Quick Thoughts: 5 Weeks of Announcements from Apple, Google and Microsoft


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–          Apple vs. Google vs. Microsoft is the central battle that will drive the next 20 years of TMT.  The road to success for others is to ride the waves created by that battle.

–          The big three have taken turns making splashy announcements that demonstrate the very different strengths each brings to the table.

–          Apple’s defining strength – UI/design – is obvious to investors.  Google’s – distributed data processing – and Microsoft’s – enterprise apps – are harder to appreciate, but no less valuable

–          Strengths define somewhat divergent strategies that will lessen the degree of direct confrontation.  The opportunities are huge and all three companies should be winners


I’ve been writing about the outsized importance of software platforms, and our belief that Apple, Google and Microsoft are in position to co-opt a disproportionate share of the value being siphoned from the rest of the economy by the Internet, for quite a while.  See LINK, LINK and LINK.  Essentially, these platforms have become gatekeepers for users, with the power to integrate their own technology to the exclusion of 3rd parties and guide users to favored 3rd party apps that pay for the privilege.  However, the brewing battle is not as straightforward as it may seem.  The three companies come to the fray with very different company strengths, and, given this, very different strategies.  This has been evident in the series of big announcements made by the companies over the past 5 weeks.

It all started on June 11th at the 2012 WWDC – that’s Apple’s World Wide Developer’s Conference for the non-tech nerds – where Apple took the wraps off of the 6th release of its iOS mobile platform software.  While there was nothing quite as flashy as the previous year, when Siri was introduced to the world, Apple’s homegrown maps application was an obvious shot over the bow of archrival Google, who’s maps had been an integral part of the iPhone since its launch 6 years ago.  Apple also launched an e-document organizing tool called Passbook that hints at a move on e-wallet payments functionality, and improvements to photo sharing and the often maligned Siri.  The hardware portion of the conference was reserved for a new MacBook line up that was welcome but not surprising – the new iPhone will be announced much closer to its expected October arrival.  By all accounts, the nerd herd walked away from the San Francisco Moscone Center well satisfied.

That lasted a week.  On June 18, Microsoft interrupted the WWDC afterglow with a surprise event at Hollywood hipster photography center Milk Studios, introducing its self-designed Windows8 tablet, Surface.  The product was cool enough to hold up to the event glitz, a magnesium clad, metro-interface driven touch screen tablet, with a nifty magnetically attached keyboard cover.  While design-forward, the key to the product is its enterprise heritage – native support for windows applications, including Office365 and a ton of customer customized programs, with the metro interface unifying the product into the line between Windows Phone and the Windows 8 desktop update due in the fall.

The strategy came a full circle with yesterday’s announcement of Office 2013, which will ship installed for free on all WindowsRT tablets, including Surface.   Office 2013 is tied to the cloud, available as a subscription as well as the traditional shrink wrapped box, with documents stored to Microsoft’s SkyDrive service as default and available for sharing and access to other Office 365 capable devices.  It also integrates touch screen gesture controls that fully extend Office into the world of tablets and shutting down a potential backdoor for wannabe productivity suite challengers to the dominant Microsoft franchise.  Office 2013 acknowledges the threat of pure cloud offerings like Google Docs with an offer that may hit short term per user revenues, but that becomes a potent weapon in the battle vs. Apple and Google.

Google’s I/O conference, which kicked off on June 28, made the biggest splash of the three – without even considering the sheer awesomeness of the painstakingly choreographed skydiving stunt that punctuated the keynote address.  Front and center was the Android Jelly Bean release, which brings big speed and smoothness improvements, along with a major search revamp called Google Now.  Google Now adds knowledge of your device use history – where you’ve been, what you’ve looked for – to anticipate your needs before you search, and to deliver much better answers when you do search, with a device-implemented speech recognition/synthesis front end to boot.  The OS revamp got a lot less press than the device announcements, including Google’s first self-designed tablet and the sci-fi Google Glasses introduced by the skydivers, but it probably the biggest deal of all of the first day topics.  Of course, the second day keynote brought Google’s both feet plunge into cloud infrastructure as a service, with its Google’s compute engine.  Here Google’s demo showed a genetics application momentarily using 768,000 server cores to solve a knotty computation.  Unsaid was the fact that no other company on earth even has 768,000 server cores in total, much less, could divert them to the needs of a cloud hosted client on even a momentary basis.

At a glance it would seem that the big three are more or less in the same business of smartphones, tablets and clouds but there are real differences in their strengths and strategies.  Apple’s greatest strengths are design – integrated hardware and software that deliver unmatched user delight – and in supply chain management – driving economies of scale while identifying and capturing component innovation.  The result are the products we all know and love, and an extraordinary manufacturing cost advantage.  In contrast, Google’s greatest strength is its unchallenged leadership in distributed data processing – millions of data cores distributed over many dozens of locations connected by its own fiber network, resilient to failure and blindingly fast, all based on proprietary systems designs that are generations ahead of competitors.  (LINK ) Almost all of Google’s businesses are designed to leverage that extraordinary asset, including its Android platform, which exists to assure as many users as possible have a red carpet entrée into Google’s cloud.  Finally, Microsoft’s greatest strength, and perhaps its greatest burden as well, is its enterprise leadership.  Consumers don’t care all that much about legacy applications or centralized control of an organization, but enterprises do.  In service to its critical customer base, Microsoft has dominance in office productivity software, e-mail, and a vibrant cloud hosting business, along with that massive installed base of PCs that it can nudge toward its portable, cloud-friendly vision of the future.

Seen in reverse, each of the big three has considerable weaknesses as well, largely in the areas where their rivals are the strongest.  Apple has little expertise and has made paltry investment in cloud infrastructure – Siri and iCloud, both of which require integration with real-time online processing, have been notable disappointments.  iTunes, the dominant play in music downloads has remained on the sidelines for music streaming, curious until you consider Apple’s Achilles heel in the cloud.  It has also a longstanding chilly relationship with the enterprise market, which seems poised to become more important.  Meanwhile, Google suffers from the fragmentation of its constellation of affiliates and doesn’t have full control of its own face to consumers.  It is making headway with enterprises, but remains a distant also ran.  Finally, Microsoft is late to the party, lacking the apps, integrated functionality and distribution, particularly to consumers, that the other two have built.

These strengths and weaknesses dictate the strategies that the companies are following.  Apple is tying its user base to a multiple device commitment with clever, value creating integration consistent across its aspirationally branded products.  In this, it may maintain user lock in while it gets its act together on the cloud side of the equation.  Google scrambles to rein in its device partners and gain a consistent user experience, while it emphasizes applications, like Google Now, Maps and media streaming, that can exploit its enormous computing power and ubiquitous presence.  Microsoft tilts its products toward its enterprise stronghold, while building alliances to help extend its brand in the consumer market and fill holes in its user experience.

Who wins?  My answer is all three.

For our full research notes, please visit our published research site.

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