Email and voice services are two real-world examples illustrating the the- ory expounded in this book. Each case study begins with a general brief history of the service, followed by a more narrow analysis of one particu- lar shift from distributed to centralized management structure. In both cases the evidence suggests that a reduction in market uncertainty at the correct time accounts for the shift in management style. In both cases there are many factors, such as technology change and regulation, which are possible causes for the shift in management structure. However, by careful analysis these other factors are ruled out as likely triggers for the shift. This leads to the conclusion that the decrease in market uncertainty was the most likely cause for this shift to more-centralized management structure.
The email case focuses on the shift of users to centralized email services such as Hotmail, which started in 1997. The case demonstrates that market uncertainty significantly decreased, as indicated by several different tech- niques at the time this shift occurred. It argues that other factors such as Internet technologies that change rapidly and new superior technology such as window-based email interfaces, the Web interface, and the Web 110 Part Two
itself are unlikely causes of this observed shift from ISP email to more cen- tralized web-based email systems. The evidence indicates that reduced market uncertainty is the most likely factor to have caused the shift to cen- tralized email services in the late 1990s.
The next case examines in detail the shift from the distributed model of PBXs to a more centralized Centrex service offered by the phone company.
In the PBX market, regulation played an important role in shaping the mar- ket and the players within it. However, the shift in management structure from PBXs to Centrex in the mid-1980s is unlikely to have been triggered by regulation. Rather, regulation only exacerbated the degree of the shift.
Centrex succeeded because as market uncertainty decreased the telephone companies could meet user needs by migrating already successful features from PBXs into the core of the PSTN. It became possible to meet user needs with centralized management structure once market uncertainty decreased enough so that the phone companies knew what features to provide.
These two cases have a common thread, showing a shift from a distributed to a centralized management structure triggered by a reduction in market uncertainty. This evidence is powerful, given the many differences between email and voice services, and differences in the infrastructure of the under- lying networks on which these services are built. The migration of voice fea- tures occurred within the intelligent PSTN (Centrex vs. PBX). Email services built on the distributed end-2-end architecture of the Internet have seen a similar migration of users from distributed ISP-based email to centralized web-based services. The likely cause of users migrating in both these cases is a decrease in market uncertainty, which shows that the theory generalizes to many services, on networks with different infrastructure. The case studies illustrate the theory that a decrease in market uncertainty caused a shift to a more centralized management structure that utilized the resources better, had technical advantages, and because of low market uncertainty meets the market well. Two examples, each from a very different type of network, yet having a similar shift in management structure triggered by decreasing mar- ket uncertainty, suggest the generality of this argument.
The next two chapters in this part are the case studies. First is email, then voice. The research leading to these chapters is from my Ph.D. thesis.
The Case Studies 111
113 This chapter presents a case study of the network-based service email, from its early days within the research community in the 70s through its stunning success in the late 90s, when the number of mailboxes grew to hundreds of millions in the United States alone. Initially, as many vendors competed for the dominant design, much experimentation occurred.
Because market uncertainty was high at that time, this experimentation was of great value. When Internet email won and the standards stabilized, the popularity of more centralized email services such as Hotmail grew.
Roughly 40 million more mailboxes currently exist for centralized email services than the more distributed (and traditional) ISP-based email sys- tems. This case illustrates the relationship between market uncertainty and management structure — when market uncertainty was at its highest in the 80s, the value of experimentation caused the distributed management structure to work best. Later, as the maturity of the technology caused mar- ket uncertainty to decrease, the value of the centralized management struc- ture overcame the advantage of end-2-end architecture. The emergence of a dominant design and stable standards indicates this reduction in market uncertainty. The history of email as presented in this case fits the theories of this book well.
The theory presented in Part One predicts the evolutionary pattern of email in the context of the standards that became accepted [1][2] and the