Lets assume for the moment that 2 controversial hypotheses about the IT Industry are true: first, Network Effects are substantial in most IT market segments ; so the emergence of one dominant technology is actually welcomed by IT organizations (Windows on the desktop is the classic example). And second, that Harvard Business School is right – most IT markets are becoming commodity markets where the critical success factor is how well your company drives prices and costs to approach zero. Yes, there is substantial innovation but it is at the margins, the bulk of the IT revenues and market place are driven towards 1-3 major share owners/monpolists. And like in astronomy, if the conditions are right, one major player may create a Black Hole of 90%++ market share. These Black Hole monopolies usually arise in big IT segments like certain network hardware, desktop operating systems, or power control hardware.
Now if these two assumptions are true then the IT industry will be reduced to several Black Holes and a few nearby Oligopoly markets. But the new thinking being advanced is that the Black Hole players will eventually eat up all the Oligopoly markets. This was the argument made by Larry Ellison in defense of his PeopleSoft buyout proposal in a recent presentation to the courts. And other vendors have cited similar arguments.
So we would like to advance two counter-arguments. First, we accept the Microsoft premise over the Harvard Business School one that there is enough fundamental research and change such that no market is safe over a long period of time. It looks like Handhelds and PDAs will merge with mobiles phones; but then re-emerge as solar-powered super-calculators and embeddable devices. It appeared that character based GUI clients died like Dodos with DOS-but they may live again in special text display and messaging devices – word paper. CASE software has been buried with some reviewers pounding a wooden stake as final death wish – and essentailly new-fangled patterns, templates, MDA and two-way tools are CASE all over again.
The second counter-argument is that Open Source, at the price of free, creates its own market segment free of all Black Holes including the Free Black Hole. This condition runs true because the Free Black Hole player has to compete against Free and Open Source. At this point it becomes a battle of features and functionality and ease of deployment, etc. An example ? Webservers were to go the way of the Internet browser into the Redmond Black Hole of free IIS; but Apache proved otherwise.
So look for a slow mechanism, call it distinguished Economist Joseph Schumpeters Creative Destruction, to work over a 5-20 year period creating and destroying even market Black Holes. Also look for Open Source to be able to resist IT market Black Holes indefinitely as long as they deliver comparable solutions.