One of the major trends that people are talking about at the moment is services working of services working on services. When people generally talk about this, the most common example is an app working on a twitter app (like Friendfeed or Tweetdeck), working on Twitter or some equivalent. Fred Wilson of Union Square Ventures recently talked about this on a video on his blog (and as an investor in Twitter this is exactly how he thinks about it).

This is, however, part of a very real trend that will change the way start-ups offering services via the web will work. I can see it having both positive and negative implications for entrepreneurs.

This shift has been coming for a while. It really started when facebook opened up their app store. Apple took it to another level by actually offering apps that people might want and pay for. As Twitter has gone main stream it has taken it to a new level by guarding only the thinnest of layers of what they do and allowing innovation and monetisation to flourish in companies working on their unmonetised platform. We will soon see much larger and more established service providers opening up their platforms through APIs to encourage innovation on them. Think Google, Amazon, Skype, Paypal. I can see all of them making their services available in a much more open way.

What does this mean for the entrepreneur? Well, on the one hand, it is awesome. It means you can do more and innovate more and do it all more quickly. It means less investment and less repetition of innovation. On the other hand it makes it much harder to claim significant value. Historically any given proposition or service was dominated by one company. Soon, it could well be 4 -6 players all offering equally important elements of that proposition. The financial opportunity is therefore split 4-6 ways (almost inevitably inequitably). This is OK if every one’s invested less. It just makes it far harder to strike it big off one idea. Instead, start-up land could well become dominated by tech/app shops investing small amounts of money on small innovations and looking for a constant stream of small wins.

Certainly no start-up looking to launch a new service proposition through the internet should be looking to do it all themselves any more.

Photo courtesy of Flickr: amboo who?