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Building Value on the Web

Tim O'Reilly of publisher O'Reilly and Associates ( was one of the keynote speakers at EclipseCon last week, and in my mind one of the more compelling speakers I've heard. Tim spoke of patterns for business opportunity in an era of open source. He opened the talk by discussing several failed patterns, such as IBM's use of commodity components for the IBM PC and its outsourcing of its true value, namely the operating system.

His most interesting remarks concerned the changing technology stack and the changing value within this stack. The stack that we have been used to is hardware (Tim broke this down into microprocessor and computer layers), operating system, and application. He notes that Intel largely has a lock on the microprocessor layer, and Dell has been successful at driving down prices on computers to commodity levels.

This leaves operating systems and applications. But Tim points out that while we associate the operating system with the computer in front of us, it really extends beyond that to the Internet. In other words, the Internet is our platform, and thanks to increasing access to fast connections, we are spending a greater proportion of our computing time there.

And it is possible to add value on this emerging platform. Major online companies such as Google, Amazon, and EBay have created entirely new businesses that now have revenues of billions of dollars.

Increasingly, these companies have also become computing platforms in their own right. EBay is a platform for small storefronts and individual sellers, while Google is a platform for search applications. And note that each of these platforms is largely proprietary in nature, even if it might be built on commodity hardware and open source code.

This means that there is still value at the platform level, but the definition of the platform has moved. It also means that the platform has not yet become commoditized, so there is ample opportunity for innovation at this level.

Building applications on top of these platforms is positive business pattern, but these applications are different from traditional desktop applications. A key facet of these applications is data, which can be considered another layer on top of the application. Tim (as well as Jon Udell in several of his recent Infoworld columns) gave Google Maps as an example of the value of data. Most mapping web sites use the same maps, which are provided by only two or three different companies that saw the value and licensed the rights to maps from the government, or created their own maps.

But he noted that there can also be value in user-provided data. For example, on Amazon, thousands of users rate books and write reviews. Amazon uses this information to be able to list responses to searches based on those ratings. In other words, Amazon uses data provided by users to add value to the search of other users.

This is a powerful concept, and one that is easily overlooked as we design applications. Many Web application designs don't persist user input, or don't make use of it to provide additional value. Not every application can do this sort of thing, of course, but those that have the ability to accept and manipulate data, and provide information back to users, have more value to the community as a whole, and to the application developer in particular. Tim reminds us vividly that by harnessing data wherever we can find it, we can find value where none existed.

Posted by Peter Varhol on 03/11/2005 at 1:15 PM

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