iPhone and use it in a way that Apple hadn’t intended, and it can become very litigious.
But rules are rules, and you should be familiar with what you’re signing up to when you join an ecosystem, right? Yes, but those who run some of the most tightly controlled ones have a tendency to change those rules or extend them whenever they feel like it. That doesn’t seem entirely ethical, does it?
When your phone, for example, gets a system update and you read the EULA and don’t like the contents, your choices from that point onwards are limited.
Ignoring the update might break compatibility with apps when they themselves get upgraded, or your phone might stop working eventually.
The other problem is in situations like the Apple App Store is that there effectively aren’t any rules. Apple doesn’t feel compelled to tell developers why their software wasn’t allowed in or why it’s been withdrawn after already being on sale for a while.
On occasion, the reason is that Apple decides to create its own version of that app or to bind the functionality into the next iOS release. That’s pretty harsh for a developer if the software in question is their livelihood and took significant effort to write.
Even if you were a lone coder who wrote apps just for yourself, you couldn’t put them on the iPhone officially without Apple’s agreement.
That’s one tick against ecosystems, and the other is cost control or rather the lack of free market economics.
Cost Implications
Imagine for a moment that you’ve bought a Porsche sports car and you intend to take it to a track day racing event. As you’ve invested heavily already, you also decide to splash out further by getting the right attire, and you head to a specialist racing shop where they have all that gear.
There you find two jackets, both of them are nice, and one of them is the official Porsche branded type and has the logo emblazoned on it. You know, probably from bitter experience, that the branded jacket is going to cost more and that because it’s part of the ecosystem of owning that car, you’ll pay for it. The jacket cost no more to make or import, but it will be much more profitable for the stockist and indirectly for Porsche, which licenses its branding.
Exactly the same happens with products that are part of an ecosystem, even if they’re not officially endorsed. This is why in the Apple ecosystem you see connectors that get rapidly replaced and proprietary connections that only Apple uses.
When the iPhone 5 shipped in 2012, it had a new ‘Lightening’ adapter, an eight-pin connector that replaced the also proprietary 30-pin one.
That meant that anyone who had an iPhone 4 with additional chargers or a docking station could junk all that stuff, because it wouldn’t work with their new iPhone. Apple made an adapter to convert from one standard to the other, but it cost £25.
It’s been estimated that in extra cables and converters Apple made an extra $100m that year, but that’s nothing compared with what it makes by licensing the Lightening port and the shape of its phones for covers in a typical year.
The port cannot be made by any company other than Apple, so if a peripheral needs to connect to an iPhone or iPad, then the company making it must go and buy the connector and its associated chip from Apple.
What Apple charges for the chip and connector hasn’t been made public, but it’s generally accepted that cable makers pay at least $3.50 or $5 to have it when it only cost Apple pennies to make. This helps explain how Apple cables ended up costing ten times what USB cable for Android phone do, while basically performing an identical function.
Proprietary solutions are always an opportunity to extort the customer, and once a strong ecosystem is established, many companies just can’t resist the temptation to do exactly that.
I’ve mentioned Apple rather often, but it’s not the only one doing this sort of thing. Laptop makers, for example, are more than happy to pump out products with a wide range of differing chargers.
Proprietary standards are a way of making things artificially more expensive and therefore more profitable, in addition to maintaining a vice-like grip on the ecosystem.
It’s worth mentioning that many companies do exactly the same thing with virtual connectors in their operating systems, allowing only ‘approved’ devices to connect. From the company perspective, they need to milk their ecosystem cow, because their life expectance isn’t great.
Over The Hill
In the last decade we’ve seen the biggest technology ecosystem, Microsoft Windows, hit a series of commercial potholes and be dethroned as the most prolific operating system in the world.
The decline of Windows, or more specifically its relevance to the world of computing, started with numerous changes that happened about the time that Windows XP was launched. However, it really came home to roost when Apple launched the iPhone, and the world went mobile computing crazy.
Ironically, it was Microsoft itself that had been downplaying the importance of Windows for some time. When the Xbox 360 launched, it framed it as the replacement for PC gaming.
While predictions of the death of the PC for gaming now seem wildly inaccurate, what they did accidentally get right was that the PC ecosystem was in a delicate balance, where it could easily be overtaken by more accessible technology.
Once the iPhone and then the iPad arrived, those who couldn’t be bothered to learn how to use Windows had an immediate alternative, and they weren’t even put off by Apple’s incredibly restrictive ecosystem or eye-watering prices.
Microsoft threw gasoline on the iPhone/iPad fire by not taking any of this seriously, ignoring the Windows Mobile division and generally undermining its own product line.
When it did finally react, with Windows 8, it was so completely knee-jerk that it managed to top the previous debacle of Vista with a version of Windows that almost everyone disliked.
What Windows 8 also highlighted was that with the success of Windows as an ecosystem, Microsoft had failed to keep it unified as the years went along. Like some medieval feudal king who conquered a massive land and then let parts of it self-administrate, the Kingdom of Windows spoke many dialects, not least the ancient tongue of Windows XP.
Each new release compounded the fragmentation, and as we approach two years after all support was withdrawn, there are still nearly 11% of PCs running it.
Microsoft’s rather drastic answer has been to make Windows 10 free to existing Windows 7 and 8 users, in a desperate but possibly too late attempt to bring all Windows users under a common platform.
In many respects instead of driving the Windows ecosystem and making it central to the company’s plans, Windows 10 has become a lifeboat launching exercise, where some of the customer base can be saved, if they can be persuaded to put their Apple/Android phone and tablet down for five minutes.
All ecosystems blossom and then ultimately decline, mostly because those who control them become complacent and disconnected from their customers.
Windows is such a big one that it will be around for many years yet, though it’s no longer at the sharp end of computing technology, and it’s been successively diminished by time and tide.
Final Thoughts
Someone once said (I’m not entirely sure who) that once a company starts circling the wagons and protecting its small patch of territory, it’s already too late.
Once you’ve defined the scope of your influence so precisely, then your competitors can nibble at that, confident that you won’t be launching into sectors that they have a solid hold on.
Also, when you become entirely focused on a defensive posture, then it’s much like a medieval siege, where it isn’t a matter of if you’ll capitulate but when.
Ecosystems start out as something designed to bond people to your vision of the future, but they end up as a creative ball-and-chain. And those using them become increasingly resentful of the external control being applied to them and their purchasing choices.
In varying degrees, this has managed to turn many people off Apple, Google and Microsoft, to mention the biggest purveyors of ecosystem thinking.
It generally comes down to where each user has their line, and at what point that company crosses it for them. Personally, Apple crossed my line of death a long while ago, Microsoft is something I put up with but wish I didn’t, and currently Google I’m moderately accepting of. That’s where I am today, but tomorrow might be different. Others have already moved outside all those ecosystems, and I can accept that.
What’s fascinating as a technology pundit is how depending how they’re doing commercially a company can transition from being very paranoid about its ecosystems to a much more pragmatic stance.
A classic example of these shifting sands is Microsoft’s relationship with Google and the world of Linux (from which Android has evolved). In June 2001, then-CEO of Microsoft Steve Ballmer said, “Linux is a cancer that attaches itself in an intellectual property sense to everything it touches.”
That was said in a context where Microsoft owned the biggest technology ecosystem in the world (i.e. Windows), and as a company it only supported its own OS and Apple’s through a long-term investment agreement.
What people wanted, although Microsoft refused to even consider it, was Office for Linux – something we’d surely have seen if the Office part of Microsoft had been floated off after the antitrust case it lost in the USA.
In 2001, with Microsoft in the driving seat, it felt remarkably confident to call Linux a ‘cancer’, never considering that it would be one that it would need to work with when Windows fell from grace.
Moving forward to today, Microsoft has entirely failed to carve out any substantial niche in the smartphone market, and it’s now relying on both Apple and Google’s operating systems to sell its services. The mobile version of Office was available on Apple iOS and Google’s Android before it came to Microsoft own mobile operating systems, because that’s the business reality of today.
According to Microsoft, some of its own technology is in Android, and it’s managed to run a successful licensing scheme that nets it more than a billion dollars a year. How those tables have turned…
That companies can flip-flop like this when the political wind changes direction shouldn’t surprise us, because they answer to their shareholders and are not paid a bonus based on any sliding scale of hypocrisy.
Those that believe that Microsoft can reinvent its business model and regenerate the Windows ecosystem should consider that numerous tech companies have tried to do this in the past. And, ironically, with the possible exception of Apple, they’ve all failed.