Monday, September 19, 2011

Migration Paths to New Technology

September 19, 2011

After receiving several friends’ proposal to order the Windows 7 system, recently I am starting my trip to explore the IT business and strategies for technology/information products.

What is the hidden engine behind improving technology and information product innovation? New technology can win the market eventually and create more benefits for producers. So how can producers persuade/attract customers switching to new/improved technology? Offer customers an attractive migration path to a new technology. What obstacles need overcome? Is there any strategy they use to smooth user migration paths to new technology?

The primary technical obstacle for technology innovators must have to do with the need to develop a technology that is at the same time compatible with and yet superior to existing product. Only in this way can producers keep customers’ switching costs low, by offering backward compatibility, and still offer improved performance. The obstacles to the compatibility and performance trade-off are not unique to upstart companies which are trying to survive in the competition with market leaders. Those leaders in the market face these challenges as well. Microsoft held back the performance of Windows XP so that users could run old application temporally only compatible in the XP environment, and left enough time for software producers to upgrade their products for Windows 7. And although Microsoft has clearly indicated that Windows Vista is a transition operating system and that its eventual goal is to move us to windows 7, there are still a bunch of people using Windows Vista (and I am one of them).

One popular way to deal with the compatibility/performance trade-off is to offer one-way compatibility. When Microsoft offered Office 2010 as an upgrade to Office 2007, it designed a part of the file formats used by Office 2010 incompatible with the Office 2007 formats. Word 2010 could read the complete files from Word 2007, but not the other way around. With this tactic, Microsoft could introduce product improvements while making it easy for Word 2010 users to import files they had created using older versions. This one-way compatibility could create an interesting dynamic: early adopters have a hard time sharing files with their slower-to-adopt fellows. Something has to give. Microsoft surely is hoping that organizations would shift everyone over to the latest version of Office to ensure full interoperability. However, when potential users see the costs of an inconvenient environment for sharing, they would begin to delay deployment of the latest version. I am thinking that could probably be the reason for Microsoft to offer users the option to save files in either the new or the old version!

So the key for the strategy with respect to selling upgrades seems to give users a reason to upgrade (such as desirable new features or the desire to be compatible with others) and also to make the process of upgrading as easy/smooth as possible. The difficulty with the tough incompatibility strategy is that users may decide not to upgrade at all, which is why Microsoft today has already softened its incompatibility strategy – Office 98 even cannot open files under Office 2003 format.  

Lorena Li

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