Microsoft, Google, Apple, and the Parting of the Ways

The other day, Microsoft apparently wanted to make clear that an iPhone version of Office might be in the works, a logical off-shoot of Web-based versions. That might seem an attempt to stave off concern that smartphone operating systems could siphon away important revenue sources from the giant. But the problem for Microsoft is that we’re seeing a change in the market that has been coming for some time, that is an historic force, and that the company cannot buck or mitigate. The days of Microsoft’s market ubiquitous dominance are coming to an inexorable and irrevocable end.
There are many reasons why Microsoft might try to emphasize the future online availability of Office:
  • Hewlett-Packard, the largest PC manufacturer in the world, has admitted that it is studying potential uses for Android. As some have noted before, Google might want Android to run virtually any device. Of course HP wants to consider it for a netbook. Why divert money to Microsoft for a Windows license if you can satisfy people with a lot less?
  • Apple’s iPhone has shown the power of a viable device that can fit in your pocket. As Greg Sterling puts it on Search Engine Land, a mobile phone is “the most personal piece of technology,” and, as such, is quickly becoming the device of first resort for many.
  • Michael Dell is hinting about acquiring or developing a mobile Internet device or smartphone, which means at least some amount of attention to selling those, possibly instead of selling at least some desktops or laptops.
  • As I’ve pointed out in the past, Microsoft badly depends on revenue from Office. The company cannot afford for people to walk away from the product line, and yet it is reluctant to move things over because the money it can get from a shrinkwrapped version is so much more guaranteed. The assumption on web access is that, over time, the total would be more. But getting all of that money in advance is pretty compelling, from a corporate finance view.

But what seems to be developing is far greater an issue than Microsoft versus Google versus Apple. We’re seeing the beginning of a bifurcation of the market.

It used to be that the PC was a monolithic and versatile machine that also happened to be the only computing answer for most people. If you wanted to write a letter, you used a PC. If you needed to crunch numbers in a spreadsheet, you used a PC. To write a software application, you used a PC. Lay out a page of a document? That’s right, a PC.

Now there is a choice of devices, and people largely fall into two categories. There are the creators of content and the consumers. Certainly there is crossover: all the creators also have to be consumers. But the consumers don’t have to create. That split is actually historic. Movie-goers were not movie producers. Artists painted canvases and the public viewed them in galleries and museums. This is an outshoot of the small-scale capitalistic models that Adam Smith first pondered in the 18th century, because the complexity of life demands specialization. You can’t do everything for yourself, so you work in one area and essentially trade the fruits of your efforts for those from others.

It was only a quirk of economic development that made the PC the ubiquitous device that it is. But the need for specialization is winning out. Companies and consumers are unwilling to keep spending the money necessary for a full-powered PC to provide access to content. That’s why lower-end personal computers have taken off, because most people don’t need more. In fact, with devices like smartphones and netbooks, they don’t even need this degree of computational prowess.

Now the market is splitting into roughly two parts. One is the creative side, where people need power on their desks or laps to create the documents and images and videos and programs and web sites. On the other side are the people who are only interested in seeing and hearing what the first group creates. They don’t need more and will opt for cheaper and more appropriately-designed devices.

That’s where Microsoft gets hit square in the corporate logo. In the office, consider that the company is there to stay for a while. But among consumers? The company’s dominance is over because its products aren’t so necessary. As this split happens, the content creators notice and, being interested in reaching the biggest audiences, they start to make versions of their creations that are well-suited to the new habits and devices. Time goes on, and eventually the alternative versions become the main ones, and finally the PC-centric version largely disappears, because it’s unnecessary.

In this new world, other companies have a far bigger say in the computing industry. Given the boost that Apple has received on the mobile front, as well as its long-standing stature in design, that could meant an even bigger market share for them in business as well as an enormous slice of the consumer landscape. Google also gets a big chunk of consumer attention in smartphones and as a conduit for content.

I’m not saying that Microsoft disappears as a company. Far from it. But it loses the market dominance it had in the past and eventually becomes a smaller and less powerful company.

BY Erik Sherman

Erik Sherman is a freelance writer, author, and photographer. He's been in or written about the technology industry for longer than he'll admit.

Email Erik Sherman or follow him on Twitter.

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