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Thursday, November 03, 2005

Microsoft Scared of Apple?

Microsoft’s current feelings about Apple bring to mind the line the Joker utters in the first BATMAN movie, “Where does he get such wonderful toys?!” As others have asked - is MS scared of Apple? In a financial sense - no. MS still throws off cash like water on a wet dog and in that aspect; MS can go on wasting cash on whatever strikes their fancy. But Apple (and Google) has grabbed the buzz away from them as the innovator of technology and they are desperately trying to wrestle that crown & buzz back ... and failing. Part of it is the bureaucracy but mostly because they are built to sell to corporations, governments and agencies and don't really understand consumers. Selling to that group is relatively easy in a business sense – they announce openly what they want and you know who is making the buying decisions - MS is great at surrounding those decision makers and helping them make their decisions. Consumers confound them. Consumers confound them in more than one aspect. Why? Because we have no real idea of what we want and even if you ask us – we say things we don’t really mean. “Yes, I want low-fat food!” But when it comes to actually buying it? Or “Yes, I’d like to watch TV on my PC,” but when push comes to shove, what it really means is I’ll pay exactly nothing extra for that feature – hence why the PC companies have managed to sell a couple million $599 home media PC machines bit not many at $2,500. And back to point one, because Microsoft has built a business on the MOST selling “features” at the LOWEST PRICE to corporations, governments and agencies – the problem is that set of thinking doesn’t carry over to every purchase consumers make – otherwise we’d all be driving small 4-door sedans or as DELL found out, people do not buy 50” plasma TV screens that way – yes, we do look at features and price, of course but we weigh a couple hundred other factors. How does Microsoft’s culture stifle them? Because they design everything BACKWARDS. You just have to look at their PC Media Center design. They designed a Digital Rights Management (DRM) scheme and went to the studios and record labels for approval and more importantly, asked them if they were willing to pay MS a few pennies/dimes or dollars on each piece of digital media sold (not to mention the MS servers and encoding software they would be buying). Once THEY signed off, MS designed the PC Media Center around that and NOT around the consumer. Apple is the complete opposite. Just as the ipod was not the first on the market, it was easily the most logical. What do you need an mp3 player to do? Be able to load songs easily and be able to navigate through my selections in any many ways as I can think of (by CD, by artist, by genre or by my own playlist). And of course, minor things like volume control, skipping forward/backwards, etc … really, not a radical concept by any measure yet why have ALL the others failed? Because like MS, those companies made a living on selling things on specs (graphic cards, PC’s, etc …) – to them, the most important component of an mp3 player was not the consumer but at what price could they assemble a flash/hard drive, a screen and some chips – the consumer was the LAST thing they thought of. Hence why there are still mp3 players on the market today where the song or album name gets truncated but the encoding rate is in BOLD or one where the battery falls out or where it takes 5 menu levels to “lock” the player so jostling it doesn’t turn it off or where you cannot load two songs with the same name on one playlist … why, because these are mini drives that play music and not the ipod which is a music device that just happens to be a drive base device. That is the key difference. Seems simple but so far has eluded a couple dozen companies other than Apple. And in that sense, MS is scared of Apple because the rules Grandpa Steve Ballmer & Bill Gates taught them NO LONGER applies. “If you have a competitor, you just surround them (extend, embrace and absorb) but on the internet and in today’s’ world, you cannot control manufacturing and distribution anymore. The old rules DO NOT WORK anymore. Look at their strategy for mp3’s – we’ll pay for technology and marketing and as long as you use WMA and our DRM, we’ll help you set up stores around the globe – we’re offering “choice!” but unlike PC’s of 15 years ago, the internet means that MS cannot cut off access as they could before. Clicking to go halfway around the world is just as easy as clicking to go down the street. That’s why MS is scared because outside of the PC business/ government market – they just don’t have the smarts, the tools, the know-how or the culture to compete. Can they change – sure, anything is possible. Will they? Hard to say – while they have thrown many tens of billions at the outside markets, they have failed in everything from watch OSes to car OSes to cell phones to MSN to MSN search to the Media Center and even the Xbox is about $2 billion short of breaking even – and through it all, Windows, Office & the Server division continues to deliver about a BILLION dollars per month into the bank so maybe instead of trying to be Bill Gates at a rave, maybe they should just be Bill Gates at GovernmentTech Expo.

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