Whether a management structure works best, given a shift to the better architecture is never an all-or-nothing proposition. In most cases, it should be expected that similar services with different styles of management structure will coexist. The success of one management structure compared to the other is measured by the ratio of the market captured by each struc- ture. I expect this ratio to shift as the market uncertainty changes. This book’s theory expects that as market uncertainty decreases, centralized versions gain in market percentage, but as market uncertainty grows, dis- tributed management structure becomes more popular.
The case study of email in Chapter 8 shows the coexistence of services providing a similar service using different management structures. In email, there is a broad continuum of use from distributed to centralized.
Users who demand complete control of their email have their personal email server running on their desktop — a very distributed style of email management. Other users choose to use their ISP as an email server provider — a more centralized structure, but still having a distributed component. Most email growth today is with more centralized Web-based email services such as Hotmail or Yahoo!. The email case study shows that one management style does not meet all users’ needs.
Similarly, the case study of voice services in Chapter 9 illustrates a contin- uum of use from a distributed to centralized management style. There will always be a market for state-of-the-art on-site PBXs managed by experts within the organization. Some users demand the control of owning and managing the equipment. Other users may require specialized features not yet implemented in Centrex, such as linkage to external computer databases for advanced call routing. An increasing number of users are opting for a centralized style of management offered by telephone service providers with Centrex. The centralized management inherent with Centrex frees many 30 Chapter 2
organizations to focus on their critical success factors, not on providing mun- dane voice services within the organization. How companies provide basic and advanced voice services within their organization illustrates how differ- ent management structures coexist for popular services.
Past approaches have not been able to explain why shifts in management structure occur when they have, and they are unlikely to explain when shifts will occur in the future. The problem with previous approaches has been that they did not consider when being able to innovate is more valu- able than other business and technical advantages. This methodology helps explain why and when shifts in management structure transpire. It illustrates the importance of market uncertainty in shifts of management structure. By linking the value of experimentation to market uncertainty, this approach illustrates how to consolidate previous methodologies by factoring how market uncertainty affects the value of experimentation.
When does the value of innovation exceed the benefits of efficient man- agement and resources? Previous approaches are partly correct: It just depends on the market uncertainty. When you are having difficulty meet- ing user needs allowing them to experiment has great value, but if the mar- ket is predictable, experimentation is not worth their effort. As Chapter 6 shows, in low market uncertainty the difference between the best and worst of many experiments is small.
To illustrate the preceding concepts, think about the Internet compared to the PSTN in the context of innovative new services. The Internet is dumb, and the PSTN is smart (see Chapter 3 for detailed definitions of dumb and smart networks), yet the innovation of new services in the Inter- net dwarfs those in the PSTN. The Web and the innovation it allows have far exceeded the services in the PSTN, partly because of who can innovate.
In the Internet, anybody can, but in the PSTN, nobody can but the tele- phone company. It is a question of centralized control versus freedom for end users to create their own services.
Figure 2.2(a) shows a dumb network, such as the Internet. The nodes through which information flows do not know anything about the end users of the data. When Mark and Scott converse, the nodes the data flows through do not know what Scott and Mark are doing. In technical terms, the nodes keep no state about Scott and Mark. Figure 2.2(b) illustrates a smart network, such as the PSTN. In this intelligent network each node that is part of a connection knows about the connection, and each node keeps state information about each connection it has. The smart network knows what its users are doing, allowing it to protect its users, efficiently manage its resources, and unfortunately also impede users from innovat- ing better network-based services.
Network-Based Services 31
Figure 2.2 (a) Smart compared to (b) stupid network.
There is no agreement about what architecture works best to manage network-based services. Traditional telephone companies believe in the centralized model of the PSTN. Many “bell” heads still believe that the Internet does not work because it can offer only best-effort service. Others believe distributed architecture like the Internet is not able to offer robust network-based services because they are more vulnerable to security attacks such as the Denial of Service (DoS) attacks that have disabled major
Scott Scott
Mark Mark
Smart Network Stupid Network
Only Scott and Mark know they are communicating
Node A and B have no information about Mark talking to Scott
Node A Node A
Mark now talking to
Scott
Node B Node B
Mark now talking to
Scott 32 Chapter 2
Web sites in the past. There is no general right answer as to what works best; it depends on each particular case and on the market uncertainty.
This question of management structure of network-based services tran- scends the particular network in many cases. For example, as discussed, within the PSTN the PBX offers a distributed structure as compared to the centralized managed structure of Centrex. In the Internet several architec- tures provide Voice-over IP. SIP and H.323 allow a distributed model, but megaco (H.248) does not. This shows the complexity of the decision about network infrastructure and network-based services. Distributed networks, such as the Internet, and centralized networks, such as the PSTN, both allow distributed and centralized architecture for some types of network- based services, making the decision about which is best very complex.