Embrace open standards or keep your legacy technology?

The tale of a market leader encountering open standards

This is a tale of a market leader who since many years made good sales and profit in a market niche using proprietary technology.
Management believed they were the ‘Masters of the Universe’ having high margins and ever growing sales volumes.

As the news of the ever increasing profits spread and the growth of the market had become evident as it was no longer a niche market, more companies became interested to become a supplier for this expanding market.

Due to the fact only proprietary solutions were available to the market, an industry organization or a competitor gathered a several vendors in order to define open standards.
As one of the market leaders the company was invited to participate, however management decided not to participate as the standardization didn’t seem to bring any immediate benefit but was considered as a waste of time. Management estimated it was certainly no threat for business of the company.
They considered themselves as the people with vision who had spotted the market long before (in reality it was probably just a lucky shot).

Slowly the open standards gained field as more vendors adopted them. Even the company enabled the open standard on some of its’ products in order to be able to present it to their customers but without the intention selling it.

Over time the open standard matured, got more features and gained field in the market. It became a real competition to the products or solutions of the company.
Customers preferred the having the freedom of choice and switching of vendors at almost no cost.

Open standards vs legacy technology

Once a technology is available as open standard the barrier to enter the market is lowered significantly as almost any vendor in the world can propose the solution (even Chinese manufacturers).

The sole differentiators that your company still can use for selling the legacy technology based products are:
- The installed base: all the references acquired since many years
- The quality of products and services
- The presence in local markets (if this has been achieved)

It will become hard to explain the premium price to be paid for the legacy technology as the open standards can rely upon components available on a large scale at a lower price and hardly any investment on development to be depreciated.

Proprietary or legacy technology is only possible in emerging or niche markets as innovation still counts.
Once a market grows and becomes significant in size, open standards are introduced, then you have the choice:
- Embrace open standards
- Look for a different market or a different solution as prices and margins will only decrease.
Your competitors will be lean and mean as they never had big margins on these products.

Do you sell solutions based on proprietary technology or open standards?

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