FREE Companies & institutions LESSON · Companies & institutions
1964 — Compatibility becomes capital
IBM System/360 and the platform wager
Compatibility becomes capital
IBM replaced incompatible product lines with a family whose machines could run the same software and use common peripherals. Compatibility protected customer software investment and invited complementary products, but it also raised switching costs and made the operating system an enormous coordination problem. A platform is a promise that outsiders can invest against. Breaking that promise destroys capital beyond the platform owner.
A stable interface converts other people’s software, skills, data, and complements into shared capital—and can convert that dependence into platform power.
Institutional reconstruction
Estimate a fictional customer’s migration cost before and after System/360 compatibility. Map who gains from the stable interface: IBM, customers, developers, trainers, peripheral makers, and plug-compatible competitors.
Trace the scarce resource, coordination mechanism, power boundary, and newly possible failure.