Figure 8.8 Growth of largest email providers.
In about 1993, Internet email hit the business radar because services pro- vided by communication giants such as AT&T and MCI had slow or no growth, while Internet email use was growing quickly [14]. A 1996 For- rester report [15] discusses the importance of the major online service
Year MSN buys Hotmail
1000s of Mailboxes
Hotmail Vs Yahoo Vs AOL email
Source:
Messaging Online 4Q95 2Q96 4Q96 2Q97 4Q97 2Q98 4Q98 2Q99 4Q99 2Q00 4Q00
0
Hotmail Yahoo!
AOL
100000 200000 300000 400000 500000 600000 700000 800000 900000
Hotmail Yahoo!
AOL Growth rate of biggest email providers
# of new email accounts
16000 14000 12000 10000 8000 6000 4000 2000 0
4Q95 2Q96 4Q96 2Q97 4Q97 2Q98 4Q98 2Q99 4Q99 2Q00 Date
(b)
(a)
Email Case Study 129
providers adopting the Internet mail protocols and how this opened the floodgates for interservice messaging. Forrester correctly believed that the Internet standards would replace proprietary standards within the next three years [16]. David Passmore wrote about the end of proprietary email and the success of Internet email in 1996 [17]. By 1999, Internet email was becoming ubiquitous [18][19] as it became the normal way many people communicated with each other. By the shift to a more centralized manage- ment structure in 1997, the established standard for email was the Internet suite. This acceptance of the Internet standards as the dominant design illustrates that market uncertainty was low.
Market uncertainty can be a state of mind: It is similar to the concept of customer confidence, a leading economic indicator used by the U.S. Com- merce Department. When the market believes a thing will happen, many times it does. When both Microsoft and Netscape became Internet-email- compliant, it indicated a major step in the acceptance of Internet email.
Now, virtually every desktop in the United States has software able to access Internet email. Microsoft was the important player because Internet email was part of Windows 95 — “the fact that Navigator included E-mail capabilities was a serious who cares for Windows 95 users, who now get E-mail software along with all of the other little doodads in their operating system” [20]. Other vendors, such as IBM/Lotus, Qualcomm, Apple, and Eudora [17], are supporting Internet email standards, showing further industry convergence to Internet email as the dominant design. This ven- dor confidence in Internet email convinced even the most conservative IT manager that Internet email was the dominant design and the only viable choice for email standards.
After the final group of MIME RFCs 2045–2049 in November 1996 [21][22][23][24][25], the framework for Internet email stabilized, indicating lower market uncertainty. This technique to measure market uncertainty requires studying how Internet email standards have evolved over the last 25 years. With high market uncertainty, one would expect many changes in the basic specifications, but with low market uncertainty, standards should be more stable because most changes tend to be small, incremental improvements. Figure 8.9 shows the history of how Internet email stan- dards have changed, detailing how the standards for Internet email have stabilized over the years. It shows the main Internet mail RFCs and the increase of pages in each specification over time. It demonstrates how the format for mail (RFC561) [5] was settled by the early 80s. Next, it shows how SMTP (RFC788) [6], the email application transport protocol, became a standard in the early 80s. MIME started in 1984 with RFC1341 [9], becoming 130 Chapter 8
settled by 1996 with RFCs 2045–2049. Note the pattern: At first, the changes are larger and then shrink in size as the standard matures. Figure 8.9(a) shows the number of pages changed per day, and Figure 8.9(b) illustrates the rate at which these specifications are changing, as measured by the number of pages changed per day. As this graph shows, the final change in three major email specifications (MAIL, SMTP, MIME) all had a similar rate of change, which is 0.02 pages per day. This shows the reduction in market uncertainty based on the rate of change of email specifications, indicating that Internet email standards were becoming stable, thus implying lower market uncertainty.
Figure 8.9 Email RFC changes.
date
# of pages
email RFC Length
Sep-73 Sep-75 Sep-77 Sep-79 Sep-81 Sep-83 Sep-85 Sep-87 Sep-89 Sep-91 Sep-93 Sep-95
0 20 40 60 80 100 120 140
MAIL MIME SMTP POP IMAP
Change #
Pages per Day of Change
Rate of Change of email RFCs
-0.02 0
1 2 3 4 5
0.02 0.04 0.06 0.08 0.1 0.12
MAIL MIME SMTP
(b) (a)
Email Case Study 131
Analysis of Other Factors
From the preceding text it is clear that market uncertainty changed at the correct time, but what other factors might be responsible for this shift?
These factors include Internet technologies and the Web, window-based email user interfaces, Web browsers, and bundled ISP email accounts, such as MediaOne. All these technologies had some impact on Web-based email;
however, the evidence suggests that these other causes were not catalytic in the migration of users to a more centralized management structure.
The technologies of the Internet, including email protocols and the Web, are certainly a necessary condition for Web-based email. Nothing was changing in these technologies in 1997, though, that could account for the observed shift in management structure. The Internet and the Web, while undergoing rapid evolution, had a stable base of standards providing the framework for interoperability. As discussed in the previous section, the major Internet email standards had stabilized by 1997. To the application writers, Web-based email was like many other database applications, con- sisting of a front-end Web-based user interface and a back-end database. It did not require the invention of new technology. The Internet technologies enabling Web-based email systems existed before the observed shift of the management structure in 1997.
Browsers and the prominence of Web traffic on the Internet occurred too early to cause the shift of management structure observed in email. Several years before the shift, browsers became popular and Web usage became a significant factor. By September of 1993, Web traffic became the tenth- largest source of Internet traffic [20]. This is less than one year after Mosaic released its browser [20]. Netscape’s Navigator debuted in October of 1994.
By April 1995, Web traffic became the number-one source of Internet back- bone traffic. The popular use of browsers to access information on the Inter- net existed several years before the shift in email management structure.
Could the Web user interface be a contributing factor in the email man- agement shift because of its consistency and friendliness? This seems unlikely because the Web interface is not unique to the Web — it’s just another window-based application, like applications in Microsoft Office.
Browsers displaying graphics are X applications in the Unix environment and Windows applications in the Microsoft world. The consistent user interface is a property of the windowing system, not of the application using it. Microsoft’s Windows 95 became the standard GUI for the office desktop. Notice that the user interfaces on Microsoft’s Internet Explorer, Netscape’s Navigator, and the Eudora email system are similar to the look and feel of Microsoft Office. They all conform to the Window’s UI and use 132 Chapter 8
the standard pull-down menus, scroll bars, and other expected items. Users had experience with the Web, Windows-based user interfaces, and GUIs for email several years before email’s observed shift in management structure.
Unlike the preceding factors, other factors, such as the success of portal sites like Yahoo! and MSN, did occur during the management shift. Portal sites gave people a place to go on the Web; did they also provide the access to Web-based email users had been waiting for? It seems not, given the tim- ing, and different types of successful portal sites, some with and some without email.
One might believe the success of portal sites such as Yahoo! and Hotmail gave email a boost; however, the opposite happened. Email helped portal sites such as Hotmail differentiate themselves from other Web search sites.
Yahoo! did not announce plans to buy RocketMail until October 1997 [26], and by January 1, 1998, Microsoft decided to buy Hotmail and its then cur- rent 12-million mailbox base [27]. This occurred after the shift to central- ized management that started in the beginning of 1997, as shown in Figure 8.9. There was no integration of Web-based email and portal sites when the shift started in early 1997; therefore, email boosted the value of portal sites, not the reverse.
The success of portal sites does not depend on email, any more than the success of email depends on portal sites. Informational sites, such as Cnet or CNN, that provide news are successful, yet they do not offer email ser- vices. Local portal sites, such as boston.com, are successful, yet do not pro- vide email. Many Web indexing and search sites, such as AltaVista, Hotbot, Google, and Lycos, have succeeded in attracting users without offering email services. It seems unlikely that the success of portal sites caused this shift in email.
The preceding discussion shows how the two most successful Web-based email providers acquired email services only after their proven success.
This follows this book’s theory; after these services proved successful, big organizations started providing the service to cash in. Companies running portal sites bought successful Web-based services and integrated them into their portals as a way to strengthen user loyalty. This indicates that Web- based email services prospered before portal sites provided the service.
The changing technology of computers and the Internet, such as email GUIs, the Web, and the success of portal sites cannot explain the observed shift in structure. The reduction in market uncertainty, however, can. It was the correct time, and nothing else seems likely to have triggered the migra- tion of users to centrally managed email. This illustrates that the reduction in market uncertainty is the most likely trigger for the shift in management structure seen in 1997.
Email Case Study 133
Conclusion
Internet email succeeded as the theory predicts; it is modular in design, started out simple and evolved, allowing easy experimentation. Also as pre- dicted, less flexible but more efficiently managed implementations of the dominant design (Internet email) became popular as the market settled. As expected, when market uncertainty decreased, innovation became less valuable than efficient management. Figure 8.7 illustrates this by showing the growth of centralized implementations of Internet email, such as Hot- mail or Yahoo!, compared to traditional ISP email. This explosive growth illustrates how well a service such as Hotmail or Yahoo! meets the needs of the average user when market uncertainty is low. In the late 90s, users had a choice between ISP and Web-based email; many chose Web-based email because of the advantages of its centralized management structure.
The environment of the mid-1990s was complex due to the rapid pace of technology and the creation of entirely new types of businesses, such as portals and Internet search sites. Neither the introduction of new technol- ogy nor the success of any type of Web site caused the shift in management structure seen with email. The technologies for the Web, browsers, and email all existed before the shift in management structure. At the time of the shift, users could choose either system with equal ease, but they picked the centralized version more than 50 percent of the time.
The timing of this shift from a distributed to a centralized management structure fits this theory well. When MIME, the final piece for Internet email, became a stable standard, a centralized management structure could easily meet this fixed target. Furthermore, vendors believed this standard was the dominant design, as its adoption by Netscape and Microsoft shows.
Because nothing else is likely to account for the shift in management style, and because market uncertainty had just decreased noticeably, it follows that this reduction in market uncertainty most likely triggered this shift.
The next chapter provides more evidence supporting the theories in this book; it presents a case study of voice services, with a focus on the shift from PBXs to Centrex in the mid-1980s. It illustrates how the theories in Part One explain the evolutionary history of the voice service market. It demonstrates that when market uncertainty was low, Centrex, with its cen- tralized management structure, became more popular, and in conditions of high market uncertainty, users migrated to the distributed architecture of PBXs. Other theories have failed to predict the unexpected growth of Cen- trex in the mid 1980s; this book’s theory explains that Centrex was a good choice at this time because of the low market uncertainty in the mid-1980s.
134 Chapter 8
135 This chapter examines the market for voice services over its long history.
By understanding how voice services evolved, were adopted, and were managed, we might better understand how current similar network ser- vices will grow. The contrast and similarities between voice and email ser- vices provide powerful evidence to support the theories in this book — voice services are mostly built on the intelligent Public Switched Telephone Network (PSTN), while email services are mostly built on the dumb Inter- net structure. Voice services, similar to email, have seen shifts in the style of management structure that works best at any particular time relative to the level of market uncertainty. In both cases, high market uncertainty favors a distributed management structure, while low market uncertainty implies that a central architecture works best. The differences between the “smart”
PSTN and the “stupid” Internet and the similar evolution of services within each network provide strong evidence proving the link between market uncertainty and choice of management structure.
Everybody is familiar with voice services over the PSTN because we use them daily in both our business and personal lives, which makes voice ser- vices attractive as a case study. The PSTN is the telephone network that switches most voice traffic. As discussed in Chapter 3, the PSTN is man- aged by large carriers and provides the voice services over a smart network not allowing end-2-end services, but instead promoting services that are