“For more than a century, economies of scale made the corporation an ideal engine of business. But now, a flurry of important new technologies, accelerated by artificial intelligence (AI), is turning economies of scale inside out. Business in the century ahead will be driven by economies of unscale, in which the traditional competitive advantages of size are turned on their head.
Economies of unscale are enabled by two complementary market forces: the emergence of platforms and technologies that can be rented as needed. These developments have eroded the powerful inverse relationship between fixed costs and output that defined economies of scale. Now, small, unscaled companies can pursue niche markets and successfully challenge large companies that are weighed down by decades of investment in scale — in mass production, distribution, and marketing.”
Hemant Taneja with Kevin Maney in their Sloan Review article, “The End of Scale.”
There are two pathways I can envisage OSS playing a part in the economies of unscale indicated in the Sloan Review quote above.
The first is the changing way of working towards smaller, more nimble organisations, which includes increasing freelancing. There are already many modularised activities managed within an OSS, such as field work, designs, third-party service bundling, where unscale is potentially an advantage. OSS natively manages all these modules with existing tools, whether that’s ticketing, orchestration, provisioning, design, billing, contract management, etc.
Add smart contract management and John Reilly’s value fabric will undoubtedly increase in prevalence. John states that a value fabric is a mesh of interwoven, cooperating organizations and individuals, called parties, who directly or indirectly deliver value to customers. It gives the large, traditional network operators the chance to be more creative in their use of third parties when they look beyond their “Not Invented Here” syndrome of the past. It also provides the opportunity to develop innovative supply and procurement chains (meshes) that can generate strategic competitive advantage.
The second comes with an increasing openness to using third-party platforms and open-source OSS tools within operator environments. The OSS market is already highly fragmented, from multi-billion dollar companies (by market capitalisation) through to niche, even hobby, projects. However, there tended to be barriers to entry for the small or hobbyist OSS provider – they either couldn’t scale their infrastructure or they didn’t hold the credibility mandated by risk averse network operators.
As-a-Service platforms have changed the scale dynamic because they now allow OSS developers to rent infrastructure on a pay-as-you-eat model. In other words, the more their customers consume, the more infrastructure an OSS supplier can afford to rent from platforms such as AWS. More importantly, this become a possibility because operators are now increasingly open to renting third-party services on shared (but compartmentalised / virtualised) infrastructure. BTW. When I say “infrastructure” here, I’m not just talking about compute / network / storage but also virtualisation, containerisation, databases, AI, etc, etc.
Similarly, the credibility barrier-to-entry is being pulled down like the Berlin Wall as operators are increasingly investing in open-source projects. There are large open-source OSS projects / platforms being driven by the carriers themselves (eg ONAP, OpenStack, OPNFV, etc) that are accommodative of smaller plug-in modules. Unlike the proprietary, monolithic OSS/BSS stacks of the past, these platforms are designed with collaboration and integration being front-of-mind.
However, there’s an element of “potential” in these economies of unscale. Andreas Hegers likens open-source to the wild west, as many settlers seek to claim their patch of real-estate in an uncharted map. Andreas states further, “In theory, vendor interoperability from open source should be convenient — even harmonious — with innovations being shared like recipes. Unfortunately for many, the system has not lived up to this reality.”
Where do you sit on the potential of economies of unscale and open-source OSS?