Today An Innovator, Tomorrow A Subsidiary?

Maybe they didn't teach this in business schools, but a near-inevitable chain of events happens when large corporations see opportunity in emerging technologies. In some cases, these companies are just too stratified to nimbly react to this potential, and find they are losing the innovation race to agile start-ups.

Maybe they didn't teach this in business schools, but a near-inevitable chain of events happens when large corporations see opportunity in emerging technologies. In some cases, these companies are just too stratified to nimbly react to this potential, and find they are losing the innovation race to agile start-ups. Then, after awhile, upper echelons at these major firms realize they are being the tortoise to the hare. Eventually, the large corporate presences realize the most effective way to get in the game is to acquire the innovative firms.

"Here we go again," I thought to myself when I read excerpts from The Yankee Group's new report: Fighting Goliath: Can Alternative VoIP Providers Survive? I am in full agreement with Consumer Technologies & Services senior analyst Kate Griffin. "While alternative VoIP providers such as Vonage and many of the Vonage-like providers have a first-to-market advantage, their lead will be short-lived, she writes. Griffin adds that at the end of 2003, "small startups," led by Vonage, comprised nearly two-thirds of the local residential VoIP market.

Griffin views this status as a perishable perch that will diminish as cable companies and incumbent local exchange carriers dive in. In fact, she believes that by the end of 2005, alternative VoIP providers will lose 47% of their current market share to the big companies.She's right. The question this poses is, then what do the niche players do? I forsee two scenarios, neither of which are mutually exclusive. The alternatives will either push the innovation curve with specialized applications they can bundle in to VoIP services offered by the majors, or just sell out.I'm not saying that three years from now, Vonage will be a subsidiary of, say,SBC (which already offers services for enterprise users) but I am not prepared to fully dismiss the possibility of similar scenarios.