You Can’t Call ‘Time Out’ In Silicon Valley

By Rob Enderle

As Apple steamrolls both Microsoft and Google in the tablet market, both companies are learning the hard way that the rules of war don’t say anything about waiting or penny pinching.

One of the lessons we are seeing play out between the iPad and every other tablet on the market is that you bring to the battle the weapons that you have. I can’t imagine a fight where one army takes the field and the opposing general walks out and says, “Hey guys, we aren’t ready yet, we’ll be back in a year or so with better weapons and kick your butts then, I promise!” Oh wait, I can think of two and involving France and Microsoft (we’ll get to that shortly). I have seen battles where armies have been more focused on cost than execution, and that’s how a bunch of savages beat the crap out of the British Army and how Google is beating itself. You would think that folks with titles would know you can’t starve an army or call a time out, yet against the iPad Microsoft seems to be doing the latter, and Google the former, while Apple is laughing all the way to the bank.

Microsoft vs. Apple

 

When Apple announced the iPad, it declared war on the PC. Actually that isn’t entirely accurate, it initially declared war on the PC with the Mac vs. PC commercials several years back. However the iPad brought the battle to Microsoft in a sustainable fashion, because it almost immediately took 5-percent market share and cost Microsoft’s CEO half of his bonus. In any book, that is a decisive victory, and if we were talking a real war, the side attacked either mobilizes the army or gets its butt kicked. Microsoft basically said, “Oh crap, we’d better start building a response and in a couple of years we’ll have one with Windows 8!”

This was kind of what happened when Mozilla challenged Internet Explorer 6 with Firefox. In the meantime, Microsoft went from around 90-percent market share to around 50-percent market share, depending on metric.

The closest thing in war I can think of (someone else may have a better example) was the Maginot Line in the Second World War. The French tried to build an impenetrable line of forts, but the line was worthless in its incomplete state. It seemed as if the French thought the Germans would wait for them to finish, they didn’t, and Germany marched around the incomplete line of forts and took France. Rather than being omnipotent, the forts were worthless.

Now, recall that when Steve Jobs took over Apple, Apple’s products weren’t competitive, and the firm was almost bankrupt. Steve had been public about the Apple products at the time being crap prior to his return. He could have pulled everything from market or done nothing until he was able to get the hardware moved over to Intel years later, or OS X out the door. The outcome would have been no more Apple. Instead he marketed the hell out of what he did have. He found advantages in each offering, and while the company continued to struggle, it didn’t go under, and provided a foundation for the iPod which returned the company to profitability and success. In short, Jobs fought with the weapons he had, and that was enough to save the company. When he did get better weapons, he kicked some ass. But it does you no good to have better weapons if you’ve already lost.

Microsoft could finish and field Origami on tablets more quickly, or scale Windows Phone 7 up like Google initially did with Android to provide an interim alternative, and then market the result on advantages like full Flash support, better security, and better compatibility with more traditional applications. But, by not doing this, the battle may be over before Microsoft can field its alternative, as the iPad is now being integrated as standard in consumer electronics.

Now let’s look at Google.

Google vs. Apple

 

The news this week is that Motorola is thinking of building an OS and abandoning Android. Several other vendors are considering similar moves, and HP was the first to act on this problem when it bought Palm to avoid Android.

Those of us in the analyst community have been hearing an increasing number of complaints from those that build Android devices, and those that provide technology for them. The complaints come down to Google being unpredictable, unavailable, unresponsive, with the biggest complaint being that the related efforts aren’t profitable for anyone but Google. Even the application developers, with one exception, are saying they are losing money with Google, but not with Apple. Google’s soon to be ex-CEO Eric Schmidt seemed incredibly pleased that his Android group was profitable, but given this information, this is false profit. Google appears to be starving Android into obsolescence.

My favorite war story that exemplifies this problem is when the British Army, the best-equipped and most powerful army for the time, took on the Zulu nation in 1879 (they even made a decent movie of this battle). It seems that they were concerned about costs, and so they put in place controls that required forms to be filled out to get ammunition, then packaged that ammunition in tins similar to those that were used for sardines in order to keep the gunpowder dry. To open the cans, you needed a special key, and then you had to unwind the air-tight container slowly, or the key would break off and you couldn’t open the container.

Now imagine thousands of British soldiers being attacked by tens of thousands of pissed-off, screaming natives with spears, having to fill out forms to get ammunition, which then had to be opened by the single key the battalion pursers had, slowly and carefully. The British force was wiped out, and you’d likely not be surprised to find the pursers were found to have been generally shot by their own people, and a lot of broken containers.

Steve Jobs is known to be frugal, and he is a true pain to negotiate with, but Apple outspends the industry on marketing, and he not only goes after the best people, he makes sure they have the resources they need to get the job done. Frugal is not cheap, and Apple launches for critical products are well-staged, the audiences are stacked, products well-seeded, and the seeding programs well supported. When Apple underfunds, as they did with Apple TV, you see a sharp difference, and the product doesn’t do as well.

If Android loses, it won’t be because of Apple, it will be because Google starved it to death, Apple will just be the biggest beneficiary.

Wrapping Up

 

The two lessons here are that when in a fight, you fight with the weapons you have. There is no “time out” while you get ready, and you make sure your troops are adequately equipped. We are watching this play out between Microsoft, Google and Apple – Apple learned these lessons, and Microsoft and Google appear to be learning them in the most expensive way possible; through experience.