Apple and Google Put the Squeeze on Microsoft

As Apple eats away at Microsoft’s market share on the consumer side of PCs and mobile devices, and Google chips at Microsoft Office’s share in business, Microsoft is caught in the middle and facing a two-front war. The giant in Redmond is already weak in the knees in the enterprise world, where the largest companies on the planet are virtualizing their systems and transitioning to services-oriented architectures. There is very little innovation going on in packaged applications — the new focus is online (with some offline capabilities). This fundamental shift to a service model, which has been going on for quite some time, will get seriously businesslike this year and change the business world over the next few years, putting Microsoft at a disadvantage.

This is no April Fools joke (note however that the article uses Techmeme as its example — so much for trusting only one source!).

Apple’s big gains with the Mac are not as newsworthy as iPhone or iPod stories, but according to analysts quoted by Philip Elmer-DeWitt in Fortune, Apple has about 21% of the consumer market in the U.S. (10% worldwide); its share of the total PC market worldwide grew from 2.4% in 2006 to 2.9% in 2007. About twice as many Macs sell as PCs: after Apple introduced the Intel Macs, Mac sales grew 37% in 2007, more than double the industry-wide rate of 15%. The analysts also found that while most people tend to believe Macs cost 20-30% more than comparable PCs, the actual difference is more like 16% for desktops and 9% for laptops.

Meanwhile, Forrester analysts posited that Microsoft’s bid for Yahoo is partly about fending off Google in the enterprise. Google has moved tentatively into the enterprise software market with a cloud-based model, adding enterprise capabilities to online applications — including the ability to work offline and to sync your library of saved files with your local computer. Productivity and collaboration software in a cloud-based model has clear benefits — it’s potentially much less expensive, easier to manage, and  available anywhere, at any time, on any computer.

Microsoft remains a threat but the company seems to be standing still, getting nibbled at from all sides. Vista stands in the way of true virtualization, but it won’t stop the virtualization of applications, which will sweep the industry and loosen Microsoft’s stronghold on the industry (which is based on tying the operating system to the user through applications). Nor will Microsoft be able to put the breaks on the virtualization of servers and ultimately personal computers, which will be capable of running multiple operating systems if need be. Microsoft will very likely acquire technologies to keep competitive with the emerging software-as-a-service (SaaS) platforms.

Apple will continue to be a source of innovation for truly personal computing, communications, and entertainment. Google and Apple will work together to change mobile computing, and the pair have a big head start on Microsoft/Yahoo. Google will certainly win the battle for advertising with Microsoft/Yahoo in the short term. Both sides will get heavy with acquisitions this year, so innovation may in fact slow down for a time as these mergers settle. But Google has plenty more big plans up its sleeve, and you would have to be extremely optimistic to say that about Microsoft or Yahoo.

The very nature of software applications will change so radically and provide so much choice over the next five years that people will look back on the operating system wars, Windows domination, and the Microsoft monopoly with amusement and nostalgia. Yes of course we will.

In the world of business IT, everything is moving toward on-demand business services. To excel in a competitive market a high level of autonomy is required, including the freedom to select the appropriate supporting IT systems. Services-oriented architecture (SOA) is a corporate means of normalizing the aspects of IT systems to make them more shareable, rewirable, dynamic, and integrated. SOA is converging with Web 2.0 technologies because companies are tired of waiting for a return on their SOA investments and the demand for change is pushing IT to search for new, more effective approaches, especially using the Web. As the intangible concerns with highly federated data and software get surmounted, expect to see the proliferation of just-in-time enterprise mashups and the tools to create them. These solve situational business problems and support dynamic business processes — the biggest potential benefit of merging SOA and Web 2.0.

As a result, it will be less important which kind of personal computer you have, which operating system you use, and indeed, which device you use to access business applications. Mobile devices will embed workers into business processes and collaboration, and mobile applications will explode. Microsoft Office, Outlook, Exchange, and all the rest of it will be obsolete as these mobile applications take hold. You probably are already using software as a service and your budget most likely does not include any packaged applications next year, so your ties to any particular operating system (Windows, OS X, Linux) evaporate.

And there you go. If you haven’t already decided to “get off Microsoft” you probably won’t do so consciously, but it will happen anyway. Even if you buy a Vista PC and run Office. At some point you will be using software as a service — even Outlook as a service — and bit by bit your computing activities will be virtualized: only loosely coupled to whatever operating system or PC you are using, loosely integrated with whatever applications you are using. Microsoft will no longer have a hold on you.

Unless, of course, you like to be held. Good luck with that.

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