The Apple v Microsoft piece I wrote generated enough comments for me to want to provide further thoughts. Primarily I’ll confine this to responding to Dale’s posting, but also I’ll add some words to the Apple Hardware v Software discussion.

Responses to Dale’s posting…

DV: I would be interested to know if you want Apple to be successful or Microsoft to lose its dominant position. The latter is fine, but isn’t the former a little dangerous?

RB: Actually Dale, I don’t really have a dog in this fight. I’m just observing a trend which I first spotted about 2 years ago when Apple shares started to respond to the iPod’s success. Most people still haven’t yet latched on to it. I decided Apple was unstoppable when it moved to the Intel chip. I watched something very similar happen in the early 1990s. At first, nobody could see how dominant Microsoft was becoming even when it had a market cap equal to IBM’s with only $3 billion revenue (IBM’s was about $70 billion). Maybe even Lou Gerstner didn’t get it. A year later, speaking to analysts after IBM showed revenue growth of $6 billion, he said “We grew a Microsoft last year”. (No you didn’t.)

Apple is just the latest company in the catbird seat. Right now it’s Apple’s to lose. The rule is that momentum trumps inertia. The irresistible force kicks the butt of the immovable object. Conceptually that’s where we disagreed. And of course, sitting in another closely related catbird seat is Google. It too has momentum but that, in my view, is a different market.

DV: What’s in my mind here is when you look at the closed end-to-end business models based on technology lock-in that Apple has put into place, it appears to me to fly in the face of the general industry move towards more openness – which even MS has had to acknowledge. Out of the frying pan? …

RB: There is a move towards openness in the commercial IT industry to some degree (complex topic). There is no move whatsoever to openness in the consumer electronics industry, which is the industry in which Apple sits (along with Sony, Samsung, Nintendo and half of Microsoft). The situation there is deeply depressing if you love openness and I doubt if it will change any time soon. (Because of the channels to market – i.e. traditional retail, it can only change when the retail channel no longer dominates, I believe). I don’t see Apple is any better than Microsoft as regards openness. Out of the frying pan into the microwave.

DV: My main concern is the business market. Outside of the media sector, Apple is still just a niche OS, even in the US. There are practical and commercial reasons why this cannot change overnight, for the reasons we discussed when we were together (commercial interest of the channel, infrastructure switching costs, software switching costs, skill set switching costs, etc). This is to do with business, risk and service delivery – not technology.

RB: By the way you used the magic word “media”. You are watching media software become dominant in the consumer market. The home computer is a media computer. As regards media, Windows is more of a niche OS than OS X. Ultimately, that’s why Microsoft is losing to Apple, because it’s about media in the home and Microsoft (despite excellent technology in many areas) is being creamed by Apple in the media market – which is rapidly maturing in the US. Europe to follow.

Whether Apple will choose to pursue the business market is yet to become clear. It seems that Steve Jobs neither wants to, nor cares. It doesn’t matter much as far as I can see. Business is less fashion driven than the consumer market, but it is fashion driven anyway. You’ll begin to see companies going to the Mac despite the fact that it makes very little business sense. Watch it happen.

Ultimately, however, – and it may surprise you – I expect the business desktop to be dominated by Linux not OS X or Windows. The dynamic on that has yet to become clear, so it may still take quite a while. Linux may get momentum from the OLPC movement or it may simply be: China plus India plus the developing world equals momentum (neither China nor India wants to be subservient to the US software industry).

No PC vendor has yet dared to get aggressive about Linux (for fear of damaging their relationship with Microsoft), but eventually they will have to. Ultimately it is the only way that they can compete with Apple. Look at the capitalisation figures. Apple is worth nearly as much as HP and will soon be worth twice as much as Dell. Neither HP, nor Dell, nor Lenovo or Acer will be able to compete if they don’t start tinkering with the OS and they’ll not be able to tinker enough with Windows.

Apple has been the bringer of a big change. For a long time the view was that all PCs were the same(ish) because they all ran Windows. Well, differentiation is now the order of the day.

DV: At a personal level, it frightens me that, as a recent iPod convert, I have sacrificed openness for usability. I recently bought a mobile phone for personal use and it happened to have a music facility so I thought I would try it – then I realised none of my Apple centric music would play on it. I fear I might regret the decision to go the Apple route at some point down the line. On this last point, while I am not qualified to talk about the dynamics of the consumer electronics sector, I think we have already created a bit of a latent monster here, so I think we should be careful what we wish for.

RB: As I said, I have no dog in this fight. Anyone who believes that Steve Jobs will be a much better “benevolent technology dictator” than Bill Gates is probably thinking wishfully. But the article I wrote simply asked the question of “When will Apple overtake Microsoft” – I didn’t actually suggest that Apple would replace Microsoft in a like-for-like manner. It doesn’t seem to want to, it can’t and it won’t. At their height Microsoft (and IBM before them) were terribly arrogant – like Apple is now, as far as I can tell. I suspect that swapping Apple for Microsoft, if it were possible, would be like swapping Frankenstein for Dracula. Dracula is smarter and has a more precise user interface.

As for the the hardware v software speculation, Apple is not about to get out of the hardware business. What Apple has done is decommoditise hardware. The trend in the past 15 years has been towards commoditisation and Apple has reversed the trend. Microsoft’s OS business model depended on the willingness of hardware vendors to not want to differentiate in software – and to sell at the lowest price. Commoditisation. That was the model-T phase of the consumer PC market. “You can have any OS you want, as long as it’s Windows.” It’s now slowly coming to an end.

Let me think. Was there room for Nike in the shoe business?