Updated: Mar 11, 2021
Big Tech has been ever-growing in its market presence and power. Stocks of these giants (Apple, Amazon, Alphabet, Microsoft, and Facebook) have been key drivers in the recent rally in the stock market, with Apple making headlines by reaching the $2 trillion market cap. This growth in dominance has brought these companies their fair share of antitrust scrutiny. Some important reasons for their surge such as increased cloud usage, the rise of e-commerce, and even investor speculation have been much highlighted. This article focuses on another overarching way in which these companies continue to grow and exert an edge over their competitors in how they influence consumer behaviour. This is in the form of the personal technology ecosystems they create, i.e, a family of devices and services that are all designed to work with one another.
Creation of Ecosystems Over Time
The fundamental glue that binds such ecosystems together is interoperability- how well these devices or services work with each other. This enables devices to enhance each other’s functionality and cumulatively provide a better experience to the consumer. The most obvious step in the creation of such a collection of devices and services is to produce those products. The next is to build upon them, generation upon generation, to make them function better both on their own and with other devices in the family. It is also important that the devices differ in their individual functionality while maintaining this interoperability. This is because they must provide users the benefit of being able to switch from device to device based on varying functionality as the situation demands, while relatively maintaining the same flow and experience. Also of importance is how much time users have spent using these products since this determines the level of comfort users have towards devices of a particular company. To sum up, expansion, diversification, and improvements to interoperability are key components that drive the creation of robust device and service ecosystems over time.
Links to Competition
The process of creation of ecosystems is linked to competition due to the fact that they are created gradually over time and a new company trying to enter a market can only control the quality of its individual product and does not have an ecosystem of previously made products to fit the new one into. The product in question could be software as well. This is precisely what happened in the complaint filed by Slack Technologies against Microsoft with the European Commission. The complaint was based on the fact that Microsoft Teams, the online collaboration platform Slack directly competes with, had been integrated with the Office 365 suite which includes Outlook, Word, Excel, and Powerpoint. Slack claimed that the integration of Teams with the existing Office suite would give Microsoft an unfair advantage over competitors (such as Zoom and itself). In this case, the Office suite is the software ecosystem that has been created over time, which new competitors such as Slack and Zoom cannot possibly have. While the existence of an ecosystem alone does not guarantee a new product’s success, it certainly aids in its reception by consumers.
In this way, established companies, by virtue of their long experience in making products, not only already have blueprints to production technology, but also a well-established ecosystem to fit any new product into. This new product, in turn, enhances the ecosystem. This self-reinforcing virtuous cycle can provide a large and sustained boost.
Another important way in which these ecosystems confer an advantage is that they create inertia in customers from leaving them. This is because customers derive utility not just from using the individual devices, but how they work together and the gains from interoperability.
Scope for the process in the future
When talking about the self-reinforcing process described above, an important question to address is if this process can be sustained and can continue to be a source of advantage. To answer this question, two key things to consider are if there are still opportunities for companies to expand and diversify, and if customers would still derive utility from improvements to ecosystems.
As for opportunities to diversify into, several areas of personal technology such as augmented reality devices, wearables, home tech, and voice assistants are still in their nascent stages and there is much room to develop and build them into companies’ ecosystems. With advancements to technology such as 5G bringing in better Machine-to-Machine (M2M) communication, there is plenty of room for improvements to interoperability as well.
With the pandemic making working from home ubiquitous, people value devices that enhance their productivity, and since that is one of the things device ecosystems enhance, there is also arguably plenty of utility customers can still derive from their existence.
They, therefore, continue to be a strong force propelling the rising dominance of Big Tech.