Dick Brass: Why Microsoft is 'failing' – Apple 2.0 – Fortune …

MSFT and Apple are just two very different companies. MSFT grew to its current size by offering a commoditized platform (Windows and Office) that could go on any hardware. they don’t get enough credit for their business savvy. they realized early on that people will flock to the comfort of what they know. Businesses purchased PCs by the millions, largely because they could pit the PC makers against each other in the bidding process – there is no appreciable difference between Dell and HP hardware as long as they are running the same software. Once entrenched, people were willing to repeatedly purchase the same mediocre devices out of familiarity. nobody cares if there is a “better” productivity suite than Office, or even if there is a cheaper one. by the time the typical consumer has learned a product, they don’t even want to see incremental updates (see Facebook as an example – every 6 months users are whining about unnecessary change). Businesses know that retraining is expensive, and home users don’t want to waste time learning something they already know. MSFT has little incentive to innovate, except to maintain share. There are few software product classes that can make as much money as OS and productivity suites. It is not surprising that Google and Facebook have crept up to steal mindshare and user-hours from MSFT because both are led by strong entrepreneurs with no intention of selling or licensing their technologies. also, both are “free,” making their money from advertising and add-ons. why would MSFT deliberately cannibalize existing revenue to chase possible future streams?

Apple meanwhile has been building on its very steady OS and tightly controlled hardware for years. their market share was low, but the margin was high. this is because Apple has always been the polar opposite of MSFT; they are not at all commoditized. for years, they languished as software developers went to the easy money (95% market share) of Windows. Then, two catalysts pushed things in their favor. first, the internet. While the WWW has been around for probably 15 years for most of us, it has only dominated our lives for the last 5-8. The internet is generally the same experience, regardless of computer – it is OS agnostic. as more of our time has revolved around the browser, developers have shifted their focus on the new easy money (100% market share) of a universal internet. The second catalyst was the iPod. Apple came along with the first mp3 player worth owning, and came to dominate an industry in the same way Windows dominates. Then they built on this success with the iPhone, and revolutionized the smart phone category. These two hugely successful products, combined with the growth of the WWW, gave buyers a reason to look again at Mac. The concept of products that “just work” has obvious appeal, and consumers are flocking to the Mac in droves.

Because Apple has a closed ecosystem, they control the user experience in a way that MSFT cannot. Users may lose out on the newest games, or may miss out on Flash support and memory expansion. however, they know that there is no blue screen of death and no viruses. as Apple market share grows and HTML5 comes into its own, Apple will have almost all of the benefits with none of the detriments of MSFT PCs.

Because MSFT has never really been a device maker, they don’t have the experience in building great, unique products that excite buyers. Again, their business is based on commoditizing technology. I would argue that they have let down their hardware partners on mobile more than on PCs. how did the big PC guys miss out on both mp3 players and smartphones as the next frontier? MSFT to provide the platform for growth, and in retrospect the market shift to mobile devices seems to have been predictable. Apple and RIMM own the market with proprietary devices, but Google has swept in faster than MSFT to make the 3rd party platform of choice. by the time Windows Mobile comes back out, users and handset makers will have already made their decision.

I agree that this is the beginning of a very slow death for MSFT, but think that they will continue to rake in cash for several more years before the end is apparent.

Dick Brass: Why Microsoft is 'failing' – Apple 2.0 – Fortune …


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