24 April 2006

Apple and Microsoft Competition Conclusions

In the last two posts I've argued why Apple no longer strategically views Microsoft as the key competitor or even a major competitor, and why indeed Microsoft welcomes a strong Apple.

I wanted to wrap up this series of posts with some other observations. If you buy into the arguments I've made about Apple and Microsoft not really competing, then there are other implications of this. For instance, it is clearer what Apple will NOT do. One key area that I'm constantly seeing hypothesised is that Apple will license OS X to other computer manufacturers. Given Vista's delays and paucity of features, lots of manufacturers (say they) would love to sell Mac OS X on their machines. And, I'm sure they might (though I wonder how much they would actively market it). But to think it's simple and profitable for Apple to do so is to misunderstand the difficulties of developing software. There are enough reports of problems of making Mac OS X work on Apple's own computers. Sure, we don't have the BSOD problems of Windows, but can you imagine the sorts of problems of people running Mac OS X on their 3 year old computer with a Brother printer, Lenovo scanner, Logitech webcam etc.? The average user would most likely have many problems - some of which would be down to their own hardware, but some down to lack of drivers, and others down to basically user error. Do we really think most users would be able to install OS X on their computers and be fully functional? What happens when they think Mac OS X has reduced their battery life on their laptop by 50%? Who gets the support calls? And, who gets the blame?

Some people think selling an OS for $150 is like printing $150 bills. Microsoft may have some internal problems, but I'm sure that a vast amount of its time and resources is to ensuring its software remains compatible with the massive installed base of legacy systems sold by the Wintel manufacturers. Apple's luxury is that it controls the hardware that its software runs on. Take away one of those controls and the game is completely different. MS makes 76% margin on its Client OS sales because it has truly awesome scale. Apple will never have that scale in the OS area.

Using the car analogy again I used in the previous post, if BMW really had a great fuel that its cars could use that was lots better, but that its cars were also compatible with the generic fuel too, would they sell the fuel to other car manufacturers? If Apple really believed they could sell 10x as many Mac OS X copies as it can Mac computers AND maintain a seriously healthy margin on such sales, then a strategy of selling Mac OS X to anyone might be a valid one to pursue. As it is, such a strategy would kill Apple as quickly as licensing clones almost did.

An alternative strategy that has been predicted by some (eg John Dvorak) is that Apple would just adopt MS Windows and give up on OS X. But while that accepts the argument that MS and Apple are no longer competitors it makes no sense either. Apple's formula is Hardware + Software = Competitive Advantage. How would it compete with Dell if it didn't have OS X? By great design alone? In my opinion, Apple has always had the best mousetrap. Unfortunately it meant you buying Apple's cheese on their terms. Now, you can still use Apple's mousetrap with Apple's cheese for the best effect, but if you prefer the cheese that you can get anywhere else that everyone else uses, then you can do that too.

So, the war of words will continue on both sides. There's been much comparing of Vista and Tiger/Leopard OSes, and debates about Apple/Quicktime/DRM/iTunes vs Microsoft/WMA formats. But at the strategy level, there is not so much competition as tacit acknowledgement that what is good for one is probably not bad for the other and vice versa. Apple AND Microsoft can both be successful, and indeed the success of one can in fact help the other to succeed in its primary objectives.

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