Clay Shirky wrote a great article on what he calls Situated Software:

"Part of the future I believe I'm seeing is a change in the software ecosystem which, for the moment, I'm calling situated software. This is software designed in and for a particular social situation or context. This way of making software is in contrast with what I'll call the Web School (the paradigm I learned to program in), where scalability, generality, and completeness were the key virtues.

[...] Situated software is in the small pieces category, with the following additional characteristic -- it is designed for use by a specific social group, rather than for a generic set of "users". The biggest difference this creates relative to classic web applications is that it becomes easy to build applications to be used by dozens of users, an absurd target population in current design practice. Making form-fit software for a small group of users has typically been the province of banks and research labs -- because of the costs involved, Web School applications have concentrated on getting large-scale audiences. And by privileging the value that comes with scale, Web School applications put other kinds of value, particularly social value, out of reach.

We've been killing conversations about software with "That won't scale" for so long we've forgotten that scaling problems aren't inherently fatal. The N-squared problem is only a problem if N is large, and in social situations, N is usually not large. A reading group works better with 5 members than 15; a seminar works better with 15 than 25, much less 50, and so on.

This in turn gives software form-fit to a particular group a number of desirable characteristics -- it's cheaper and faster to build, has fewer issues of scalability, and likelier uptake by its target users. It also has several obvious downsides, including less likelihood of use outside its original environment, greater brittleness if it is later called on to handle larger groups, and a potentially shorter lifespan.

[...] By relying on existing social fabric, situated software is guaranteed not to work at the scale Web School apps do, but for the same reason, it can work in ways Web School software can't.

[...] Situated software isn't a technological strategy so much as an attitude about closeness of fit between software and its group of users, and a refusal to embrace scale, generality or completeness as unqualified virtues. Seen in this light, the obsession with personalization of Web School software is an apology for the obvious truth -- most web applications are impersonal by design, as they are built for a generic user. Allowing the user to customize the interface of a Web site might make it more useful, but it doesn't make it any more personal than the ATM putting your name on the screen while it spits out your money."