That one business owner is making a choice that software developers, newpaper chains, school text book publishers and many other fields are going to have to make in the next year – which camp are they going to join in the Internet’s cold war.

As the web matures, we’re seeing four big empires develop – Google, Apple, Facebook and Amazon which are going to demand organisations and consumers make a choice on who they will align with.

That decision is going to be painful for a lot of business; each empire is going to take a cut in one way or another with Apple’s iStore charges being the most obvious.

For those who choose to go the non-aligned path – develop in HTML5 and other open web standards things will be rocky and sometimes tough. At least those on the open net won’t have to contend with a “business partner” whose objectives may often be different to their own.

Over time, we’ll see the winners and losers but for the moment businesses, particularly big corporations and publishers should have no doubt that the choices they make today on things as seemingly trivial things like reader comments may have serious ramifications in a few years time.

Consumers aren’t immune from this either; those purchases through iTunes, Amazon or Google are often locked to that service for a reason.

Probably the development that we should watch closest right now is Apple’s push into education publishing; those governments, universities and schools that lock into the iPad platform are making a commitment on behalf of tax payers, faculty and students that will affect all of them for many years.

For many, it might be worthwhile hedging the bets and sticking to open standards. A decision to join one or two of the big Internet empires is something that shouldn’t be made lightly.

While much of the commentary on the article has – correctly – focused on how US manufacturing move to China is destroying the economic bases of the American working and middle classes, there’s also another serious consequence of the story; the destruction of the US supply chain.

The story itself emphasised this;

In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.

While wage costs are important, far more critical are the surrounding supply chains. Without those, even if you want to manufacture in the US or anywhere else you’ll struggle to find suppliers and skilled labour.

The amazing thing with the United States is the world’s most powerful economy has managed to dismantle most of their supply chains that took a century to develop inside twenty years whil China has built up most of theirs since they joined the World Trade Organisation in 2001.

For the United States economy, the effects are more subtle and dramatic than they first appear. The accompanying video to their story illustrates how the multiplier effect, the number of jobs created in the wider economy for each industry worker is as much 4.7 for a manufacturing job, while a service sector worker is less than 1.

That means less employment and less wealth.

For the US, and most the Western world, we were able to avoid the effects of becoming less wealthy over the last decade by spending big on credit cards. Homes that would have been out of reach to the average American – or Australian, Brit or Irishman – were kept accessible by easy, cheap credit.

As that credit dries up with the end of the Twentieth Century debt supercycle, the economic basis of this model is eroding.

For most of us in the Western, developed world it means we are going to become poorer. Chinese and Indian workers might catch up with our living standards, but that standard will be at a lower level that we anticipated a decade or two ago.

The most interesting consequence of the New York Times’ story is what happens to the managerial classes?

Right now they appear to be riding high as their companies’ profits increase and they award themselves trips to the Paris Ritz and receive 50 million dollar payouts when caught cheating on their expenses.

Over time though this cannot continue as the senior managers themselves have become major cost centres which will eventually have to be reduced.

Indeed Apple, the leader in the outsourcing trend, is unique among US companies in that it had a driven, visionary leader and doesn’t have a bloated, self indulgent cohort of bureaucrats managing the business.

With every stage of the deskilling of America and the offshoring of supply chains, there’s been the belief that “it could happen to me” to various groups of workers – we’re now seeing the same process happen in white collar professions like the law are subcontracted to Indian and Philipino service providers.

Senior managers should have no illusions the same will happen to them as the search for cost savings runs out of targets in the rest of organisations.

The biggest problem though is that loss of supply chains and industry knowledge. The question is, can you rebuild that capacity in decade in the way China did?

Supply company image courtesy of Stock Xchange and Andy McMillan.

Such graphs starkly illustrate how the industry is changing as people start using tablet and smartphones instead of their PCs but there are some caveats with making blanket comments about the death of the Windows based computer.

Sales are still huge

One important thing about the chart shown is it has a logrithmic scale – a doubling in height indicates ten times the sales.

That point alone shows just how massive the lead Windows had over 15 years from the mid-1990s, something that is shown in a previous Asymco chart.

Despite Gartner’s reported 1.4% fall in PC sales – the basis of the Asymco graphs – there are still 92 million personal computers sold each quarter so it is still a massive market.

Tethered devices

One of the weaknesses with smartphones and tablet computers is they are still tethered to the desktop. If you want to get the best experience from your phone or iPad you have to synch it with your home or office computer.

For the moment that’s going to continue for most users, but not forever and the extended life of PCs means customers are using older computers to connect.

Extended life cycles

A bigger problem for the PC manufacturers is the extended life cycle of personal computers.

Since the failure of Microsoft Vista, PC users have been weaned off the idea of replacing computers every three to five years and nearly half the market is using systems that are more than ten years old.

On its own that indicates fundamental problems with the Windows and PC markets for Microsoft and their manufacturing partners.

The irrelevant operating system

One of the effects of increased computer life cycles is that the operating system has become irrelevant. Customers no longer care about what they are using as long as it works.

This is one of Microsoft’s problems; the virus epidemic of last decade and various clunky versions of Windows Phones has left customers perceiving PC and Windows software as being clunky and buggy.

Not yet dead

While the PC market is now shrinking, it’s far from dead. There’s still a huge demand to cater for although the big growth days are over.

For manufacturers whose business model has been based on fighting for market share in a growing sector, they now have a problem. They have to identify profitable niches and generate innovative products.

Unfortunately for the PC industry, the market has moved on. Apple have captured the bulk of the high margin computer sector and the industry’s response of pushing “ultrabooks” to capture the MacBook Air customers isn’t going to resonate with consumers trained to buy cheap systems.

Watching the PC industry over the next five years will be fascinating. Some companies will adapt, others will reinvent themselves and many will fade away as they cling to a declining business model.

Despite the personal computer industry only being 30 years old, it’s already in decline which is something older industries should ponder upon.

So it wasn’t a surprise to read at the beginning of this year that Microsoft were allocating $200 million for marketing Windows Phone in the US alone.*

The Consumer Electronics Show is the high temple of tech journalism with thousands flying in from around the world to breathlessly report on the latest wide screen gizmo or mobile device

At the 2010 show, 3D television was going to be the big consumer item while at the 2011 event it was going to be Android based tablets that were going to crush the Apple iPad.

Despite the millions of words written and spoken about these products, both flopped. So it was no surprise we were going to see plenty of coverage of Microsoft given the budgets available and it being the last time Microsoft’s CEO, Steve Ballmer, would give the CES keynote.

Microsoft’s CES publicity blitz kicked off with a rather strange profile of Microsoft’s CEO in BusinessWeek which if anything illustrated the isolation and other worldliness of the company’s senior management.

The PR blitz worked though with Microsoft tying for first place in online mentions during the show according to the analytics company Simply Measured.

After the show the PR love for Microsoft continues with Business Insider having a gorgeous piece about why Windows Phone will succeed and criticising tech blogger Robert Scoble’s view that the mobile market is all about the number of apps available.

Scoble replied on his Google+ page explaining why apps do matter and adding that most of the people he meets hate Windows Phones, the latter point not being the most compelling argument.

The most telling point of Scoble’s though is his quoting Skype’s CEO that they aren’t developing an app for Windows Phone as “the other platforms are more important, so he put his developers on those”.

Microsoft spent 8.5 billion dollars buying Skype and intends to lay out over $200 million promoting Windows Phone. Surely there’s a few bucks somewhere in those numbers to pay for a few developers to get Skype functionality on the new platform.

Since writing this, Robert Scoble has issued a correction from the Skype CEO stating a version is being built for the next version of Windows Phone

The fact Microsoft can’t organise this seems to indicate not all senior executives share the vision for Windows Phone. It’s difficult to image Google or Apple having this sort of public dissent on a key product.

Management issues aside, Microsoft’s real problem are they are late to the mobile party and don’t have anything to gain attention.

There’s nothing wrong about being late to the party – Apple were late to enter the MP3 player, smart phone and tablet markets – but in each case they bought something new that changed the sector and eventually gave them leadership of each sector.

With Windows Phone, there’s so far little evidence Microsoft are going to deliver anything radically new to the sector. With Apple’s iOS and Android dominating, it’s going to be a tough slog for Microsoft and they are going to have to have to carefully spend every cent of that big marketing budget.

At least Microsoft’s PR team is doing a great job, the challenge is for the rest of the organisation to sell it as well.

*As an aside, it’s interesting the author of that article about Microsoft’s marketing budgets boasts how he “been sitting on this information for weeks so that Microsoft can make its big announcement at CES this coming week”. It’s good to know where Paul Thurrott thinks his responsibilities lie – certainly not with his readers.

We’ll be going to air from 10pm, Eastern Australian time across Australia on ABC Local Radio’s Nightlife to look at the following questions;

• Why were people disappointed with Apple’s iPhone 4S that was released a few weeks ago?
• The big competition are the Google Android phones, what are they doing?
• What’s happened to Nokia? They seemed to have lost their domination.
• Microsoft were the other big player, what are they doing?
• How are the smartphones changing business?
• Shopping centres seem to be jumping on board with various social media checkins. What are those?
• There’s been a push to online payments, how are the smartphones affecting this?
• Are smartphones going to be the big buy for Christmas?
• What are the best plans for consumers and business?
• How do people deal with telco disputes?

The podcast from the program is available from at Nightlife website, and some of the information we mentioned can be found here;

Dealing with Telco complaints

We’ll be adding more resources in the next few days, the next ABC Nightlife spot is on 23 November and our events page will have more details. If you have any suggestions for future programs or comments on the last show, please let us know as we love your feedback.

Some in the press portrayed this as “ambush marketing” by Samsung, claiming that the Korean company has stolen coverage from Apple.

In reality, all the stunt has done is emphasise the different market positions of the companies; Samsung have people camping out for $2 phones while a few doors up the street there’s a bigger line for an $800 Apple product.

The message is clear; Apple’s products are more desirable than Samsung’s at even 400 times the price.

Whatever Steve Jobs was reincarnated as – a Bogong Moth or the next Dalai Lama – he’s laughing right now.

Simon Marnie and Paul Wallbank looked at why Steve Jobs was important to Apple, who will be taking over and whether this affects whether you should buy an Mac computer, iPhone or iPad.

Listeners’ Questions

As usual, we had plenty of great questions from listeners and some of them we promised to get back to, these included the following.

Removing Mackeeper

Cheryl called about MacKeeper warnings that keep popping up on her Apple computer.

MacKeeper, and other variants like MacProtector and MacSecurity, are known as malware – software designed for malicious reasons – which has been the bane of Windows computer users for years.

Removing Mackeeper is relatively easy and Apple has released a security patch to fix it. Details and download are available at the Apple Support website.

Wiping an old computer

The most valuable thing on a computer is the data, so it’s important to wipe any system before disposing of it. Deborah asked how to wipe her old Mac system before she left it out for her council’s e-waste collection.

If you have an OS X or OS 9 disk, you can completely wipe and “zero” the disk to make it extremely difficult for someone to recover any data from the old computer. Apple have detailed instructions on this at their How To Zero All Data On A Disk page.

Warning! Before following these instructions, make sure you have backed up all important and valuable data.

How to disable automatic Windows Updates

Updating your computer, whether you have a Windows or Mac computer, is very important as new security bugs are found all the time. Gary though was finding his system automatically installing Windows Updates often disrupts his work.

It isn’t a good idea to totally disable the Windows Update service as those updates and patches are important, but you can change the settings so they are downloaded but not installed until you choose to do so.

Microsoft’s Knowledge Base describes how to change the Windows Update Settings, we recommend the download updates but let me choose when to install them option.

Next 702 Weekends tech spot

Our next Weekends spot is scheduled for 23rd October when we’ll be discussing how to backup your valuable data. Check the Events Page or subscribe to our newsletter for any changes to the 702 Sydney programs and any other upcoming radio shows.

Speculation is mounting about Apple releasing a cheap netbook. The idea is Apple needs to compete in the ultra cheap sector and their existing range is too expensive in the current market.

While there’s no doubt Apple will have to respond to the difficulties in the market and give up some margins and profits, there’s danger in simply chasing other people’s price points.

Apple’s success is built upon high margin products, not the stack ‘em high, sell ‘em cheap models other manufacturers follow with varying degrees of success. Those high margins allow Apple to offer value added services like free help in their Apple Stores.

While it’s important to meet consumer price points in the current market, pitching a product to meet someone else’s price point is madness. Apple’s market couldn’t be different to that of the Asus EeePC for example.

That people are suggesting companies in Apple’s market and financial positions should be doing these things illustrates just how tough times are in the tech industries. This was flagged in yesterday’s SmartCompany New Years Resolutions article where Amanda Gome specifically clearly flagged IT as an area to cut.

As we learnt in the tech wreck, IT spending is the first to be slashed, and from what I’m hearing there’s a bloodbath looming in the technical services industry.

Others are hearing this too. The website GigaOm and Gartner Research both published tips on surviving the downturn last week.

Gartner’s paper was firmly aimed at tech service businesses, but there‘s plenty of good ideas there for other businesses as well. Their key point is you have to lead the market as followers will struggle.

The GigOm article starts from the same premise as Gartner – businesses need to differentiate themselves from the rest of the market – for GigaOm focus and simplicity are the keywords.

Focus and simplicity are how Apple has achieved its position in its market. Right now is the worst possible time to lose this focus.

All of us need to focus on the areas where we have advantages and how we can simplify things for our customers. We need to be talking to our clients now and understanding where their pain points are and how we can help.

Once we’ve done that, we can start getting new ideas and products out there that will help our businesses through the tough period ahead.

Image by Kriss Szkurlatowski.

The big challenge for all businesses in this downturn is to focus on core values and products. For a company in Apple’s position, to be distracted by a venture into low margin, cheap products would be a terrible waste of management time and resources.

There’s no doubt Apple will be affected by this storm, they are going to lose sales and profits will suffer. The key to survival is to limit that damage and come through the other end with loyal customers and good products.

Macworld gives Apple a captive audience of dedicated fans. Any other business would kill for the same opportunity to roll out their new products to such an enraptured audience.

While there’s not doubt the Internet and the Apple Store channels have diluted the importance of the trade show, the Macworld event is still an important part of the tech industry’s calendar.

I’m a bit baffled why Apple would be doing this, I think it’s an asset they should treasure.