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The Role of Standards

In information technology, a standard is a set of specifications that help enable systems built by different parties to interoperate. In Internet commerce, standards serve two primary functions.

  1. Standards are a way of transferring power from vendors to customers.

    It is generally to the benefit of the vendor to have a proprietary technology base. Proprietary systems can lock in customers by raising extreme switching costs and can reduce vendor costs by removing the necessity of testing against the products of other vendors to ensure standards compliance.

  2. Standards are a way of assembling a complete system from multiple vendors.

    In an early-stage market, it may be that no single company can build the “whole product.” To the extent that the complete system relies on components from others, standards help everyone. Individual vendors build components that comply with appropriate standards, and this permits system integrators to use components from multiple vendors to assemble a complete system.


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