Network effects are those effects that have a profound effect on the popularity and reach of a service or a product. The moot question to be asked is will cloud computing break some of these traditional research methods? Network effects happen to be the strongest forces in the technological world today. These effects are partly successful for the success of both traditional software such as windows operating system and of services like Google, Facebook. But the question to be answered is what these network effects are? As per the famous Wikipedia a network effect is the effect that the user of a product or service has on the value of the service to other users.
Social networks like facebook, are standing examples of more users in a network, the more valuable the network becomes both for participating users and potential ones. After some time, people join the network simply because everyone they know has joined the network. Organizations are always keen on exploiting the network effects of as they create a subtle form of lock-in. Here users will not change the network unless a significant percentage of people change first, so it becomes much harder for new players to enter the market.
This was apparent in the example of Google, inspite of its brand and marketing power, only a small percentage of investors adopted this social network. The user’s viewpoint is that all my friends are on Face book, so I will adopt Google only if these friends adopt it. These effects also create enduring situations from the technology point of view. For example, Orkut which Google’s first incursions in the social networking scene, was dominated by Brazilian users for a few years. Upto last year,59% of its 66 million users, or almost 39 million people still use the social network.
This works out to roughly the same as Facebook’s 38 million users in the country, even though Facebook is from a technical and functional standpoint, a superior service. It is the network effects that have kept Google going for the past few years. Network effects go much beyond social networks, but they are almost everywhere in technology. Looking at Windows, whose power is easy to see, run on most users run Windows on their PCs, so most developers will target that platform to present their services, which in turn will make more users available for it.
The same thing applies for the interface metaphors in Microsoft software (menus, layout and so on), especially office users take time learning the interface because employers expect everyone to know it because so many people use it. The more software spreads, the more it becomes essential for everyone to know how it works, making it spread even more. Therefore, we can say that network effects are responsible for setting either formal or informal standards in technology, with the importance and value of standards increasing with the number of adopters. For the cloud, where the market is still nascent, there is still an interoperability that can play the part in shaping the future landscape of cloud computing.
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