Microsoft has a weird business model, and a fragile one.
Their model is: Get people to need Microsoft software, then sell that software at high prices.
Contrast this with Apple’s model, which is: Get people want your consumer electronics so bad they’ll pay a lot for it, then sell the hardware, software, services and content at high prices.
And finally, Google’s model: Get people use the Internet more by making it awesome and free, and make money when people use the Internet.
All three companies make operating systems for phones, tablets and desktop computers.
But which models will succeed in the future and which will fail?
I think it’s clear that Google’s model is most likely to succeed and Microsoft’s most likely to fail. And Apple will do just fine.
Here’s what’s happening.
The Trouble With Microsoft
Old beliefs die hard. For example, of these three companies, people believe Microsoft is the giant, too-big-to-fail company, Apple the scrappy upstart and Google even more of a scrappy upstart. This is an antiquated view. Let’s clarify their relative positions with some hard facts.
First, Microsoft is the smallest, weakest and poorest company of the three. With a market cap of about 260 billion dollars, Microsoft is a fraction of its former self — its market cap in 1999 reached $616 billion. So Microsoft has failed by more than half.
Google is about $33 billion more valuable than Microsoft. And Apple currently comes in as the world’s most highly valued company at over $450 billion.
Sure, you say. Market cap is merely a function of rapidly fluctuating stock prices determined by a fickle Wall Street.
At least Microsoft still has the dominant operating system. But that’s not true, either. Overall, Google is the biggest OS maker ever. Android has more users than Windows every did or ever will, and it’s still growing fast.
Google and Apple together own more than 92% of the world’s smartphone OS market share, a significantly higher market share than Microsoft ever had with Windows on the desktop.
But wait, you say. Microsoft dominates the business and enterprise markets, which is where the real money is!
Well, not so fast. One of the biggest trends in business and enterprise is the BYOD — bring your own device — market. And when people bring their own device, it’s almost always an Apple or Android device.
And this push by users comes before massive technology and feature pushes friendly to the enterprise coming from Apple starting Tuesday in iOS 7.
Google has and will make similar pushes. Together, Apple and Google will erase Microsoft’s advantages in the enterprise.
The preference for Apple and Google gadgets in the BYOD phenomenon demonstrates that people use Microsoft products only because they have to, or feel they have to. They have to because it’s the “standard.” They have to because their company is on Windows. They have to because their colleagues use Excel and PowerPoint.
Or they want to because they hate Apple and believe Microsoft is the only alternative to Apple on the desktop.
And that’s why Microsoft’s entire business is a house of cards. As soon as people don’t need Windows or Office — and remember that Microsoft’s entire business model is based on need — they will abandon it in huge numbers. And when they do, it will no longer be the required “standard,” and there will no longer be any reason to use Windows or Office.
And that’s why Google’s desktop strategy is so devastating to Microsoft. Their goal is to make nobody need Windows.
Google’s Windows-Killing Strategy, Plan A
In order to understand Google’s desktop Android strategy, it’s helpful to understand Apple’s and Microsoft’s desktop strategies.
Here’s the challenge: The operating system industry is having a tough time moving users from the second generation paradigm to the third.
The first generation was the command line. The second generation was/is the WIMP paradigm (windows, icons, menus and a pointing device). The third generation is multi-touch with physics and gestures.
Thanks first to Apple’s bold push for third-generation computing with the iPhone, followed by Android, the mobile space is totally third-generation.
But the desktop is still stuck in the second generation. How do you get there from here?
Microsoft’s pathetic and failed attempt with Windows 8 was to offer both the old and the new. They chickened out, and decided to default back to the old. Now they’re stuck with WIMP, a computing paradigm that first shipped during the Nixon administration.
Apple’s approach is to offer both the old on OS X (with some conspicuously third-generation features introduced with each new version), and the new with iOS. But what Apple is clearly doing is moving iOS up like the Jeffersons. Soon enough, I believe, they’ll go desktop with iOS. OS X will remain as a “pro” operating system, but iOS Desktop will become Apple’s mainstream desktop platform.
Don’t look now, but that’s Google’s strategy as well. Google has never shipped a second-generation operating system. They’ve made their third-generation OS desktop friendly, and now the OEMs are starting to build desktop Android systems. Big OEMs.
HP recently announced its Slate 21 Android all-in-one, 21-inch screen desktop touch PC.
Acer even more recently announced its Acer DA241HL, a 24-inch all-in-one Android PC.
And there are many others.
Android on the desktop is like Linux, but with apps!
Android on the desktop is like your smartphone and tablet, which you love more than your PC, but for the desktop.
Android on the desktop currently lacks desktop-friendly apps. But that will change. The big picture is that Android today is what Windows should be: A third-generation desktop operating system with plenty of apps.
Plus, it’s free, so Andriod PCs are going to be more affordable than Windows PCs.
Google’s Microsoft-Killing Desktop Strategy, Plan B
Google announced this week something called Chrome Apps, and launched the Windows version (OS X coming later). Chrome Apps sound innocent enough. These apps simply launch from and live in the Chrome browser, and facilitate offline use of cloud-based apps, as well as synchronization with the cloud. They can access a Windows PC’s hardware like Windows apps can.
There are about 50 Chrome Apps already in the Chrome Web store, with thousands more to come in the years ahead. These apps are office suites, productivity apps, picture-editing apps — essentially all the basic things most people do with their computers.
Chrome Web Apps are extremely appealing to businesses of all sizes, as well as schools, non-profit organizations and, really, just everyone who wants both security and simplicity. They don’t have the feature bloat of Microsoft office applications. They don’t get slower and slower with every passing day (in fact they get faster). They eliminate most of the hassles of maintaining PCs.
Yes, the Windows version of Chrome still requires Windows, obviously. But once you or a company are using Chrome Web Apps primarily, the Windows part becomes totally unnecessary. Why not use a free OS? Why not use an Android tablet? The part that Microsoft sells becomes unneeded. And once people don’t need Microsoft, they delete it and use something better (Apple) or cheaper (Google).
In both cases — Google’s Plan A and Plan B — Windows becomes unnecessary. And if Windows is unnecessary, it has no reason to exist.
This is a devastating two-part strategy that should be appreciated for what it is: The end of Windows as the dominant desktop operating systems.