The Smartphone war seems to be shaping up to look very much like an earlier paradigm shift in computing. Sure analogies are imperfect, but let me try this one on you.
It was 1983 and the computing industry was in transition. Digital Equipment Corporation (DEC), notionally the inventor of interactive computing, was still in its ascendency and it along with other Minicomputer companies were at the heart of the technology world. IBM, for the first time in well over a decade, was facing an actual threat to its dominance. The technical workstation market, dominated by Apollo Computer and newly minted competitor Sun (and later to briefly be lead by DEC) was emerging. And an interesting little niche known as the Personal Computer was about to start its rise to the head of the computing class. In 1982 the Personal Computer battle was between the Apple 2 and the IBM PC (running MS-DOS) and their (DEC-like) command line interfaces. In 1983, first with shipment of the Lisa and later with the introduction of the Macintosh, Apple brought the GUI style of user interaction to the mainstream market. Microsoft would follow suit in 1985 and with the introduction of Windows 3.0 in 1990 the outcome of the war would pretty much be settled. Apple had pioneered the market for GUI-based computing, had changed the world if you will, and developed a following that was almost cult-like. But in the end, although their hardware/software combination offered the cleanest user experience, the variety of price points and capabilities offered by Microsoft’s model of selling through many hardware manufacturers won with consumers. Choice is good, even if it means making tradeoffs in the purity of the experience. Various stakeholders in the industry fought back trying to establish their own desktop offerings. IBM tried to stop Microsoft and Windows with the OS/2 Presentation Manager. DEC and the Technical Workstation vendors went the GUI route themselves. But in the end we were left with the Apple Mac still strong in a few niche markets and with its cult members, and Microsoft Windows owning the vast majority of the desktop computing market.
If you map history to today’s players Apple is Apple, Google is Microsoft, Nokia/Symbian is Digital , RIM is Sun, and Microsoft is IBM. Oh, and HP is HP (who purchased the original technical workstation leader Apollo as it lost out to Sun and has now purchased original PDA/Smartphone leader Palm as it lost to Apple and others).
Apple once again has stepped in and really created a new category of a mainstream consumer-oriented finger-friendly touch UI (meaning, like with the Lisa/Mac, others originated the concept but Apple was the first to really succeed with it in the mainstream) with IOS. They sell it just as they did that original Mac, as a hardware/software combination with Apple retaining complete control over the hardware and, now, what software can run on it and what channels can offer it. Google stepped in with the Android OS, using a business model largely emulating Microsoft, but making it even more open via the open source movement. As with Windows in the 80s/90s it does not offer as consistent, smooth or elegant a user experience as Apple’s IOS but the variety of hardware and price points has allowed it to pass IOS in market share. Nokia, RIM, and HP/Palm are attempting to fight back and regain their former leadership positions, but have the dual handicap of having neither Apple’s ability to produce the single best hardware/software combination nor Google’s ability to harness the power of numerous hardware manufacturers, carriers, channels, and application creators.
And then there is Microsoft. Like IBM trying to regain PC leadership with OS/2 Presentation Manager Microsoft is trying to regain leadership with Windows Phone 7. It is trying to chart a course right down the middle of Apple’s closed world and Google’s wild wild west world, which overall seems like it could work. The problem I see is that all of Microsoft’s hardware partners are also in the Google Android camp. And all of them, seeking differentiation from one other, are likely to favor Android-related investments over Windows Phone 7 investments. They can do more hardware differentiation and more user experience customization with Android. Yes this leads to fragmentation, and the key question is will choice or consistency win. Microsoft is betting that consistency with limited choice wins. Back in 2008/2009 that was the lesson that one got from studying the success of the iPhone. In 2010/2011 it seems that choice is once again dominating, in which case Windows Phone 7 may suffer the same fate as OS/2 Presentation Manger.
So based on current dynamics and historical perspective I (sadly) predict that Google Android wins the Smartphone war. I do think things will be somewhat different this time, with Android never achieving the mid-90s percent market share that Windows achieved on the desktop. The market could easily end up 50% Android, 25% IOS, 25% TBD/Other.
And Google could yet screw this up. For example, OS/2 started as a joint Microsoft-IBM next-generation OS project which Microsoft then abandoned as Windows gained market share. Having two competing (or artificially bifurcated) offerings would have screwed up both offerings. Google has its own OS/2-like next generation OS project, Chrome OS, throwing confusion into the market. Google could indeed find a way to snatch defeat from the jaws of victory by having Chrome OS pull the rug out from under Android.
So is Microsoft wasting its time on Windows Phone 7? Not necessarily. They have a history of keeping up the pressure until a competitor makes a big mistake and then the Microsoft offering takes the leadership position. And even if Google and Apple don’t screw up Microsoft has a great shot at dominating that 25% TBD/Other . Do the economics of having a less than 25% market share work out? Now that is a very interesting question.
What of RIM? Well Sun did reinvent themselves into a very successful Server company before ultimately disappearing into Oracle. RIM needs to reinvent themselves. HP, well the analogy itself tells all one needs to know. And Nokia? Nokia needs to stop thinking they can sort-of-own an OS with Symbian or MeeGo and start focusing on being the best manufacturer of Android or Windows Phone 7 devices. Or they will disappear, eventually acquired by one of the competitors they pooh-poohed for years. Wouldn’t it just be the icing on the cake to have Motorola rise from its near-death experience and ride Android to the level of success where it acquired a failing Nokia? Maybe Motorola should have been HP in my little analogy (and then Android would be Unix). Isn’t this analogy stuff fun?