For the past 10 years, the client-server on-premise software world has pursued a competitive model that was based on domination of a horizontal layer in the software stack and working to orchestrate the stack to your benefit. Platform Wars emerged and continue to rage.
For the next 10 years, the emerging web-centric, on-demand software-as-a-service world will introduce new and unique competitive dynamics. Early players are moving to transition their web-applications to web-platforms… and more specifically web operations platforms. As stated by Debra Chrapaty "in the future, being on someone’s platform will mean being hosted on their infrastructure "
As covered earlier here, and as outlined below, the emerging source of competitive advantage in the On-Demand / Web 2.0 / Enterprise 2.0 market will be the ability to aggregate, store and share customer-driven data in a way that is defendable and difficult (costly) to replicate.
Bill Burnham and Tim O’Reilly describe this in more detail by using the "Search" space as an example.
Peter Norvig, Google’s Director of Research, made one comment in particular that stood out in my mind at the time. In response to a question about the prospects for the myriad of search start-ups looking for funding Peter basically said, and I am paraphrasing somewhat, that search start-ups, in the vein of Google, Yahoo Ask, etc. are dead. Not because search isn’t a great place to be or because they can’t create innovative technologies, but because the investment required to build and operate an Internet-scale, high performance crawling, indexing, and query serving farm were now so great that only the largest Internet companies had a chance of competing.
In my talks on Web 2.0, I always end with the point that "a platform beats an application every time." We’re entering the platform phase of Web 2.0, in which first generation applications are going to turn into platforms, followed by a stage in which the leaders use that platform strength to outperform their application rivals, eventually closing them out of the market. And that platform is not enforced by control over proprietary APIs, as it was in the Windows era, but by the operational infrastructure, and perhaps even more importantly, by the massive databases (with network effects creating increasing returns for the database leaders) that are at the heart of Web 2.0 platforms.