On the other hand, some features of network industries suggest that rivalry between incumbents may not be the sole determinant of innovation or even pricing. For example, incumbents cannot innovate as freely because they must maintain a link with installed base. Changing a program too dramatically will alienate current users. They are thus more susceptible to leap-frog innovation. Also, firms with installed bases do not necessarily depend on rivalry as the sole reason to continue to innovate or keep prices low.
Software programs are like durable goods.
Once they're installed, they can reside on a computer indefinitely, subject to incompatibilities caused by hardware and other system developments. Software companies make money from the installed base by selling upgrades. To get its customers to buy the upgrade, the software firm must convince the customer that the upgrade has something useful beyond what's in the original program. They don't get used up. Moreover, a firm's general reputation for delivering value meaningful upgrades at good prices can be an important factor in persuading a new customer to buy the program in the first instance.