What This Article Covers
- Background on the Enterprise Software Market
- Requirements for an Efficient Market
- How Enterprise Software Stacks Up
- Are Prices are published and Easily Compared?
- The Elusiveness of Total Costs
- Ease of Product Comparison
- Third Party Ratings
- Are Producers Regulated?
- Regulation of Statements by Software Vendors
- Sellers Must Not Have Monopoly Power
- Why the Enterprise Software Market is Inefficient
Any selection of enterprise software happens within the context of the enterprise software market. Most people who write about the enterprise software market also either depend upon it for their livelihood, or write upon the topic which involves entities that are major advertisers, and thus do not have an incentive in describing how it really works. One the other hand, the academic department that might be well suited to analyzing the enterprise software market would be economics, but economists have little interest in studying how the enterprise software market works. I have performed the research on this and there are extremely few articles or papers written about the enterprise software market by economists, which is both strange and quite unfortunate because some substantial portion of the improvement in productivity (something that economists are quite interested in) is due to enterprise software. It also means that anti-competitive behavior, which reduces the efficiency of the enterprise software market, is not called out because those most qualified to write on the topic and to compare and contrast the enterprise software market with other sectors of the economy are not part of the conversation.
In writing these articles, although I am not an economist, I have applied principles of economics, such as tests for market efficiency, anti-competitive techniques applied by certain vendors, and the industry’s interaction with consulting firms and other actors. I used some of these articles in writing this book, as the nature of the enterprise software market essentially determines what is available to choose from during a software selection, and is also critical to understand before making a software selection.
Background on the Enterprise Software Market
Before we go too far down this road of the details of the efficiency of the enterprise software market, in particular, let’s cover some of the requirements of an efficient market generally. I believe this is important because one must know what an efficient market looks like before one can evaluate the efficiency of a currently existing market like enterprise software.
Requirements for an Efficient Market
- Prices are Published Easily Compared: In order to have an efficient market, buyers must be able to perform price comparisons. If one looks on Amazon for laptops, it is easy to perform price comparisons, allowing buyers to drive more volume to lower cost providers – making the providers search for more ways to be efficient. Producers have a natural inclination to hide prices – meaning that the buyer must spend more time determining pricing information, making it more likely that the buyer will overpay.
- The Product is Easily Compared or Rated by Unbiased Third Parties: If buyers do not know what they are buying and cannot differentiate between products it is very difficult for an efficient market to exist. For instance, agricultural commodities tend to have efficient markets for them because an ounce of gold or soybeans is considered the same thing regardless of who is selling. Of course, few items can match the comparability of agricultural commodities. Consumer Reports greatly assists in rating products and services for the consumer market and uses objective criteria in order to provide ratings. However, not all consumers use Consumer Reports to make decisions, and many instead follow marketing messages and salesmanship or allow retailers – who are not objective sources of information (they have a bias) to steer them into purchases. Amazon.com also provides consumers with the ability to compare products through the use of reviewers (although there are a suspicious number of books with 4.5 star average reviews). However, these types of tools are far less commonly available information in the business-to-business market – which is a major reason IT consultancies have so much power.
- Producers Must be Regulated: Efficient markets normally require regulation. This is because producers, in order to obtain an unfair advantage will often purchase their competitors in order to eliminate a competitor in the marketplace. With a competitor eliminated, the producer can then raise their prices, and reduce the investment into their product. This is the strategy of all the serial acquirers in enterprise software. In fact, these are two of the most common outcomes of software acquisitions. If the producers are not regulated, it is very similar to a competitive sports game without any referees; there is simply no incentive to not cheat. Regulating markets protects the market, but not the producers in the market. The concept of regulation is to make the markets work for the most Those that oppose regulation often oppose it on grounds that the regulation restricts freedom, but this is incorrect typically because unregulated markets are not at all “free.” They result of unregulated markets is tyranny by what eventually become monopolistic producers, which hurts not only consumers but also other producers who are marginalized or eliminated from the market by the large monopolistic producers. This is not simply conjecture, but can be quite easily demonstrated through the evaluation of any industrial sector that has insufficient regulation.
- Sellers Must Have Low Monopoly Power: A monopoly is technically a single seller with multiple buyers. However, this is a relatively rare scenario, and economists have broadened out the term to mean “tending towards” monopoly, as was described earlier in this book. Some types of production are so efficient when produced on a large scale – such as power generation – that they tend towards having only one seller. These are referred to as natural monopolies and normally highly regulated. Wherever monopolies exist unless they are regulated, customer service/satisfaction/innovation declines and prices increase. This is one reason why the large software vendors are so poor at innovation. Sellers generally only innovate if they need to in order to compete, and many companies that say they are innovative are not innovative in the least. Declarations of innovation are constant, and predictable and are often used to justify high profits which are due not to innovation but to a monopolistic position in the market. This is explained with regards to software vendors in the following article, Why The Largest Software Companies Have now Reason to Innovate. Now that we have set the requirements for an efficient market, let us see how the enterprise software market compares.
How Enterprise Software Stacks Up
Are Prices are published and Easily Compared?
While there is not a single answer to this question as it varies depending on the software vendor, in general prices are mostly not published in enterprise software. The software vendors that publish their prices tend to be the low-cost producers. For instance, the two software vendors, Demand Works and Arena Solutions – being the low or lower cost producers in their respective software categories publish their prices right on their website. Salesforce.com does the same but is not actually the low-cost producer, but this is a special feature of the CRM software category, which is particularly transparent. CRM is an interesting case study as a software category as the software costs are remarkably close to one another. For instance, SAP, which follows a high-cost strategy for most of its other applications does not follow this strategy in the CRM market, and SAP CRM is about the same price as many other applications in the CRM category. CRM also has the most SaaS offerings, which appears to be an impetus to more price transparency.
Typically in the enterprise software market, pricing is complicated. Pricing is based partially upon how many users will be on the system; a user is called a “seat.” However, a host of other factors also come into play, including extra add-ons. For instance, beyond different levels of usage, there are add-on modules or integration modules that have a separate price. Also, how strategic the account is considered to be to the software company – if they think they can gain a big bump in credibility from selling to one particular client, the price may come down. Instead, prices are given only after considerable interaction between the vendor and the company. SAP and Oracle being the high-cost producers rarely publish their prices. For instance, SAP publishes the price of Crystal Reports – advertising it in effect, but Crystal Reports is their lowest cost application (although it is no a low-cost application in terms of its TCO). On most of the SAP product line, which his typically the most expensive in any category, they do not publish pricing information. Publishing prices only where you are competitive is not pricing transparency – in fact, it is misleading. In general, most software vendors similarly do not publish their prices. Furthermore, many vendors treat requests for pricing information as opportunities to gain information in order to make a sale. Often the salespeople at software vendors will continually ask for more interactions and more information in order to “meet your special needs.” They have a series of rationales that interfere with any entity determining pricing on the basis of ostensible dedication to quality with statements such as “we don’t like to just through out pricing numbers without knowing the situation.”
Of course, the software vendors could make their pricing much more simple, so determining price would not require such extensive information. At Brightwork Research & Analysis our Product Planning Package, as well as our TCO Calculator, estimates software costs based upon variable user input – therefore if the software companies wanted to, they could put similar calculators on their websites. However, most choose not to do this. In fact, software vendors often seem to go out of their way to make their software difficult to compare with alternatives – as a result, it takes a great deal of effort to determine pricing, at least with many if not most vendors.
It does not get much more transparent in terms of pricing than Demand Works.
However, even still a number of different factors must be added up before arriving at the correct price. The pricing listed here is ordinarily simply to prompt the customer to call for more explanation.
Salesforce was one of the first to provide a great deal of transparency to prospects right on their website. Salesforce provides options for getting details about their application right on the first page. Salesforce will allow anyone to got into their demo system immediately.
Salesforce has its pricing options declared very clearly.
Something, which helps clients, is inexpensive or even free trials. Salesforce offers very inexpensive lower level CRM functionality, allowing the buyer to test drive the application before they commit much of anything.
Rare software vendors like Ciiva provide free versions of their applications that prospects can use for as long as they like. For more fully functional versions of the software, the prospect is migrated to paid versions. As applications become more SaaS based, something, which is inevitable, we see this model becoming more common.
However, the more monopolistic the vendor, the less pricing information they make available. Oracle’s prices are nothing to brag about, and therefore you essentially can’t find published pricing information at the Oracle website. In fact, you can’t find demos or videos of Oracle on their site either (although you can find them on YouTube). The Oracle website is all about getting prospects to contact Oracle directly.
The Elusiveness of Total Costs
So software costs are often not published, and when they are, there still is considerable interpretation required to come to the final software costs. However, these are not the total costs that the company will pay for use of the application. For the applications we have priced at Brightwork Research & Analysis, the software cost averages a little less than 10% of the total cost of ownership (TCO) of the application, and the proportion of the overall costs vary. The largest cost is by far maintenance costs.
Even the rare buyer or software vendor that performs a TCO analysis will often leave out many costs. This is why I refer to almost every TCO study that I reviewed for the book Enterprise Software TCO: Calculating and Using Total Cost of Ownership for Decision Making, as a partial cost of ownership study, or a “PCO.” The TCO analysis at Software Decisions estimates costs of internal implementation (that is the cost of internal resources assigned to the project) as well as internal support costs on the business side.)
Most buyers make purchase decisions are substantially based upon this initial cost – the software license cost – rather than the TCO. In fact, estimation of TCO, particularly in any substantial way, in general, is exceedingly rare. I find this strange because there are so many white papers on the importance of selecting applications with a low TCO. However, talking about low TCO and actually producing a low TCO are two completely different things. The common presentation of many entities in the enterprise software space regarding the topic of TCO is that it is “important, but unknowable.”
With multiple factors complicating the calculation of costs, costs are clearly frequently unknown in the enterprise software market. This makes decisions making more difficult for enterprise software buyers and works against market efficiency.
Is The Product is Easily Compared or Rated by Unbiased Third Parties?
The subsection deals with how buyers interpret the products in the market and how easy or how difficult it is to understand the features and value of the product.
Ease of Product Comparison
Enterprise software is not an easily compared product. Enterprise software is a complex product which for which the interpretation changes depending upon one’s perspective and who is presenting the information regarding the product, as well as the pre-existing software that the buyer has already purchased. Enterprise software buyers will very frequently not understand much of what they are buying. This is simply the nature of enterprise software, which is one of the most complex products that any company will purchase. It is in fact far more complex than computer hardware. Increasingly, understanding computer hardware at a detailed level means understanding physics, particularly how electrons are controlled by various mechanisms. However, it is not necessary to get to that level of detail make purchase decisions, as specifications can be compared. However, the software cannot be compared as easily on gross specifications. In order to appreciate the distinctions between various applications, it can take years working in the application. As an example, I was familiar with PlanetTogether’s Galaxy APS for at least three years before I realized it contained multi-plant planning functionality, and I did not realize this until I met the business requirement on a client. Except in rare software categories, like CRM, it simply impossible to know everything about what an enterprise software application can do, and how it can be used.
The main way in which buyers become familiar with enterprise software applications in detail is through software demonstrations. Most demonstrations or demos are performed either through site visits or increasingly through screen sharing web conference sessions. Some software vendors provide online access to demonstration systems for potential customers, but most software vendors do not offer this option. Many software vendors make the argument that their applications are too complex to simply provide an online demonstration system to prospects, and there is some merit to this argument. However, a few hours spent with a person who is expert in an application is nowhere near enough time to understand an enterprise software application.
Third Party Ratings
Consumer Reports is an excellent example of a financially independent entity that provides ratings of products and vendors and is a great boon to the efficiency of the market for consumer products. Yelp is another example of a rating entity that while they cannot police every fake review written, is not known to have a financial bias towards those entities that are rated. That is, a local dentist cannot pay Yelp to change its reviews. Yelp has been extremely important in improving the efficiency of the market for local services, channeling more customers to higher rated businesses – which improves market efficiency.
Few financially unbiased media entities exist that provide objective information on enterprise software. Some of the best-known names, notably Gartner have the largest financial bias. This will be covered in specific detail later in this book. In interviewing buyers as well as performing troubleshooting and diagnostic projects for problematic implementations, it is clear that buyers are not able to consistently determine application capabilities, the level of vendor innovation, or even the fit between enterprise software and their business requirements. The evidence I present for this is that the applications that score the best in our multiple dimensions – but specifically along the lines of maintainability, usability, functionality, and implement-ability (what we call MUFI for short) are only very rarely the best selling applications in their respective software categories.
The Santa Clause Syndrome
Unlike the consumer software market, the executives who make the purchasing decisions are never the same as those people who actually use the software. At Brightwork Research & Analysis we refer to this as the Santa Clause Syndrome, and just as with Christmas, when the buyer is buying for someone else, the purchasing decision tends to not be as good.
That is, the purchase decision made for others, even when the buyer places the interests of the recipient above that of the seller; the purchasing outcomes are almost always inferior to when the individual who is to use and live with the selection makes the selection themselves.
In fact, normally neither the executives nor anyone else at the company will actually use the solution prior to the purchase. Typically the potential customer will see several software demonstrations or review some screen shots. Much of what is published about the software in marketing literature— or what vendor salespeople state— is of limited accuracy or is not applicable to an actual implementation. Not understanding the distinctions between applications themselves, corporate decision-makers rely upon sales representatives, consulting companies, and IT analyst firms for this information, and each of these entities have their own financial incentives that are not only not aligned, but aligned against their client’s interests.
Are Producers Regulated?
Enterprise software is not orally consumed, and it can’t hurt anyone physically, so the main form of regulation which would protect buyers and make for an efficient market would be regulating the messages that sent out by software vendors – to ensure that they are true, and then whether the statements related to functionality, such as user manuals and release notes are true.
Regulation of Statements by Software Vendors
As anyone who has worked for a reasonable amount of time in enterprise software can tell you, there is no restriction on what software companies can say. Any software company can make any announcement it likes regardless of how false, and no government agency will come knocking on their door asking for a retraction. And it gets worse than simply placing false information and puffery into marketing documentation, some of the information in release notes describes functionality that is either does not work, or does not work as intended. There is no regulation of what software vendors say or what they place in their documentation. However, the government seems to have problems in regulating food labels, and regulating software for the accuracy of the “contents” would be far more complicated than regulating food labels as it is both more complicated and more subjective.
Regulation of the Concentration of Market Power
In the US, where the majority of enterprise software companies originates and is based, it is extremely rare for software acquisitions to be disallowed by the Federal Trade Commission (FTC), even in cases where it quite clearly increased monopoly power – such as in the all too obvious Oracle acquisition of PeopleSoft. I have witnessed repeated acquisitions, which are clearly performed to eliminate a competitor, and while I continually hear about all the benefits of the acquisition of the acquiring company, in just about every case I can think of, the software acquired goes into a steep decline and the costs of the software rise. Within a few years, the acquired application is no longer relevant. Oracle’s acquisition of Agile and SAP’s acquisition of Business Objects, Servigistics’ acquisition of MCA Solutions are notable examples of this common outcome, but the examples go on and on. In fact, it is very difficult to find examples where the acquired application actually improves post acquisition.
The effect of software acquisitions is to restrict choice, increase prices and allow large and inefficient software vendors that are poor at innovation to continually replenish their application base with new applications. It also substantially increases risk for buyers. At any time a smaller, high value, the innovative vendor can be acquired, and a buyer can find himself or herself sitting across from major software vendors – i.e. “sharks,” and the value proposition can turn upside down very quickly. The customers of Business Objects found out about this when SAP radically reduced the service support for Business Objects after the acquisition. The support was so poor that it became the subject of articles in the mainstream IT press.
If software acquisitions were not allowed, the larger vendors would eventually give way to the smaller and more innovative vendors. For instance a primary reason that SAP purchased Business Objects, and why Oracle purchased PeopleSoft is that these software vendors were beating the SAP and Oracle in competitions – and this was just “too much competition,” for these two entities – and they most likely would have continued to loose market share to these vendors. The standard applied by the FTC for acquisition approval is where the combined entity would increase market concentration on what is referred to as the Herfindahl Index – which I won’t go into, but is essentially a way to justify any acquisition or merger based upon esoteric criteria that has little to do with the practical outcomes of mergers. The entire exercise is academic, because most of the employees a the FTC that have decision-making ability are out of industry, are angling for better paying jobs once they leave the FTC, and the entity has been fully captured and only in very extraordinary instances does it look out for anyone’s interests aside from the major enterprise software producers.
Enterprise software mergers and acquisitions are a major way that uncompetitive vendors can stay relevant and in control of the market, and a major if not the major way that they are able to maintain their monopolistic power.
Sellers Must Not Have Monopoly Power
The biggest software vendors have monopoly power in the enterprise software market, and this is not so much a contradicted point, as an un-discussed point. While this concept existed at one time – as is evidenced by anti-trust legislation like the Sherman and the Clayton anti-trust acts, there is very little residual idea remaining in the US culture that companies should have to follow any rules of competition or that the government has a role in keeping markets efficient.
Why the Enterprise Software Market is Inefficient
Monopoly power exists in the enterprise software market for the simple reason that there is little to no effort to keep the market for enterprise software competitive. Although many would like to propose it, there is no “natural” reason for this. Some would make the argument that this is simply “the way of the market.” However, it isn’t. It is instead because of how the game is setup. Furthermore, the present inefficient state of the enterprise software market is quite good evidence (although no further evidence is really required on this point) that markets left to their own devices/or the law of the jungle, do not result in efficient outcomes. It also means that the deck is stacked against buyers and that the likelihood of overpaying and ending up with underperforming systems is quite high – in fact, it happens quite frequently, and it shows up in the success/failure statistics – but the underlying reasons for why this is the case are either not at illuminated or poorly illuminated by IT media entities which must be careful not to alienate advertisers and other funding sources. It should not take much of a logical leap to understand that buyers in this market face a much higher risk than if the market were regulated.
If consulting companies were not allowed to sell implementation services into the same clients they advise, the market power of the largest software companies would be seriously compromised. If mergers were disallowed, within a decade, the structure of the enterprise software market would be significantly changed for the better.
The Outcome of an Efficient and Inefficient Market
Let us go over whose interests are served inefficient versus an inefficient market.
- Consumers: An efficient market serves consumers.
- Prices: An efficient market produces lower prices.
- Producers: An inefficient market serves some privileged producers, but not all An inefficient works particularly against the high-quality producers/software vendors that do not have monopoly power, and works for producers that have monopoly power and prefer to provide poor value to their customers.
- Workers: Workers do benefit for working for employers that have monopoly power. In the enterprise software area, employees that work for Microsoft, SAP and Oracle are paid well versus their counterparts in employers that do not have monopoly power. In fact, unions tend to attempt to unionize companies that have monopoly power, and tend to stay away from companies that lack this power. Companies with monopoly power make excess profits because of this power, and some of this excess profit is shared with workers. Interestingly, workers are very quick to assume that their extra compensation is because they and their company are “good” and very rarely acknowledge that at least some of their compensation is because they work for a company that has monopoly power. Workers for monopoly companies are quick to assume that the company they work for is the “best” rather than they are controlling the market through unfair competition.
- Innovation: This is mostly reduced in conditions of monopoly power. The major monopolistic software vendors – Microsoft, SAP, IBM and Oracle are all more known for buyer or copying innovation rather than creating innovation internally. The innovation that SAP developed was primarily its ERP system, which was developed decades ago – when they did not have the monopoly power that they do today. Oracle was innovative in databases at least initially, but again that was earlier in their history. Most of their recent activity has simply been buying other software vendors in order to increase their monopoly power. This change in innovation level over time is why at Brightwork Research & Analysis, when we rate a vendor’s innovation; we rate what we refer to as their Current Innovation Level. This is because the current innovation level is a far better predictor of future innovation than past innovation.
With an efficient market, more often than not, customers receive good value for their purchases and don’t have much of a problem finding the best product for their needs. Over the long term, in the absence of regulation markets tend towards monopoly, not towards perfect competition – as is often proposed by those that promote the concepts of free markets. Those entities that propose the markets can tend towards perfect competition or efficiency without regulation very strongly tend to be either monopolists or media outlets that are funded by monopolists.
Making Better Future Decisions
It is important to understand that much of the information necessary to make good software selection decisions in the enterprise software market is hidden from view and made difficult to obtain. In most cases, to obtain this information you must contact each vendor directly, interact with them, and go through their process (which they control). I have painted a rather bleak picture, however, in many ways the future looks better than the past. There are several influential changes that are currently underway that buyers can leverage to improve their chances of obtaining better outcomes. The first of these is using SaaS applications. The CRM software category provides support for the theory that online and hosted applications would naturally lead to a more efficient market for enterprise software. Not only are SaaS solutions more transparent in areas ranging from pricing to the ability of buyers to experience enterprise software first hand, but SaaS solutions have a much lower TCO, go live more quickly, and have much less lock in than on premises solutions. SaaS software vendors must be much more concerned with the satisfaction of their customer base than on premises vendors – and most of them know this. Arena Solutions sells most of their customers their SaaS solution, although they do offer an on premises version. Arena Solutions knows that their success is greatly dependent upon the yearly percentage of their subscribers that continue to subscribe – and their openly state their belief that the SaaS model more tightly aligns the interests of the software vendor with their client’s interests. A second positive feature of the enterprise software market is the rise of crowdsourcing websites that democratize the review and rating of applications. In my book Gartner and the Magic Quadrant: A Guide for Buyers, Vendors, Investors, I was openly skeptical whether a crowdsourcing website could replace Gartner, and for many executive decision makers, I think this is true. However, I have much more faith in the objectivity and validity of the ratings of applications in a site like G2 Crowd than I do in Gartner. Secondly, Gartner covers applications at far to high of a level, and I believe that many other IT analysts make this same mistake – and it is bad for decision making. The most important feature of purchasing any application is not the high-level strategic considerations that tend to be highlighted by Gartner and many other IT analysts – as any application can be made to work with the current applications that are in house. Instead, the most important feature of whether an application is a good fit for a company is whether it meets its business requirements. Gartner and many other IT analysts have gotten away from this truth, and it has lead to poor outcomes for those that have taken this advice.
The good news is that because of these developments, it is quite possible for buyers to make much better decisions than the typical company. One strategy to do this is to stop listening to entities with a financial bias, and the other strategy is to leverage SaaS applications and more democratic forms of application review and rating.
 Please see the SCM Focus Press book Gartner and the Magic Quadrant:
 In fact, economists so rarely comment on technology that it was jarring to find an article on “The Decline of E-Empires” by Paul Krugman, one of the most prominent economists in the US. http://www.scmfocus.com/enterprisesoftwarepolicy/2012/03/11/why-the-largest-enterprise-software-companies-have-no-reason-to-innovate/
 Without regulation of a natural monopoly the monopolist could charge extremely high rates. A perfect example of this scenario was Enron. While the California utilities themselves the energy market in California was deregulated under the Pete Wilson administration. Not surprisingly, Enron and other energy trading firms were instrumental in lobbying to have deregulation passed. Enron’s traders created shortages of power specifically so they could massively increase the price of power. They did this in a state that at the time had a 1/3 more energy generating capacity than they had energy demand. Enron did everything from move power out of the state to call utilities and tell them to make up an excuse to go down for maintenance during peak periods. Enron then charged many times the standard cost of the energy. While a kilowatt-hour may have normally traded for $35 with $40 being a high price, Enron would charge $1000 per kilowatt-hour. This is what happens when an unregulated monopoly is allowed to run wild. It results in price gouging.
 This website can be found at http://www.softwaredecisions.com
 In fact, there are many cases where those responsible for corporate purchases place the seller’s interests ahead of the recipient, such as in cases where the decision maker is being compensated in some shape or form by the seller – compensation can come in many forms – such as seller provided dinners and gifts. Sellers provide these enticements precisely because they move the decision-making away from the actual attributes of the purchased item. This extends from the corporate procurement environment to the government procurement environment (where political donations overwhelmingly control contracts) and to doctors offices, where doctors will in most cases write prescriptions for patented drugs that often have either very similar or identical chemical properties to the patented drug. The pharmaceutical companies compensate the doctor to do this – offer “free samples” of the patented drug to promote the continual purchase and use of the drug. Patients that off patent alternatives, in the US at least, must ask the doctor if it exists, but most patients don’t do this.
 SAP actively reverse engineers software from other software vendors. They actually had a program that as nothing more than an enormous intelligence gather program cloaked as a partnership program. http://www.scmfocus.com/inventoryoptimizationmultiechelon/2010/01/its-time-for-the-sap-xapps-program-to-die/, http://www.scmfocus.com/enterprisesoftwarepolicy/2012/01/27/how-common-is-it-for-sap-to-take-intellectual-property-from-partners/. SAP lost a case to Oracle for downloading enormous amounts of its intellectual property through SAP’s TomorrowNow subsidiary.
 The counterexample of the relationship between monopoly and innovation is that two of the most important private research laboratories of the 20th century were Bell Labs (funded by the AT&T monopoly) and PARC (funded by the Xerox monopoly). But in general, innovation declines as monopoly power increases. Apple has been enormously innovative in its history, actually serving as the R&D entity for the computing industry. Many computer and software companies don’t seem to do much innovation themselves, but simply reverse engineer whatever Apple comes up with. It will be interesting to see if Apple can break the cycle of ceasing to push and innovate as they have gained monopoly power.