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Understanding Competitive Barriers: Intellectual Property

It is important to understand how suppliers can gain sustainable
competitive advantages. IT professionals need to know this so they can
better understand how to assess the companies they do business with, and suppliers need to understand this to know where
they stand in the market. Any businesses' goal
is to gain a competitive advantage that is defendable. To do this, they
need to build barriers. For the technology company, those barriers are
the intellectual property that makes up the product, the logistics that
creates or delivers the product and the customers that use the product.

The goal of these barriers is to make it more difficult for the
competition to unseat these companies from the market leadership
position that they have attained. The ideal scenario being that the
barriers are so great that few companies even bother to enter the
market. It is easy to beat the competition if they never show up.

A good example of a company executing along these lines is Intel. While
someone may have done the design work to
create a better processor, who would? How could they possibly develop
the logistical capabilities to create it? You just don't snap your
fingers and create a new FAB. Even if you could build a new FAB, how
would you come up with a way to unseat the millions of users that count
on Intel CPUs? I'm not saying that it will never happen, but it is going
to be very hard to do, and as the PowerPC guys determined, there are
probably other more profitable areas of the market.

Of the competitive barriers intellectual property is potentially the
least defendable of the three. As I indicated in my recent blog about legal actions in the storage industry, lawsuits can defend a
position for a time, but eventually someone will figure out a way to
reverse-engineer your product's technical capabilities in a way that it
will pass the legal test. While a company will want to defend its
intellectual property as best it can, it also wants to be realistic and
understand that any technical advantage that the company may have is
fleeting. Intellectual property is a game of leap frog, you have to be
aggressively advancing the state of the art while perfecting last year's

One of the key differentiators is how solid of a foundation did
the technology company establish to play in the game of technological
leap frog? We see this in storage as more mature companies try to catch
up by implementing thin provisioning or clustered storage on legacy
systems. In some cases, it is implemented quite smoothly, in other cases
it is a incoherent set of bolt-ons. This is important for users to try
to assess when selecting a vendor. How well has the legacy system
adapted to new ideas? It is a great indicator of how well it will adapt
to future ideas.

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