Principles that Matter: Sustaining Software Innovation from the Client to the Web

Innovation and Economic Growth, Networks, the Internet, and Cloud Computing and Internet

Article Snapshot


Marco Iansiti


HBS Working Knowledge Working Papers Series No. 09-142, 2009


This article analyzes three principles that are key to continued competition and innovation in internet software.

Policy Relevance

The same principles that were key to promoting growth and innovation during the initial development of personal computer (PC) software can be used and modified to ensure continued innovation and competition in internet software.

Main Points

  • Internet software consists of software products that are available to users online for which they need not buy a physical product, such as cloud computing.
  • The development of internet software is currently progressing at a tremendous pace, but may not continue to do so without external pressures ensuring that the market remains competitive and innovative.
  • Internet software differs from traditional software in a number of ways, but some of the same principles underlie both markets.
  • Three core principles, and the interaction between them, are important to ensure the competition and coexistence of internet software.

    • Choice – firms should allow consumers and partners to choose between competing products, for example browsers should allow users to choose to set a competitors page as their home page.
    • Opportunity – developers should be given platform access, allowing them to innovate and build on platform technologies to create new products and services.
    • Interoperability – vendors should enable products to work together allowing consumers to realize the full benefit of complementary products offered by competing vendors.
  • All three of these principles where important to the development and success of the PC software market.  Thus, the PC market can be used as a model for predicting the development and problems that may arise as internet software develops.
  • While following these three principles gives companies long term benefits, some companies may forgo those benefits in order to gain short term benefits.  This type of behavior should be discouraged via a combination of public awareness and regulation.

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