I remember when my father came home with one of the first Motorola Dynatac cell phones, paid by his employer. The handset cost $50,000 and monthly service was $9,000. A Motorola sales person spent 4 hours at his office to show him and several members of his team how to use it. That evening, our family marveled at the technology he had brought home from the office.
Over the past year, I have listened to startups pitching social networking for the enterprise or software companies championing the thesis of consumerization of IT: that innovations in the consumer world drive innovations in the enterprise.
My how times have changed. In the 1980s, innovations migrated from work to home. Today, technologies surreptitiously tucked into briefcases at home draw gasps and exclamations at the water cooler and eventually appear on the corporate intranet.
Consumer markets, not enterprise work forces, exert the greatest demand for new technologies. This change has been enabled by:
- Decreased costs of development both for new technologies, platforms and software. Gone are the days of $50,000 handsets and $10,000,000 supercomputers.
- Ease of distribution through the open web and open mobile platforms. Businesses can reach hundreds of millions of customers more cost effectively than reaching businesses.
- Consumer demand for the latest and greatest. Consumers seem to have an insatiable appetite for trying new apps and technologies while enterprise upgrade cycles are measured in years.
- Minimal technology switching costs. Consumers have great options for data portability. Moving to a new mobile phone? Your address book goes with you. For enterprises, migrations are measured in quarters, not minutes.
The most important of these factors driving consumer technology demand is low technology switching costs. Ensuring users can migrate easily among services is essential to maintain our pace of innovation.
For example, movies, books and music are shifting to subscription models. I no longer have a library of music I purchased, but access to most of the music ever recorded. And I can rent access to this library from about ten services. Consequently, my switching costs decline because the music is a commodity and my sunk costs are minor – there are a few playlists to recreate. I’m much more likely to try out different services.
In contrast, as consumers build libraries of home photos and movies using a particular service, their proclivity to adopt new services will ebb over time because migrating proprietary data today is painful. How do I export all my photos from Picasa to iPhoto? Or all my YouTube videos to iMovie? I wouldn’t know where to start.
Enterprise customers are very familiar with the notion of vendor lock-in. It’s one of the first issues CTOs raise: “How easy is will it be to transfer my data?” Of late, data portability and use of open standards have surfaced as key differentiators in enterprise sales.
Similarly, enabling simple data portability for consumers ensures the continuing health of the startup ecosystem. If consumers can try new services easily, they will find the best ones – a market economy at its best. Be open and let your customers migrate easily to and from your platform. Your company, users and the ecosystem are all better off.