Recently there as been a lot of news and analysis about the relative positions of Google, Microsoft and Apple in the IT industry. In many ways, it appears that the three companies are bitter rivals and locked in a struggle to dominant the future of computing. The question many people are asking is how will this competition play out? Who will ultimately be left standing when the dust settles? Apple has made a pretty spectacular rise lately. The media really grabbed onto the fact that Apple’s market capitalization recently bypassed Microsoft. There has been a lot of gossip about the former rival of Microsoft’s finally beating them. Every new device Apple releases seems to captivate the public at large. But is Apple really beating Microsoft? I would have to say no because Apple isn’t even playing the same game as Microsoft anymore.
Apple: Not a Computer Company
At one time, the rivalry between Apple and Microsoft centered around the desktop computer. While Apple still makes Mac desktops, and they have certainly cut into Microsoft’s market share, Apple really isn’t a computer company anymore. The wild success of the iPod, iPhone and now, iPad have repositioned Apple as a consumer electronics company. Apple spotted the trends towards mobile computing and got there ahead of anyone else.
With iTunes, Apple is also a media distribution company. This is the arena where Apple has the most to lose. So much of Apple’s business is based on the availability of content for their devices that any change in the content distribution model could potentially hurt Apple. Apple has created a very closed ecosystem for its users to acquire media for their devices. And they have almost monopoly power in the marketplace as a distributor of media and content. It seems unlikely that the content publishers themselves will remain happy with the status quo for long. This could create problems for Apple’s business model.
Recent missteps by Apple have also hurt their image somewhat. The recent antenna problem with iPhone 4.0 shows that Apple’s products are just as prone to errors or defects and any other vendor. While this will not affect the opinion of the Apple faithful, it may slow down the adoption of Apple by those seeking to avoid flaws in Microsoft’s products.
Microsoft: Missed Train
Microsoft at one time held a stranglehold on the PC industry. However, security flaws, a series of patent lawsuits and several antitrust actions have all damaged Microsoft’s lead. The greatest damage to Microsoft’s lead however, was caused by not realizing trends early enough to respond. The migration to mobile devices and the rapid growth of the mobile web seemed to completely catch Microsoft off guard. Their mobile strategy has never really been clear and the products that Microsoft has offered in the mobile space have been mediocre.
Microsoft has in many ways relied on their dominance of the desktop PC. Competition from Linux and Apple, have eaten into their market share. Additionally, the way people use computers is changing and with the rapid growth of smartphones, the traditional desktop’s days may be limited.
Fortunately, Microsoft has been able to make strong inroads in the enterprise market. This is one area where Microsoft still has a stronghold. Enterprises still prefer commercially support software and Microsoft has done an excellent job of marketing their server products. The enterprise market is also a highly profitable one while desktop PCs have fallen to near commodity prices. The .NET platform also gives Microsoft a strong grip in the enterprise market. This is a highly competitive market however and Microsoft faces stiff competition from other enterprise companies such as IBM, HP and Oracle. Additionally, open source solutions are quickly gaining more acceptance in the enterprise leading to even greater competition.
Microsoft’s greatest weakness is that it often tried to do everything. This in many ways may be its downfall. Bing has been a joke and it seems that use of Bing is directly tied to how much Microsoft spends. The best choice for Microsoft at this stage would be to concede the fight in those areas where they are performing poorly and focus their energies in the areas where they can still do well. If Microsoft were to do this and to begin to once again truly innovate in the enterprise space, they could easily enjoy a resurgence. Continuing to dabble in many segments with mediocre products, however, will likely lead to their demise.
Google: Advertising is Key
Google began as a search engine for the web. The web has been central to everything that Google does. They have moved into web based applications and are one of the leading companies in the cloud computing revolution. Google has dabbled in some other arenas creating the Android mobile platform, the Chrome browser, and the Chrome OS. But the web ties all of Google’s projects together. Google’s approach to business is somewhat unique as well. They give their services and products away. Some of them have premium versions to which users can subscribe but these subscriptions represent a small fraction of Google’s revenues. Google’s revenue is mostly driven by advertising. By giving away email, search, and various web based applications, Google has created the ability to put ads in front of millions of users every day. They have successfully capitalized on this.
The real question for Google is whether this business model has long term potential. There has been a lot written lately by both web publishers and advertisers about dismal click through rates on Google Ad Words ads. Advertisers are continuously trying to find new ways to get their message across and lately social media has been the hot way to do so. Google has made a number of forays into social media with extremely limited success to date. If Google cannot find new innovative ways of delivering ads or devise a new revenue model, it will be a risk to their long term potential. Google is working to innovate on their existing model however. They recently purchased a company who delivers mobile ads. This shows that Google is aware of how the web is evolving and is attempting to find new ways to develop their existing business model. Whether this will be successful remains to be seen.
Google’s core business has always been search—making sense of the chaos. Fortunately, for Google, making sense of chaos seems to be a much needed skill these days. Our society is so information focused that people are bombarded with information from various sources on a constant basis. This trend suggests that Google’s core competency of indexing and retrieving information will also be in high demand.
So ultimately, who will be left standing? Personally, my money is on Google. They have positioned themselves well and have truly been able to innovate their business time and again. The growth of the volume of information that users must tackle means that the need for search and indexing is unlikely to drop anytime soon. While I’m betting that Google will emerge as the leader, I don’t believe for a moment that Apple will fail or go away. Apple has a great deal of strength as a consumer products company and a media distributor. I doubt that will change anytime soon. I just don’t really view Apple as a computer company any longer.