Sunday, April 18, 2010

Closed and open systems

Apple’s absolute stunning success over the last few years has spurred in some circles a heated discussion about the benefits of a closed versus an open system approach for enterprises. A closed system can be described as a tightly regulated and controlled universe of services that are primarily communicating with its own system element while prohibiting the connection with outside partners (or making it extremely difficult or expensive). Apple and Microsoft are probably some of the most prominent examples of a closed system where as Facebook and any open source application (e.g. Linux, Wikipedia) represent best-in-class open systems.

Some people would argue that the best performing systems want to be open (and potentially even free), other people would argue that only closed systems are performing at the most innovative and user friendly level. The discussion seems to be less empirical driven than a question of philosophy and belief systems. If one objectively looks at the success and failures of open versus closed system, one has to acknowledge that we have extremely successful open and extremely successful closed systems and companies.

But who is following the right strategy, closed or open systems? It’s a tougher discussion (and maybe the wrong question) than one might assume. Just last week, Tim O’Reilly’s and John Battelle’s open letter to Apple to join the open forum of the Web 2.0 principles confirm that this becomes a fundamental and more heated discussion of right or wrong, of being good versus evil, or being progress versus hampering innovation.

But looking at the reality of all companies, one has to conclude that all commercially viable companies need some sort of closeness to protect their competitive advantage and monetize their services. But at the same time every company needs some degree of openness to fuel its own growth and innovation. It seems that it is more a question of degree between closeness and openness than a black and white decision. While Facebook might be 90% open and 10% closed and Apple 99% closed and 1% open, each company’s strategy and business model relies more on the right position within this ever shifting changing continuum of closeness and openness than making a dogmatic decision. A company can be successful by being either much closed or very open. The key criteria for its success seems to be how the company is utilizing the intrinsic structure and benefits of either a closed or open system, not a decision for or against either one of them.

In the future we will not see a clear winner between companies who are pursuing open or closed systems. There will be a co-existence of both models in which the smartest company of how to leverage the differences of these systems is winning, independent of its decision of being open or closed.

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