{"id":552247,"date":"2022-08-22T13:39:58","date_gmt":"2022-08-22T13:39:58","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2022\/08\/22\/proprietary-software-is-suppressing-innovation-and-solidifying-large-companies-market-positions\/"},"modified":"2022-08-22T13:39:58","modified_gmt":"2022-08-22T13:39:58","slug":"proprietary-software-is-suppressing-innovation-and-solidifying-large-companies-market-positions","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2022\/08\/22\/proprietary-software-is-suppressing-innovation-and-solidifying-large-companies-market-positions\/","title":{"rendered":"Proprietary software is suppressing innovation and solidifying large companies\u2019 market positions"},"content":{"rendered":"<p><a class=\"content-anchor\" id=\"tldr-story-02\"><\/a> <strong>Is the growing use of software at large companies fueling a slowdown in innovation?<\/strong> That\u2019s the broad hypothesis Boston University School of Law\u2019s Technology and Policy Research Initiative Executive Director James Bessen poses in his book, <a href=\"https:\/\/yalebooks.yale.edu\/book\/9780300255041\/the-new-goliaths\/\" style=\"color: rgb(252, 118, 1);\">The New Goliaths<\/a>: How Corporations Use Software to Dominate Industries, Kill Innovation, and Undermine Regulation. Tech-powered corporate giants (think Amazon, Google, and Facebook) have built and mastered software designed to their operational and business advantage, but these software systems have acted as \u201cmoats against competitors,\u201d Bessen argues, according to the <a href=\"https:\/\/www.nytimes.com\/2022\/07\/21\/business\/software-james-bessen-book.html\" style=\"color: rgb(252, 118, 1);\">New York Times<\/a>.<\/p>\n<p><strong>At the heart of the issue: Proprietary software<\/strong>, which Bessen defines \u201cbroadly as not only code but also the data that companies collect on their customers and operations, the skills of their workers, and the organizational changes they made to exploit the technology,\u201d the Gray Lady writes. Proprietary software, he says, is not just the regular software that most businesses build and employ in their operations. It\u2019s the software that is specifically built to \u201cbetter manage complexity and thus differentiate themselves from rival firms,\u201d making it more difficult for smaller market players or new entrants to unseat one of the heavy hitters in any given industry, Bessen wrote for the <a href=\"https:\/\/www.technologyreview.com\/2022\/02\/17\/1044711\/technology-slowing-innovation-disruption\/\" style=\"color: rgb(252, 118, 1);\">MIT Technology Review<\/a>.<\/p>\n<p><strong>How big is the proprietary software push?<\/strong> In 2016, US firms <a href=\"https:\/\/hbr.org\/2018\/11\/how-software-is-helping-big-companies-dominate\" style=\"color: rgb(252, 118, 1);\">spent around USD 250 bn<\/a> on developing proprietary software, Bessen says, citing government statistics.<\/p>\n<p><strong>More investments in proprietary software = larger market shares:<\/strong> Over the past couple of decades, firms have ramped up their investments in proprietary software, which has been accompanied by a rise in market shares held by the biggest firms in individual industries, according to <a href=\"https:\/\/www.journals.uchicago.edu\/doi\/abs\/10.1086\/708936\" style=\"color: rgb(252, 118, 1);\">research from Bessen<\/a> published in 2020. And that trend means that these businesses are more entrenched in their industries: \u201cIn a given industry, the chance that a high-ranking firm (as measured by sales) will drop out of one of the top four spots within four years has fallen from over 20% to around 10%,\u201d Bessen said in MIT Technology Review.<\/p>\n<p><strong>With the suppression of innovation comes inevitable economic concentration:<\/strong> \u201cTechnology,\u201d Mr. Bessen said, \u201cis playing a different role than it has in the past \u2014 less to disrupt than entrench.\u201d Sectors that are highly digitized and reliant on technology can be a double-edged sword as far as concentration goes, researchers Nicolas Crouzet and Janice Eberly argued in a <a href=\"https:\/\/www.kellogg.northwestern.edu\/faculty\/crouzet\/html\/papers\/Qplus_latest.pdf\" style=\"color: rgb(252, 118, 1);\">2019 paper (pdf)<\/a>. While on the one hand, they can lead to efficient concentration (by eliminating inefficient market players), they can also create barriers to entry for smaller companies that can\u2019t keep up with the entry costs associated with high-tech industries.<\/p>\n<p><strong>Startups \u2014 which are broadly known for \u201cdisrupting\u201d industries with innovative offerings \u2014 can\u2019t keep up with the heavy hitters:<\/strong> \u201cAcross a wide range of industries, dominant firms are employing large-scale information systems to outflank their competitors, including innovative startups,\u201d Bessen wrote.<\/p>\n<p><strong>That\u2019s not to say that technology is the enemy:<\/strong> Bessen caveats that proprietary software isn\u2019t necessarily an all-bad thing and can \u2014 besides improving companies\u2019 bottom lines \u2014 serve important benefits. For one, successful software-enabled companies \u201care more productive than their smaller rivals\u201d and have an average 17% premium on salaries for the same jobs compared to their competitors. Companies that have been able to invest in building proprietary software have <a href=\"https:\/\/www.puttiapps.com\/how-proprietary-software-is-driving-competitive-advantage\/\" style=\"color: rgb(252, 118, 1);\">also reported<\/a> significant improvements in their operational efficiency.<\/p>\n<p><strong>But the answer could simply be to make these proprietary softwares more accessible to the wider industry<\/strong>, Bessen argues. Policymakers could enact reforms or policy changes that \u201cnudge or force\u201d dominant companies to open up their softwares to other players, he suggests. \u201cBanning non-competes would help employees spread their knowledge by moving jobs. Reforming patents, which aren\u2019t always necessary to protect software innovation and are abused by patent trolls to the detriment of nearly everyone, would help, too,\u201d he wrote for the <a href=\"https:\/\/hbr.org\/2018\/11\/how-software-is-helping-big-companies-dominate\" style=\"color: rgb(252, 118, 1);\">Harvard Business Review<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Is the growing use of software at large companies fueling a slowdown in innovation? That\u2019s the broad hypothesis Boston University School of Law\u2019s Technology and Policy Research Initiative Executive Director James Bessen poses in his book, The New Goliaths: How Corporations Use Software to Dominate Industries, Kill Innovation, and Undermine Regulation. Tech-powered corporate giants (think [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":552248,"comment_status":"closed","ping_status":"open","sticky":false,"template":"single-feature.php","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[9595],"tags":[633,123,639,9242],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-552247","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-whats-next-2","tag-enterprisepm","tag-startups","tag-technology","tag-whats-next","wpautop","entry"],"acf":{"mongo_id":"da166bcb-c236-413c-ac02-ccc77310aeda","is_powered_by":true,"story_type":"1","photo_url":"https:\/\/ent.news\/2022\/8\/574.jpg","photo_position":"above","related_issue":[552237],"teaser":"","voice_url":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.1 (Yoast SEO v27.1.1) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Proprietary software is suppressing innovation and solidifying large companies\u2019 market positions - EnterpriseAM Egypt<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterpriseam.com\/egypt\/2022\/08\/22\/proprietary-software-is-suppressing-innovation-and-solidifying-large-companies-market-positions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Proprietary software is suppressing innovation and solidifying large companies\u2019 market positions\" \/>\n<meta property=\"og:description\" content=\"Is the growing use of software at large companies fueling a slowdown in innovation? That\u2019s the broad hypothesis Boston University School of Law\u2019s Technology and Policy Research Initiative Executive Director James Bessen poses in his book, The New Goliaths: How Corporations Use Software to Dominate Industries, Kill Innovation, and Undermine Regulation. 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Infor expressed its interest in investing in Egypt through collaborations with local up-and-coming software companies, Al Borsa says.","rel":"","context":"In &quot;Telecoms + ICT&quot;","block_context":{"text":"Telecoms + ICT","link":"https:\/\/enterpriseam.com\/egypt\/category\/telecoms-ict\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/ent.news\/internal\/536550.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":642966,"url":"https:\/\/enterpriseam.com\/egypt\/2017\/08\/27\/itworx-huawei-team-up-to-provide-mnos-with-software-solutions-for-north-african-market\/","url_meta":{"origin":552247,"position":2},"title":"ITWorx, Huawei team up to provide MNOs with software solutions for North African market","author":"enterpriseam admin","date":"27 August 2017","format":false,"excerpt":"Egyptian software company ITWorx signed an agreement with Huawei that will see them cooperate on providing software solutions to mobile network operators. 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