The invisible engine model followed by Apple’s iPhone has helped power the information technology industry for about three decades. Apple itself was one of the pioneers in encouraging developers to write applications for its desktop operating system. It invented the “software evangelist.” Microsoft, though, was the maestro catalyst. Its Windows software platform attracted thousands of software developers and hundreds of millions of users. As a result it has been the durable center of a vast desktop-computer based ecosystem since at least the launch of Windows 3.0 in 1990. Invisible Engines tells the story of how software platforms have transformed industries including computers, video games, and handheld devices and then accelerated innovation. It then examines the forces behind the various business models that have been adopted in these industries. Many software platforms have decided not to charge developers while others have. Some have decided to vertically integrate into hardware while others have remained pure platforms.
The development of the Internet and the spread of high-speed broadband throughout the world provided have resulted in a new age of software platforms. Several of the major Web businesses have turned themselves into platforms. The heart and soul of any Web business does not reside in a server farm somewhere or in its buildings — it lies in the thousands and thousands of lines of software code that enable people to see and interact with Web pages. Once written these software programs can be opened up to others by exposing APIs that enable developers to use portions of that code to interact the Web properties.
Facebook has allowed developers to write applications that work inside its social network. As a result developers can write games, such as Farmville, that people on Facebook can play or online shopping and advertising programs such as those developed by FreeCause for raising money for charities. By the end of 2009 there were more than 500,000 (yes, really) applications running on Facebook. This five-year old site has also developed a program called Facebook Connect. Developers can write applications that through APIs made available by Facebook enable users of those applications to pull their Facebook identity, friends and privacy to other websites. As of the end of 2009 there were more than 6,000 developers working on Facebook Connect applications. These applications make Facebook more valuable to its users, and the greater number of users makes Facebook more valuable to developers. Although it has made slow progress the expectation is that Facebook will make money by selling, in some fashion, access to the eyeballs drawn to Facebook and these applications to advertisers.
Amazon is one of several companies that are competing to create a general purpose software platform that can be accessed over the Internet. Such platforms are said to reside “in the cloud” (more on this soon) because they are off in the distance as opposed to on the user’s desktop or other client computer. The idea is to develop a set of services that application developers can use. These include software services that allow developers to use the code rather than writing their own. But they also involve access to the vast server farms and communication networks around the globe. Amazon’s Web Services plays to this company’s strength in selling products over the Internet. It provides special services to developers who are writing programs to help merchants operate virtual stores and receive payment.
Invisible engines are beginning to disrupt the payments business both online and offline. This industry is at the heart of commerce and makes it possible for businesses and people to exchange value around the world. By definition it involves essentially all the money in the world. If invisible engines start driving innovation in this industry they could have an enormous impact on consumers and businesses who transact with each other.
David S. Evans is an economist and a business advisor to payment companies around the world. His recent work has focused on helping companies create, ignite and profit from payments innovation. He is the originator of the Innovation Ignition Framework® , a tool provides a systematic way for companies to evaluate and implement innovative ideas and achieve critical mass.
I. The Invisible Engines that Drive Innovation and Transform Industries
II. How the iPhone Invisible Engine Provided a Catalyst for the Mobile Phone Industry
IV. What’s in the Cloud for Payments?
V. Why the Payments Industry Needs a Catalyst to Drive Payments Innovation
VI. Can IP Commerce Create the Apps Store for Payments?
VII. PayPal X’s Global Payments Development Platform
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