The race for the customer: A constant battle between centralisation and distribution

The software industry these days is developing at revolutionary speeds with new innovations continuously tumbling over each other in favor of the customer. The biggest change is the major architecture change in ‘computing’ as a whole with blockchain technology. A technology that is free for everyone and has been developed by unaffiliated coders from the open source community. While the possibilities of this technology are mind-boggling, the reaction of the established industries remains surprisingly predictable.

A brief history in centralisation and decentralisation

Years ago the first digital computing was done on mainframe systems that allowed users to tap in and use basic functionality. The mainframes literally replaced humans that had a job as ´computer´ in those days. The networks around these systems were still small and not very well connected. This centralised architecture had some disadvantages. Many people could not use the systems due to lack of connectivity or hardware.

Driven by cheaper hardware, the next phase in computing became a more decentralised architecture as computing went ‘to the desktop’ with Windows 95 and intel computers. This more decentralised approach resulted in a competitive software market as software companies all wanted a space on the desktop. After a couple of years a few companies evolved as the rulers of the desktop. Everybody ended up using more or less the same office, graphics and business software and the market was centralised once again. While the desktop allowed for many applications only few made it all the way to the user.

A not so distributed internet

Not much later the decentralisation trend took over once more as the distributed internet became popular. The rise of the internet, even today, remains revolutionary. But in a way it followed the same path, from decentralisation to centralisation, driven by free-market capitalism. The internet is a very decentralised system as there’s no owner or other ruler of some sorts. As a result ‘the web’ quickly became a very competitive field. It spurred many competing applications through its open and accessible architecture. From e-commerce, the first ‘killer app’, up to large social platforms like Myspace, Facebook and Twitter.

As these ‘social networks’ and applications developed during the last twenty years, the internet, and therefore a large part of computing, became very centralised again. The internet turned into a system that supports a globalised community that, most of the time, uses few variations of the most important functions of the internet. For example, most of us use Facebook to connect with friends, Google and Baidu for searching and there´s this famous online bookstore many of us rely on. The result is a centralised industry where existing and new online services, for example Uber and AirBnB, aim especially to become market leaders by profiting from first-mover advantage, making healthy competition difficult.

The limits of centralised computing

As the top-level ‘application’ layer became more centralised, with only a few large online companies left, ownership of data and data privacy became part of modern business models. The result is a globalised online world where the most valuable asset has become data-ownership and the data itself, preferably from millions of users.

Meanwhile, lower layers of computing became more decentralised. The mostly centralised industries that produced hardware and operating-systems were pushed forward by consumer demand. Different types of hardware now allow us to access our data. Handhelds, smartphones and laptops give access to the same forms of computing that supply us with our primary social, information and consumption needs. The level between hardware and applications, the layer of operating systems, got more decentralised as Microsoft got serious competition from Apple, Android and Linux.

Distribution got in between the user and the application

After these lower levels of technology got more and more distributed, the remaining centralised application-layer became old and started to creak. The battle against distributed ownership will no longer only play out at the consumer facing application layer. The limitations of modern centralised computing architecture led us to the blockchain invention. Circumventing the suboptimal centralised structure of the past years, the blockchain introduces a distribution layer that offers users a new form of independence. The distribution layer allows users to interact more freely of their banks and possibly even their governments. With this new layer, distributed computing ‘in the cloud’ has become the new battleground for companies and governments to win over customers.

The race for centralised control over the technology — that allows for cheaper, faster and more customer friendly products and services — shifts from the application layer to this new layer of distributed trust.

The incumbents of the industry are left with this final struggle against the natural yearn — of data and functionality — for freedom and decentralisation. An evolutionary process of distribution, in this case of data and data-ownership.

With history in mind we can predict what will happen next. Large companies will claim parts of this new industry surrounding the blockchain and try to make it fit with their existing business models. When this fails or slows down the evolutionary process too much, new business models get a chance, triggering new more customer oriented innovation all over again.


Originally published at www.martijnbolt.com.

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