• Technology
  • The Economist

Profit from Peer-to-Peer

Despite Napster's travails, some fledgling firms are out to sell the idea of peer-to-peer computing to large enterprises. They promise to use the computing architecture to empower workers, unleash their creativity and solve communication problems.

Ironically, one of their bigger advantages is that distributed computing can be made to work with a wide variety of Unix and Windows programs that are available off the shelf, opening the door to far more potential customers. Supercomputers, by contrast, require specialised, custom-made software that can take years to write and cost millions of dollars.

Still, questions remain about whether companies are prepared to trust anonymous computer users around the world who may accidentally or maliciously tamper with their precious data. Not surprisingly, most of the young P2P firms are designing their bread-and-butter applications for enterprises that are large enough to do their distributed processing in-house. Most of the fledgling firms offering distributed supercomputing claim to have eager customers lining up. But analysts question how large this particular market can really become. Indeed, the closure of one start-up, Popular Power, in March, hints at the hardships that lie ahead. However, the distributed-computing folk insist that today’s venture-capital market should not be taken as a measure of their future prospects.

As businesses go, peer-to-peer could not have happened at a worse time. Venture capital has dried up and companies have been less willing to spend on such projects. Despite the recent meltdown in high-tech investment, some $300m has poured into peer-to-peer companies, reckons Larry Cheng, a partner at Battery Ventures, a venture-capital firm based in Wellesley, Massachusetts. The best funded so far have been Groove, which has already garnered $60m; Entropia, which has collected $29m; NextPage, which has received $20m; and United Devices, which has $13m. Apart from these four companies, there is going to be little fresh capital for many of the other peer-to-peer ventures.

Dropping Like Flies

Would that signal the end of commercial P2P? Not necessarily. Even as the first swarm of peer-to-peer companies drop like flies, the know-how will permeate all manner of applications developed for large enterprises by Microsoft, Oracle, Sun Microsystems and others. Those behemoths have worked to emphasise their backing of the technology in recent months. Intel, the first big company to back peer-to-peer, has thrown its weight behind the technology, investing in several start-ups and helping guide the peer-to-peer working group to develop standards. Meanwhile, Microsoft unveiled in April its Project Hailstorm, as part of its software-as-service initiative (“.Net”), which features peer-to-peer services prominently. Not to be outdone, Sun Microsystems unveiled its JXTA (pronounced “Juxta”) set of standards for an open-source P2P platform. Sun also has begun investing in the area — most recently by acquiring Infrasearch for a reported $10m.

But for all the problems associated with the technology and financing, it is the psychology of the modern workplace that will make peer-to-peer a force to be reckoned with. The past decade has seen a dramatic shift in the nature of work. Company boundaries have grown wider, tying customers and suppliers ever closer, and increasing their reliance on temporary workers and consultants, while depending ever more on ad hoc work-groups. According to Daniel Pink, the author of “Free Agent Nation”, such a workplace is increasingly devoid of fixed structures and clearly defined social and professional roles. Peer-to-peer matches the behaviour of modern corporations rather well.

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