Understanding the role of network externalities in software systems: a case study on Microsoft Word 97

Network externalities are the effects on the value of a product that can be ascribed to the presence of a network of users of such product. They play an essential role in the business success of any product. The authors think that such role is even larger in the software industry, where (a) documentation and effective training often lack, and (b) consumers regard as major benefits interoperability and compatibility, because of the ever increasing need to share information and re-process it over and over again with different tools. However, only few studies exist on this topic. Network externalities are caused by choices operated at different level of the design of a product: data format, GUI metaphors, keyboard sequences, API, and so on. Understanding and planning their presence in a product is difficult. However, the ability of manipulating them properly provides a clear competitive advantage. This paper reviews briefly the literature on network externalities, outlines a graphic notation to represent them, and applies such notation to describe an exemplar case, that of Microsoft Word 97. The study of the network externalities of Microsoft Word 97 evidences the several different kinds of externalities present in it. The authors focus their considerations on the data format, the API, and the human-computer interaction paradigm.