Translate My Page

Sunday, July 15, 2012

Why Google and Microsoft want to be Apple-fied

It's clear as retina display. Microsoft and Google want to do an Apple. The time for bluster, arguments and experiments has passed. The situation has turned desperate in the iPad, er, tablet market. All the 'transformers' 'galaxies' and 'playbooks' haven't humbled the iPad. Worse, research firm IDC forecasts that by 2016, iPad and iPad-Mini (moniker for rumoured 7-inch version) will still control over 60% of the market. If you can't beat Apple's game, what do you do?

Play by its rules and share the spoils. Don't just code, weld. Microsoft went all the way, Google found a Taiwanese partner, Asus, to chip in. Two companies which swore by "open systems" took the first step towards controlling the entire user experience.

Of course, neither admits to the strategy change. Carefully worded scripts say the same blah-blah: adapting to market and giving consumers something they hadn't seen before.

Like the two weren't going green in their gills with Apple envy. Or weren't worried that a whiz-bang for Apple was vending out pennies for them. What if the Cupertino guys thought of "one more thing" before they got a chance to understand the slate market?

From this perspective, the hardware route wasn't a choice for Google and Microsoft. It was a compulsion, not just because of Apple but demons in their backyards.

Survival Issues

Google's operating system (OS), Android, is all over the place. The big complaint: most devices don't do justice to the tablet version of the OS. As a result, smartphone apps perform poorly and dilute user experience on the tablet.

For Microsoft, the problem is more existential. The tablet and smartphone markets are growing at the expense of laptops and PCs. Tech advisory firm Gartner predicts that by 2016 tablet sales will total a whopping 665 million units. Microsoft is staring at a shrinking source of bread-and-butter revenue.

Yet, it remains a laggard in the smartphone/tablet market. Latecomer Windows Phone 7 hasn't been able to lift the fortunes of Nokia or Microsoft. Nokia's Windows 8 tablet was due this summer but has been delayed.

Microsoft couldn't afford the wait. It needed a product bang. So it imported the only strategy that has proven successful in the market — hardware plus software. But imitating a business model doesn't guarantee that Surface will make money. Look at Kindle Fire.

Math Behind Hardware

Google earns nothing from Android as the OS comes without licence fee. Last year, it even gave up its share of glory when Kindle Fire pipped Samsung, Asus, etc, to become the world's second largest, and Android's highest-selling tablet-cum-e-book reader between October and December 2011.

But Amazon doesn't make money out of Kindle Fire. In fact, some say it suffers a net loss to sell at $199. Yet Google wants to snuff out Amazon Fire. For the Nexus 7 may be a long-term bet against iPad Mini, but immediately, it bulldozes Kindle's territory. Same price — $199 — similar looks, more features.

Even if Nexus doesn't generate profit, it will give Google something important: control. The dirty word of the open-source loving tech world is now sacrosanct. Google sent out a clear message when it bought Motorola Mobility in August 2011. Now with the co-branded tablet, the first with its Jelly Bean OS, it has dug deeper, changing the character of the search-engine company.

The best part: latest analysis shows Nexus 7 can deliver 25-35% profit despite the low price. According to iSuppli, a research firm, the bill of materials for the $199 product is about $150 that leaves Google and Asus with a neat margin.

What about Surface? Much of Microsoft's tablet is mysterious: the shipping date, price point, even the usability of the keyboard in the cover. Who can say anything about profitability? But if Surface RT comes at $599 and Pro at about $1,000, it will be shameful if Microsoft doesn't make money.

Cracking The Code

Profit in the books, better user experience and a killer advantage: competitive price. Are Google and Microsoft about to topple the Apple-cart? IDC's prediction of iPad's 60% market share in 2016 doesn't suggest so. But you could argue that forecasts don't accurately factor in technology innovations.

Microsoft and Google can never be fully closed ecosystems. Windows earns because it is shared widely. Gartner says Windows 7 powers 42% PCs worldwide. With over 1 million activations a day, Android has spread too wide to be pulled back.

Though the two companies now have control over some hardware to show off their OS, they will inadvertently encourage competition from partner hardware makers. Already, Microsoft CEO Steve Ballmer's statement that its partners will have to buy Surface from their retail stores or website (like Apple) is causing heart burn.

So even if the June tablets become hits, sustaining product differentiation among frenemies will be tough. Moreover, neither company is actively boosting its app stores. Microsoft's plans for Windows 8 tablet apps are, again, mysterious. Google doesn't admit Google Play can do with some innovation.

Microsoft and Google are finally following the Steve Jobs success formula: imitation. Steve Jobs wanted to make the "whole widget" all the time. These two can't go all the way. Say welcome to open-closed ecosystems.

Why Google and Microsoft want to be Apple-fied


Share My Posts! :)

No comments:

Post a Comment