Wild Horses: Renaissance 2.0 in the Technology Industry

Running-horses

“People who are really serious about software should make their own hardware.” – Alan Kay, 1982

Back in 2011, then-CEO of Google Eric Schmidt was asked which are the most important companies in the Technology business: he named Google, Apple, Amazon, and  Facebook. What do these companies have in common? Each of them dominates their respective corner of the Tech industry: Google clearly dominates Online Advertising and Services, Apple dominates Mobile Devices, Amazon dominates eCommerce and Facebook dominates Social networking.

a) You may have noticed that since those words were spoken, each of those companies has started to nudge into each others’ respective space. Google makes beautiful hardware now. They also do a Social Network. Apple is now a huge Online Gaming and Services company. And Facebook, clearly is chewing more and more of Google’s Ad business up.

b) You may also notice that two very strong companies are missing from that list: Microsoft and Samsung.

“Beleaguered” Microsoft is off the list because they happen to dominate a sector that is very large, but growing less and less attractive with each quarter: the traditional desktop/laptop PC industry.  Yes, they’ve moved into the Search Engine business, and they’re doing their own hardware. Frankly, they do everything now. And their partners don’t know what to think.

And Samsung? Well, they weren’t as dominant in 2011 as they are now. Surely they deserve a seat at the table. But to do so they have to bump Apple off the ‘Mobile Devices’ spot. And they have, outselling (or basically matching) Apple in Mobile devices sold last quarter. The line is that only two companies are making any money in the mobile phone business, Apple and Samsung: Apple gets 75% of industry profits and Samsung gets 25%. So for now, Apple is still the king of Mobile devices, but that could change very quickly.

So what does the industry look like going forward: all of these businesses are going to be fighting over engineers in hardware, software, and cloud services, with advertising pushing down prices wherever the customer will bear it (remember Google makes almost all their money from ads; same with Facebook). They’ll make their own devices, with their own software platforms, and host their own cloud services. And they’ll beg you to jump ship.

And that’s where Alan Kay and the Renaissance Man comes in. For decades Apple was uniquely positioned as the only Renaissance tech company in the world, because they made the “whole widget”. Their kooky ideas on corporate strategy were actually taken from way back in the early IBM days, when specialization was impossible. Apple made the whole widget and was ridiculed for ityear after year. Eventually, the haters couldn’t keep laughing. Apple kept winning. So here we are, in 2013, and every one of these major players is going old-school in full ‘vertical integration’ mode. Thats’ why today’s Facebook Event was so brilliant: Zuckerberg hopes to overthrow the entire Android install base of devices, without hiring a single factory worker.

And what’s at stake? Lock-in. Each of these companies is building a mobile devices and development platform (yes, even Amazon) in the hopes of getting you to buy a few apps, and lock you in to their ecosystem of hardware and services. It happened with Windows, it happened with iTunes Music Store, and it’s happened with the App Store. In the next few years, consumers are going to be forced to pick a platform to host all of their music, photos, apps and games. And just like Microsoft all those years ago, we all benefit when we converge on a single platform–dare I say it–a monopoly. Give Microsoft their due: they were bloody rich, bloody competitive and bloody scary. But they just had a monopoly on a couple markets.

Imagine one company owning the whole damn industry.

 

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