On technology commoditization

If you ever wondered how Sun monetizes Java, I suggest reading Jonathan Schwartz's (President of Sun) post on commoditization, standards, and Java. The crux of his discussion is that standardization and commoditization is not terrible as it inevitably opens up new market opportunities for industry players (just look at the railroad industry as an example). On the tech side, Jonathan believes it is mainly bandwidth that has been commoditized as opposed to a broader trend in software.

So I'd like to answer once and for all the question, "how does Sun monetize Java?" with a historical reference: the same way GE and General Motors have monetized standard rails, Vodafone monetizes GSM, banks monetize ATM networks, and oil and gas companies monetize the fact that my car can use "gas."
The Java community, which we steward, drives a broad array of platform standards, among an even broader array of industry participants. That activity levels a playing field, that just so happens to be the single biggest playing field the technology industry has ever seen. The network is a commodity. We should all be celebrating.

In some respects, one could view commoditization as a bad thing as it is difficult to differentiate one product from another as they are easily replaceable based on price alone. However, what Jonathan is saying and what I agree with is that it is what you do with the commodity bandwidth, standards, and platforms that separates the winners from the losers. Sure, companies are all on a level playing field due to advancing technology and platforms. For example, with standardization, building new software and technology products and integrating them with existing solutions takes much less time and costs way less than ever before. Despite that, we continue to see innovation and new business models. The value just resides in a different layer. While Jonathan would like to believe that the creation and promotion of Java would soley benefit Sun, his argument is that it makes the market bigger for everyone, including Sun, so that is a great thing.

The one thought that could cause worries is that if you buy into Jonathan's story of commoditization, the inevitable result is that the industry will consolidate leaving only those with scale and monopoly power to survive. Just look at the examples from his post - GE, GM, Vodaphone, and banks have benefited from standardization. Well, those are all big guys. In my mind that's ok, as consolidation will be a long time coming as we are in the very beginning of this commodity movement in the technology space. Sure certain markets are in more advanced stages, but overall as an entrepreneur and venture investor you will have plenty of chances to make your impact. Remember, as markets commoditize, new opportunities will continue to arise, huge ones that we never even thought of today.

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