Right now, we are watching what I believe is a game changing
power struggle in the technology world as we move to a cloud
computing, platform-independent world. It pits Google (
) and its ubiquitous presence on the Net against Apple (
) and its tentacled reach into sundry platforms both in hardware
and operating systems and Microsoft because of its legacy position
in desktop operating systems. I see the Apple - Android wars as
central to this shift.
It won't be winner take all because the new world will be
platform independent. Instead, the winner will get the lion's share
of the spoils and the losers will have to innovate to keep up.
Where we came from
The technological convergence that many of us who worked in the
tech world during the bubble days a decade ago heard was coming is
finally here. So, let me back this up to the pre-computer world and
run through a bit of history. It's relevant to how the world of
technology, dominated by only two of the five senses, is coming to
take on a disproportionate number of the activities we now perform.
That means, from the standpoint of society-wide capital investment,
this is a very important struggle.
The old world pre-computer was one only of touch, smell and
taste that involved real objects you could also see and hear. When
microprocessors and computing came along, it changed all that.
Forget about touch, smell and taste. Forget about smelling perfumed
letters or feeling old books as you read or tasting dirt if you
fell as you played a game. Many of these activities have moved to
little boxes via e-mail, e-reader or video game. I am talking about
using your eyes and ears to read books or play games or watch
movies or look at pictures, regardless of the place or device you
used. A lot of the activities we used to do that could involve
touch, smell and taste moved to the realm of seeing and hearing
Initially though, this world of computing devices was
un-networked the way that mechanical devices like dishwashers and
cars and turntables was. We had tape decks, touch-tone phones,
cd-players, home computers, camcorders and video recorders, all
standalone devices that didn't 'interact' with each other. This
first technology world was a balkanised space of semi-compatible
technology platforms that people used to communicate, read, listen,
watch and play.
Networking and The Computerizing of Devices
Last decade, as networking capabilities moved out of the
business environment into homes, and as processing speed and
storage capacity allowed computers to be used as the basis for
other devices like TiVo (
) machines, iPods and Smart Phones, devices started to 'talk' to
one another. This meant the much fabled TMT (Technology, Media and
Telecommunications) convergence of computing, telephony, music, and
video had finally arrived. But the PC was always the controlling
element. You got TV tuners and DVD Players in computers, MP3
players that synced with your computer, phones that synced with
your computer, and videos that played off of your computer.
The PC was front and centre, and that gave Microsoft (
) and Intel (
) a dominant role since Wintel machines accounted for some 80-odd
percent of computers.
The Internet Shifts the Balance Away from Wintel
As we move away from the PC-centric model that has been
dominated by the Wintel duopoly for nearly a quarter-century to a
platform-independent Internet-centric model, the main adversaries
in this shift are Microsoft, Google and Apple. What is happening
now is that the Internet allows an unlimited networking of
platform-independent computing devices to interface with each other
limited only by bandwidth, software interface, and hardware
processing power, size and design.
This effectively spells the end of the Wintel duopoly. But it
also introduces the network providers like AT&T (
), Vodafone (
) or T-Mobile as gatekeepers (think net neutrality). And it makes
it critical that operating systems like Windows, Android or iOS can
be ported to a wide spectrum of device formats from phone to tablet
to PC to set top box. Think of your iPhone as a mini-Computer that
you can use for calls, texting, e-mail, video calls, movies, gaming
etc. The same is true about your PC, iPad or set-top box. If you
want to watch a movie, you stream it. If you want to watch or read
news, you can stream that too. If you want to type an e-mail, you
can do it from any device. Same thing for games, texts, pictures
and music. All of this 'content' lives in the Internet cloud or on
your own networked devices and personal storage devices.
Going forward people will want to access 'their' content
anywhere and on any device on any platform and have it work without
a huge amount of technical know how. This is the world we are
moving to. And that means Microsoft has a one-time window to move
from its prior platform dominance into content gatekeeping via a
more ubiquitous operating system or role as content king.
The controlling element in the short-term is bandwidth. Despite
the advent of broadband, we still live in a bandwidth-constrained
world, especially in North America where home broadband speeds lag
behind developed European and Asian economies. That also gives the
legacy telecom providers a limited window of opportunity to extract
rents and expand in scope while they have their gatekeeper
All of the technology companies know this - from the hardware
manufacturers to the Internet Service Providers and telcos to the
software companies and Internet companies. And they are all
re-orienting strategy around this shift (Intel, for example, is
moving into Smartphone chips).
Apple and Google Will Dominate
I really don't think the Telcos or Microsoft will be able to
make the transition without forfeiting their existing monopoly
positions. Moreover, the desire to forestall the movement away from
their legacy control is huge and that will mean organizational
inertia stops them from making the transition deftly. Instead Apple
and Google will rise to prominence.
Monetizing the future computing world is important because a lot
of the kinds of things we used to do (looking for information,
searching for jobs, playing games, reading books) are going online.
There are four ways to profit from this.
You can have the content.
This is the game my prior employer Yahoo! (
) fought against Microsoft and [[AOL]] by building quality
content. App developers for Mobile phone platforms play in this
sphere by creating applications to view content. The problem, of
course, is that the Internet is an open ecosystem and it's very
difficult to build a lasting franchise around extracting rents
from apps and content alone. You can't maintain a paid walled
garden (Good luck New York Times and Rupert Murdoch) because
people will get similar content for free elsewhere. Netflix (
) can do it because there are few competitors. However, outside
of a few examples (online commerce), advertising becomes a big
factor. Gatekeeping becomes crucial then too.
You can gatekeep by controlling network access.
This is what telcos are trying to do, especially in squelching
net neutrality. They want to turn themselves from dumb pipes into
gatekeepers who can extract rents by controlling which
applications and websites are preferred. Quite frankly, I see
this behaviour as anti-competitive. But, in due course, this kind
of behaviour will invite competition and the telcos will find
their monopoly rents diminishing.
You can gatekeep by controlling the operating
. This is where Apple lives and breathes. Google plays this game
via Android as well. For instance, I use Microsoft's Bing as my
search engine on the desktop but on my mobile I am forced to use
Google because of the Android OS on my Nexus One. Apple can
decide which applications to select for its devices and exclude
any apps that reduce their ability to monetize their music and
video content at iTunes.
You can gatekeep the content
. Google has come to prominence by using search as a content
gatekeeper. Rather than building proprietary content, which is
expensive, Google focused on search which is infinitely scalable.
But since a large percentage of internet activity happens through
search rather than people going directly to previously vetted
content, that gives Google a gatekeeper role which they have
monetized via advertising.
I see a future computing world which is networked and platform
independent. And that means gatekeepers of bandwidth and content
will be the winners in that world. Over the short-term Microsoft
and the telcos will play their part in protecting their legacy
franchises in these arenas. But ultimately, people just want to get
their content when- and where- ever they can. And that means the
organizations which dominate the multi-device interfaces of the
future will take on a leading role in technology, perhaps the
leading role. Right now that looks to be a battle between Apple and
Google because the mobile Internet is in an unprecedented early
stage of growth. Mobile phones and mobile devices is where it is
at. Research in Motion (
) still has a chance to play a large role as does Palm (
) given the
) hook-up. But Apple and Google will definitely be central in this
I'll leave it there for now. But in my next technology post I
will outline how I see that battle shaping up. I will concentrate
on the source of Apple's competitive position from the closed
system tying the iPod/iPhone/iPad hardware platform to the iTunes
content platform, the inherent network effects in this tie, and the
premium pricing which drives profit margins. And I will discuss the
Android threat to all of this and Apple's incursion into Google's
In the meantime, here is a very recent presentation on Internet
Trends by Mary Meeker outlining how she sees that market shaping up
Mary Meeker Morgan Stanley Internet Trends
Apple Exceeds Expectations Again