All Things Digital ("ATD") is a rather good website for commentary on technology and the business of technology. It features two Wall Street Journal standouts, Walt Mossberg, who authors the WSJ Personal Technology column/blog, and Kara Swisher, who does the same for BoomTown. A few years back, ATD decided to host a conference about, well ... all things digital. In early June, this year's conference, D8 rolled around and the opening night featured an expansive Mossberg/Swisher interview of a modern day Lazarus of sorts, Steve Jobs.
In case you have been out of touch, Steve Jobs is legend. Having co-founded Apple somewhere around the dawn of the personal computer age, Jobs helped steer the company to be one of the only true alternatives to the hegemony of Bill Gates' Microsoft. He left Apple for a while, and then returned when Apple seemed to be foundering. During this return engagement, Jobs has reshaped Apple and the world of computing yet again, revitalizing Apple's core line of computers, both desktops and laptops, and revolutionizing a somewhat definition-less space loosely called personal computing devices. A few years back, personal computing devices amounted to not much more than a few smart-phones that were struggling to become smarter and more integrated through wireless connection to the Internet.
Jobs did a flanking maneuver with a personal music player called the iPod. He built an online store called iTunes and started selling music to fill iPods. The industry took this as a noble little gesture befitting of Apple's technology wizardry: a sleek little device to entertain us, but hardly a big threat. Still, people seemed to like this idea and started buying iPods, filling them with their own music and downloading songs from iTunes. Soon other things came along, like a new thing called a "podcast" and videos. Othe companies brought out generic MP3 players. Microsoft thought that it could compete in this market and launched a player of its own, Zune.
The first iPods were relatively primitive. (I know, because I still have a second generation Mini, which but for the lack of any battery life, still works.) By the time that Zune arrived, however, Apple had newer versions of the iPod that were better and fancier and started to do more things, like play video that could be downloaded from iTunes. The first generation Zune never had a chance. Nowadays, I am told that there is an outstanding new generation Zune that outperforms the iPod in a number of areas. Unfortunately, not many people care. Apple's iPod dominates.
This pattern bears watching, because Apple repeats it. Jobs admits that Apple needed to make much more strategic choices. Apple is a hardware company that does particularly innovative things with the software it develops for that hardware. Its computers remain a much smaller part to the market compared to the legion of computers that run Microsoft's Windows operating system. What Apple does is look for openings in the market where it can excel and innovate. It has succeeded and, in doing so, has moved the market toward Apple.
Apple brought out the iPhone to take on other smart-phones that were having trouble figuring out how to integrate their functionally with the Internet. Several generations of iPhones down the line, Apple dominates the creative side of this space, with the rest of the industry still trying to keep up. It has made this market interesting enough to draw Google into the operating system competition. Microsoft recently released a new version of its mobile phone operating system, again trying to catch up in this competition.
Apple also brought out an iPod called the "Touch" or "iTouch" that connected to the Internet via WiFi. Built with many features in common with the iPhone, the iTouch started to capture the attention of younger users who wanted mobile access to the Internet for emailing and social networking, but did not necessarily want to get an iPhone (just yet).
Finally, Jobs unveiled the iPad this year. The iPad is a tablet computer that appears to be redefining the non-desktop computer sector. Of course, we still have laptop computers, which thanks to Apple's leadership again, are getting small and lighter, but are capable of providing full-function computing on a par with a desktop computer. We also have "netbooks", devices that are smaller than a laptop, which connect to the Internet and provide some computing capability, but lack the memory and other features of laptops. Finally, we have e-readers for electronic books, such as Kindle, Nook, etc.
Building off the iPod, the iPad is a uniquely different computing device. Through it, Apple definitely has designs on furthering its emergence as a media company. Apple is making a play for the market held by e-readers like the Kindle. The iPad also is designed to build on the iTouch and provide more utility as an access point to the web. The competition has followed Apple's lead by announcing its own tablet computers.
Through all this, Microsoft largely has been missing in action. It failed to mount any meaningful competition to the iPod. It has meandered around in the cell-phone operating systems wars without much distinction. Google's Droid operating system is a more formidable challenge to the iPhone.
Apple recently surpassed Microsoft in market capitalization. And, Jobs dodged the grim reaper in his bout with liver disease. So, getting him to sit down and talk on opening night of D8 was huge.
There are significant problems in the forgoing success story, some of which are attributable to Jobs' insistence on doing things the "right" way (his way?). First, the iPhone has only been available on the ATT network, which, for all its technical synergy with the iPhone, is universally viewed as a lousy network. Apple will now be selling a lot more iPhones, as the rumors that the iPhone will be available on Verizon next year appear to be confirmed.
Second, and more problematic, Jobs could not get satisfaction out of Adobe over weaknesses in its Flash Player, so neither the iTouch, iPhone or the iPad run Flash Player. As Flash Player is integral to the operation of many website audio/visual clips, particularly on Google's YouTube, Apple has wonderful devices to reach the Internet, but spotty content once you get there. No word at this writing on how this standoff will end, but Jobs is asked about it in the interview.
Finally, the newest iPhone model, iPhone4 received bruising criticism for reception problems related to the device itself (not ATT's network). The New York Times reported that Consumer Reports would not recommending the iPhone4 because of a flaw with its antenna. The furor dragged down Apple's stock price for a while, but seem to have blown over.
With apologies for the long lead above if you already knew all this stuff, what I want to discuss are comments by Jobs at D8 on the future of the computer and a response from Microsoft CEO Steve Ballmer on the last morning of D8. Let's clarify terminology first. The term "PC"seems to be a bit of a sore spot between Jobs and Ballmer. My take on these interviews is that Jobs uses the term to refer to full size desktop computers generally and to some extent fully functional laptops (with hard drive memory and CD/DVD capabilities). At one point he says as much to Walt Mossberg, describing himself and Walt "as people from the PC world" and saying that "PCs have taken people like us a long way". Ballmer seems to respond as if he interpreted the remarks to apply strictly "PCs", i.e. -- computers running Microsoft Windows (or the next OS from Microsoft, which may not be called Windows anything).
Remember that Apple is a hardware manufacturer. Microsoft is a software company. Except for the Xbox game system, Microsoft has not really succeeded in developing any significant hardware business; it makes its money on operating systems that are installed in the vast majority of full scale desktop and laptop computers. So, Ballmer may simply be defensive about Microsoft losing market share, but he comes off sounding like the PC half of those famous Apple Mac-PC ads. (Ballmer is certainly defensive about a lot of things these days; listen to his comments about Google and Android and Chrome. Here is a mash-up putting the Jobs and Ballmer comments side by side in a point-counter point debate.)
Jobs essentially made an analogy that the full scale desktop computer is like a truck: it has great utility and will continue to have great utility to accomplish the jobs for which we need a full scale computer. (And, like trucks, there will be some people "driving" a full scale computer when they do not really need one.) Jobs thinks, however, that we have already entered an era where typical computing needs can be handled by small devices, that there is a paradigm shift under way.
Ballmer made some jokes about "Mac trucks" and offered some backward-looking platitudes about Windows PCs being "mass popularizers", but ultimately conceded that there will be smaller devices that serve different functions. Jobs, of course, does not say that the iPad is going make the PC obsolete (at least not any time soon), but that new order is coming.
Microsoft is really besieged on several sides by the forces of change. Google (which Ballmer called a "behemoth", as if Microsoft is somehow the new David to Google's Goliath) is focused on more and more functionally occurring online, with the need for resident operating systems and programs in our personal computers becoming less important.
My take on this is that Ballmer's smugness hides an unease about Microsoft's ability to adapt. With the desktop computers beginning to wane and Microsoft missing in action on most other fronts, Microsoft faces the prospect of watching is its operating system business for PCs slowly (or rapidly) disappear.
One can only hope the Ballmer and others at Microsoft can read their own corporate history and understand its implication for the future. After all, what Jobs said embodies and extends the vision that Bill Gates had many years ago when he foresaw the personal computer becoming a part of every day life, empowering people and moving us out of the era of mainframe computer.
Ballmer seems to lack a vision of the future. His comments are reminiscent of a backward looking discussion last year by Mircosoft's chief strategist, Craig Mundie. Jobs is not clairvoyant. He is just a keen observer of what has happened with computer technology and where the future lies. Historically, as Gates foresaw, computers and computing devices have gotten smaller, more affordable, and have empowered more and more people and have rapidly broken down definitional lines in the process. The Internet has driven this process even faster by allowing people to do many things online that they used to need a desktop (or mainframe computer) to do.
Interestingly, in September, IBM CEO Sam Palmisano declared the PC business dead in an interview with The Wall Street Journal's Viewpoints. Remember that IBM invented the PC. IBM sold its PC business several years ago for a reasonable price. Palmisano went so far as to say that he "could not give [the PC business] away today."
I think that there is little doubt that we will see a growing use of smaller computing "devices", more use of the Internet in place of the desktop and more freedom and power to use this technology in the hands of more and more people. The desktop will still be around. Netbooks may or may not survive the advances represented by the iPad. Our cellphones will get smarter. We yet may see widespread availability of connectivity through WiFi. (Google is certainly pushing in this direction. The major wireless carriers better take notice because their monopolistic pricing structure will be vulnerable to competition for access that is more fairly and properly priced.) Microsoft's challenge seems to be finding its place in this future. Jobs is at the crest of the next hill telling us what he sees beyond. Ballmer is still huffing and puffing his way up to get a peak.
Look at the people around you, at work, at home, at leisure. Increasingly, people are doing many things without a desktop computer (PC or Mac). Laptops have become more common place, even within offices. Whether they are using a netbook, a iPhone, a Droid phone, an iPad, an iPod Touch, other similar devices, people are connecting and computing through the Internet from home or office or places in between. The Wall Street Journal ran a story recently on the surging sales of portable communication devices, including the iPad, at big box retailer Best Buys. The article also noted that the iPad was drawing customers away from laptops.
Whether at work, on vacation or at the gym, people are reading email, listening to music, going to websites, linking to their workplace network, making dinner reservations, checking out local movie listings. I typed part of this column on a laptop at an ACTEC meeting in Pennsylvania. It is fairly clear that a new paradigm has emerged. The next part of this series of columns will discuss some of the reasons why the desktop computer and even the traditional laptop computer, while still important, are increasingly secondary in the modern world.
(Disclosure: The author holds stock in Microsoft, Apple and Google.)
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