Friday, 28 May 2010

Apple, Google, Microsoft: the tipping point is nigh

And so here we are in the middle of 2010 with the mass computing market at another tipping point. Everybody can feel it, the calm before the storm; the only question is, which way is it going to go?

On the day that Apple's "magical and revolutionary" iPad goes on sale in the rest of the world, pity poor Microsoft. After pushing the tablet format (in one incarnation or another) fruitlessly for well over a decade, Microsoft has finally lived to see the market stolen from it with an audacity that we haven't witnessed since, well, they themselves stole it from GO Corp. in the 1990s.

Microsoft now seems curiously inactive. Once trumpeted as the inevitable inheritor of the smartphone operating system mantle, it has become so wrapped up in its failing attempt to take search away from Google that it hasn't even noticed that it's almost completely irrelevant, its mind share zero outside its business stronghold, like an early-90s IBM.

Apple is riding high with, for the moment at least, a larger capitalisation than Microsoft. Apple is cool once more, its products aspirational — and not just to tech dweebs this time but, with the spread of computing power into every area of life, to snobs both young and old, jocks and cheerleaders, pop stars and presidents: cool to the cool. A design company as much as a tech company, and a fashion company as much as a design company, the Apple brand is the King of Cool right now.

I can't help feeling, though, that Apple is making exactly the same mistake, by tying together hardware and software, that it did with its personal computer business. Apple was first among equals in the invention of the personal computer market at the start of the last quarter of the 20th century, and in the late 70s and 80s its Apple II line was certainly the best known and the most successful of all personal computers. With the loudest and most inventive developer community, it was the product that every other product strove to be.

However in the 1990s Apple was no longer content to profit just from sales of hardware. Deciding that it wanted a cut from everything that touched its machines, Apple replaced the open-architecture Apple II with the pretty, pricey, and indubitably closed Macintosh line. Unfortunately, Apple forced its developer community into a technology change just as the Windows-compatible market was taking off. Hardware and software makers accustomed to developing to a well-known spec for a large market and being able to sell their products without anyone's say-so suddenly found themselves developing for a gated, curated platform with puny market share. Their costs soared and their profits collapsed, and the Apple ecosystem ceded ground to cheap-and-cheerful commodity PCs running Windows. As investment in Windows-compatible hardware and software exploded synergistically, Apple fell further and further behind, eventually being almost completely chased out of the market.

And then there's Google. Eager, even cocky, it has felt the electric potential in the air and concluded that there's now the kind of opportunity that only comes along once in a generation. The hand-held (in its broadest sense) platform has been a fragmented mix of offerings. The alpha player, Nokia, is losing ground to a new challenger, and its response looks dated and incoherent. The new challenger though is limited to a single manufacturer, with all the production and innovation bottlenecks that this implies. All the other entries are also-rans. The landscape is ripe for the same kind of consolidation that was achieved on the desktop in the 90s but Microsoft, the natural company to do this, is asleep at the wheel. Bing!, and you're dead.

Of course, even if Microsoft had come up with a must-have handheld OS device manufacturers would still have been wary, given Microsoft's history of sucking the profitability out of hardware via licensing costs (though if it had achieved critical mass it would have undoubtedly have picked them off one by one, with its divide and conquer strategy of old).

A carrier meditating on its product strategy.

Now in a world red in tooth and claw, a world of eagles and of sharks, carriers and handset manufacturers are the puffins. If there's one thing they really want, it's to differentiate their handsets from everybody else's. And if there's one thing that they really dread, it's the costs associated with actually being different. Oh how they quail at the thought of being the owner of a proprietary platform! ("Why, look what happened to Compaq, to Sun, and to p-p-p-Palm!") Odd though, since that's exactly how Apple makes all its money. They must undoubtedly perceive, correctly, that their risk-averse, extremely short-term, MBA-laden, engineering-lite corporate cultures render them completely incapable of the sustained effort required to "do an Apple" with any hope of success, so they substitute product churn, wacky names, and our old favourite, financial "innovation" for true excellence.

So Google spots the gap and brings out Android, its master stroke. Now the carriers and manufacturers can tick one box because it's Google that's paying for the development, not them (and it's not so bad for Google either because Android must be relatively cheap to develop, being based on linux and java). Android is also open source, so that's another couple of boxes that they can tick, this time labelled "Absence of lock-in" and "Low per-unit cost". Finally, thanks to Google's permissive attitude, they can realise their dream of inexpensive product differentiation via extensive customisation. Indeed, some of them customise their handsets so extensively that they are unable to upgrade them to the new versions of the operating system that Google is bringing out seemingly every couple of months. But that's no matter, just release a new handset (with a fabulous new name!) every quarter, and leave the suckers who bought the previous (now obsolete) product to cry into their two-year contracts. Sheesh, maybe "Google" is Lakota for "dances-with-fools".

The point for Google of course, is to avoid the creation of a new Microsoft (especially one that is also the old Microsoft) while relegating Apple to an expensive, upmarket, and hopefully investment-starved niche. Google doesn't have to profit from the unifying operating system per se in order to win, they just have to ensure that nobody else does. Then, by insisting that for an offering to be labelled as "Android" with all the consumer confidence that that instills, the product must use their web services, Google intend to rule, like some deity of old, from the clouds.

Best sentence of the day (so far)

"Yet the surface is where the movie stays, like an old submarine with dead batteries" (the WSJ reviewing Sex and the City 2).

Well, like an old something with dead batteries, anyway.

Thursday, 20 May 2010

Google open-sources VP8, Flash will play it

See webmonkey and The Register for details.

The open sourcing aspect was long expected, but by tying in Adobe Google seems to me to have made a typically smart end-run around Apple (and Microsoft, but it's really Apple whose face we're loving to punch, isn't it guys?).

So Google will update YouTube and suddenly half the video on the web will be in the VP8 format, and Adobe will update Flash and suddenly 90% of all browsers will be able to view it. Since it's all open source, the rest of the web will follow in dribs and drabs.

Who then will need H.264? Only Apple and its walled garden of iPhones, iPads and iDontPlayVP8s I guess. That garden's looking a little droopier than it did a moment ago, and Apple could even end up having to pay publishers to supply content in H.264, ouch!

Monday, 17 May 2010

Famous delusions of grandeur

Angela Merkel: "[It's] a battle of the politicians against the markets ... I am determined to win."

King Canute: "Sea, I command you to come no further! Waves, stop your rolling! Surf, stop your pounding! Do not dare touch my feet!"

Saturday, 8 May 2010

Gordon Brown - a modest proposal

I see Gordon Brown is still causing trouble for the country, this time by squatting in number 10 and refusing to go.

If he needs a hint then we could ask Her Majesty to send in the yeomen from the Tower of London to winkle him out with their pikes. In fact if they then took him to the tower and put him in the stocks, I for one would pay good money to throw ordure at him. It could be his little contribution to help pay off the national debt that he did so much to increase.

How we used to laugh when we heard him, as Tony Blair's chancellor, talking about "prudent" "investment" over the business cycle. We knew it would all end in tears, and now it has.