Tag: apple

How much did Vista really cost Microsoft?

Microsoft Vista’s failure hurts Microsoft today.

Microsoft Vista was the company’s despised stepchild – released way past schedule, clunky, slow and disdained so much by the market that PC manufacturers started offering “downgrades” to Windows XP to attract customers.

Despite the embarrassment, Microsoft retained its position as the world’s leading software company and does so today. But Vista certainly did hurt Microsoft and today’s marketplace shows the deep, long term effects of that damage.

Research website Asymco earlier this week looked at the ratio of Windows PCs sold to the sales of Apple Macs over the last 30 years. The ratio peaked at 56 to 1 in 2004.

Today that ratio is 18 and when phone and tablet sales are added in, the ratio is approaching 1:1. Apple has caught up.

It’s no accident 2004 is the peak of the Windows-Apple ratio. In 2004 Windows XP had matured after three years on the market, the older computers running Windows 98 or ME (another hated operating system) were being retired and a new version of Windows – codenamed Longhorn – taking advantage of newer technologies and with improved security was due to be released.

On August 27, 2004 things started to change with Microsoft’s announcement Longhorn would be delayed two years. This effectively broke the product roadmap that underpinned the business models of Microsoft and their partners.

To make matters worse, Apple were back in the game with their OSX operating system well established and a steady stream of well designed new products coming onto the market.

For consumers and businesses one of the advantages Windows systems had over Apple was the cost difference. The “Apple Tax” started to be eroded by the company’s move to Intel CPUs which delivered economies of scale coupled an aggressive program of tying up the supply chain with key manufacturers.

Then Longhorn – now known as Microsoft Vista – was released.

Despite the cheerleading of the Microsoft friendly parts of the technology media, consumers weren’t fooled. The product was slow and buggy with a new interface that confused users. Making matters worse was Microsoft’s ongoing obsession with multiple versions offering different features, something mocked by Steve Jobs,  which further confused the marketplace.

Vista languished, customers decided to stick with Windows XP or to look at the faster and better designed Apple computers, and Microsoft’s market share started to slowly erode.

By the time Windows 7 was released Apple had clawed back their market position, launched the iPhone and caught the shift from personal computers to smartphones.

Probably the biggest embarrassment of all to Microsoft was the launch of the iPad, the market had been gagging for good tablet computer since the late 1990s and Microsoft’s partners had failed to deliver, partly because Windows XP, Vista and 7 didn’t perform as well as Apple’s iOS on the tablet form factor.

Microsoft’s completely blowing a decade’s lead in the tablet market is almost certainly due to the misguided priorities and feature creep that dogged Vista’s development. This is now costing the company dearly.

Asymco’s conclusion of Microsoft’s new market position is stunning and accurate.

The consequences are dire for Microsoft. The wiping out of any platform advantage around Windows will render it vulnerable to direct competition. This is not something it had to worry about before. Windows will have to compete not only for users, but for developer talent, investment by enterprises and the implicit goodwill it has had for more than a decade.

It will, most importantly, have a psychological effect. Realizing that Windows is not a hegemony will unleash market forces that nobody can predict.

Vista’s cost to Microsoft was great, it meant the company missed the smartphone surge, the rise of tablets and – possibly most dangerous of all to Microsoft – the move to cloud computing.

A lot hangs on Microsoft’s next operating system, Windows 8. Another Vista could kill the company.

Building the Internet’s Frankenstein monsters

Changing Internet empires give rise to strange alliances

Apple’s announcement of deep Facebook integration into their iOS6 operating system for the iPhone and iPad is the latest in the weird beasts created as the various online empires jostle for position in a changing marketplace.

We’re used to failing companies creating alliances – most notably Microsoft and Nokia in the mobile phone sector – and almost all of these ventures fail as they are akin to the two slowest runners in a race tying their legs together believing that will make them faster than the leader.

In other areas we see the big players buy out hot new businesses as the incumbents figure its easier to buy out the competition rather than try to compete.

While those purchases form the basis of the Silicon Valley greater fool model, usually the new business gets subsumed into the big corporation, the technology is lost and all but the most cynical founders wander off to do something more interesting.

Then there’s the merger of equals, and today’s announcement of Apple and Facebook’s deep co-operation is one of these.

Facebook has been talking about building its own phone – much to the scorn of industry participants – as the company struggles to deal with user moving onto mobile phones.

Apple is hopeless at social media, which is barely surprising from a company that employs its own secret police.

So the two coming together make sense although it may not work well as alliances like these can be likened like mating the world’s best golfer with a Grand Slam Tennis champion and expecting the child to be an Olympic swimmer.

Of course Apple had a successful merger of equals back in the early days of the iPhone – Google. The alliance worked well and, Google’s then CEO Eric Schmidt sat on Apple’s board for some time.

Than Google decided to develop its own mobile software build its own phones so relationships soured between Steve Jobs and Eric.

Now Google Maps has been ditched from the iOS phone system and steadily Google are finding their services being dropped from all of Apple’s products.

Those moveable alliances – not dissimilar to Eurasia, Eastasia and Oceania in George Orwell’s 1984 – are something we should get used to as the Big Four maneuver for position in the changing online world.

While it’s going to be tough time if you’re a mindless fanboi following the progeny of these strange alliances, for the rest of us it should be fascinating viewing.

It’s all in the timing

Being first is no guarantee of success if your timing is wrong.

This morning I sat in on a corporate breakfast and heard a well known presenter talk about social media for business owners and managers.

The advice was terrible and what was valid could have come from a 2008 book on business social media marketing.

But the room loved it and obviously the client – a major bank – thinks the speaker’s work is worthwhile. He has a market while many of us who’ve been covering this field for a decade don’t.

Timing is everything in business. Earlier this week stories went around the Internet about how Microsoft could have invented the first smart phone.

Microsoft could well have done it, they tried hard enough with Windows CE devices through the late 1990s and there was also the Apple Newton and the Palm Pilot.

While all these companies could have developed the smartphone in the 1990s it wouldn’t have mattered as neither the infrastructure or the market were ready for it.

Had Microsoft released the smartphone in the mid 199os it would have been useless on the analogue and first generation GSM cellphone networks of the time.

Customers were barely using the web on their personal computers, let alone on their mobile phones, so the smartphone would have been useless and unwanted.

Ten years later things had changed with 3G networks and real consumer demand so Apple seized the gap in the marketplace left by Motorola, Nokia and the other phone manufacturers with the iPhone and now own the market.

Apple weren’t the first to market with a smartphone, just as Microsoft weren’t the first with a Windows-style operating system and Facebook weren’t the first social media platform.

Those who were first to the market stood by while upstarts stole the market they built.

Plenty of people have gone broke when their perfectly correct investment strategies have been mistimed – “the market can stay irrational longer than you can stay solvent” is often proved true.

That’s the same with the speaker this morning; he’s not the first to discover social media’s business benefits but his timing is impeccable.

Being first is no guarantee of success if your timing is wrong.

Rivers of gold

Can there be a downside to Google’s massive profits?

Google’s announcement that their revenues have increased by 24% over the last year shows the search engine juggernaut keeps rolling on.

It’s tempting to think that Google is untouchable and that’s certainly how it appears when you’re on track to earn forty billion dollars a year and book close to 40% of that income as profits.

On the same day, Sony announced a massive restructure including with 10,000 redundancies and the company’s CEO, Kazuo Hirai, spoke of a sense of urgency to address the once dominant corporation’s drift into irrelevance.

Twenty years the thought of Sony – one of the world’s innovators in consumer electronics – would be wallowing in the wake of companies like Apple and unknown upstarts like Google was unthinkable.

Fortunes are won and quickly lost in a time of great change and this is something we should keep in mind about Google when we look at their rivers of gold.

“Rivers Of Gold” was a term coined to describe the advertising riches of the newspaper industry in the 1980’s. Google’s online advertising is partly responsible for destroying that business.

Today Google is a search engine business that makes its money from the advertising that deserted print media and went online.

It may be that manufacturing mobile phones, running “identity services” disguised as social media platforms or augmented reality spectacles are the future of Google but right now they it’s search and advertising that pays the bills and books the massive profits.

The challenge for Google is not to lose sight of its current core business while building the future rivers of gold.

If Google’s leaders can’t manage this, then they risk following the newspaper industry that they themselves disrupted.

Ending the era of Mac complacency

Does the Flashback bug end the Mac’s virus free status?

The news that the Flashback Trojan has infected an estimated 600,000 Apple Mac computers has been greeted with joy by the dozens of industry experts that have predicted a virus holocaust for smug Mac users for nearly a decade.

While the Flashback malware – the earlier versions could be described as a computer Trojan Horse while the later editions are more like a computer worm – is a real risk to Mac users and it’s important to take this risk seriously.

The Netsmarts business site looks at how Mac and Windows users can protect themselves from Flashback and its variants.

One of the key things in the advice is to make sure anybody using the computer has limited rights; as a Managed User on the Mac and as a Limited User in Windows. This dramatically reduces the opportunity for bad things to happen while online.

I’ve discussed previously while user privileges are one of the reasons why the Mac has historically been less prone to infection to virus infections than their Windows cousins.

Microsoft made the decision in the 1990s not to tighten Windows’ security settings and their customers paid the price for the next decade. This was compounded by some poor implementations of various technologies in Microsoft Windows.

This isn’t to say the Mac, or any other computer system, doesn’t have security bugs. Every operating system does and it’s a conceit of everybody immersed in new technologies, be it cloud computing back to horse drawn chariots, to believe their products are magically infallible.

Part of the crowing from the security experts and charlatans who’ve been desperately predicting a “Macapocalypse” for nearly a decade overlook this.

Even with the proven problem of the Flashback virus, its unlikely we’re see the deluge of malware like that of the early 2000s simply because the Mac OSX, Windows 7 and all the other mobile and computer operating systems don’t have the structural flaws that Windows 98, ME and early versions of XP had.

Much of the Mac versus PC argument in security is irrelevant anyway; the main game for scammers and malware writers has moved to social media services like Facebook and this is where computer users need to be very careful.

However the stereotype of the “Smug Mac” user was true, one caller to my radio show claimed he didn’t have a problem with spam because he had a Mac. Nothing could convince him that email spam wasn’t related to the type of computer you used.

To be fair to Apple they never made the claim their computers were invulnerable to malware, apart from the odd dig at Microsoft. Their users did it for them.

That type of smug Mac user are those who do need a wake up call. For the industry though, it’s business as usual although some will be feeling a little smug their hysterical predictions of the last decade came true in a small way last week.

702 Sydney Weekend computers: April 2012

Join Paul and Simon Marnie to discuss the tech that affects your home and office

On ABC 702 Sydney Weekend computers this Sunday, April 8 from 10.15am Paul Wallbank and Simon Marnie will be looking at the end of innocence for Apple Mac users, the DNS Changer Virus and how political campaigning is coming to a Facebook site near you.

Some of the topics we’ll discuss include;

If you’d like to learn how to protect your Mac or Windows computers from malware, visit our Netsmarts article on the Flashback virus that explains the security settings and suggests some free anti-viruses.

Listeners’ Questions

While we had a great range of calls from listeners, there was only one we promised to get back to. Kay clearly has a virus infection on her Windows computers and we recommend the free MalwareBytes program to clean it up.

Our IT Queries site has more instructions on cleaning up a virus infection if you’re worried about a sick computer.

We love to hear from listeners so feel free call in with your questions or comments on 1300 222 702 or text on 19922702.

If you’re on Twitter you can tweet 702 Sydney on @702sydney and Paul at @paulwallbank.

Should you not be in the Sydney area, you can stream the broadcast through the 702 Sydney website and call in anyway.

We come here to work

We shouldn’t under estimate the economic power of the Chinese factory worker

“We come here to work and not to play” is the quote from a Chinese production line worker in Reuter’s article on Foxconn factory workers.

That quote could have come from a hundred years ago in Western societies as young workers fled agricultural communities to make better money and find greater opportunities in the factories and cities of North America, Europe and Australia.

In their report on Chinese labour conditions commissioned by Apple and its supplier Foxconn, the US Fair Labor Association confirmed the quotes from the Reuters article.

48% thought that their working hours were reasonable, and another 33.8% stated that they would like to work more hours and make more money.

These workers have an average 56 hour working week and over a third are putting in 70 hours each week.

Like our great grandparents they are focused on bettering themselves and deeply conservative; they know their immediate livelihoods and future prospects depend upon the work they can get.

They also understand the government owes them nothing and their expectations on what the authorities will do for them are low.

It often said the Communist Party of China is the most effective capitalistic organisation on the planet today. In reality it’s the workers on the assembly lines who personify what we know as the free market.

As the leaders of Western nations continue to indulge in corporate and middle class welfare while believing in magic pudding economics where massive mis allocations of resources have no cost and tax cuts pay for themselves, it might be worthwhile thinking of the businesses those 23 year old factory workers in Shenzhen or Chengdu might be running in thirty years.

Just as our great-grandparents built modern economies and industrial empires out of their hard work, which most of us still reap the benefit from, those young Chinese workers are doing the same thing.

The tough world of smartphones

Competing in the smartphone market is tough as Dell have discovered.

Dell’s announcement they are going to exit the Smartphone business – for the second or possibly even third time – comes on the same day Nielsen release a survey showing smartphones are now the bulk of US mobile phone purchases.

For Dell this shows the problem they have in being locked into the commodity PC business, what was once a lucrative business is now suffering softening margins and slowing sales. In desperation they are looking to other product lines but struggle to differentiate themselves in other markets.

The difficulties of doing this in the smartphone sector is shown in Nielsen’s analysis of what phones are selling.

Of those sold in the last three months, a whopping 43% were Apple products while 48% were Google Android devices.

Even more frightening in those Nielsen figures is Blackberry’s collapse where the Canadian product has 12% of the market but only 5% of sales in recent months. It’s little wonder Blackberry’s owner RIM is laying off senior managers.

For Microsoft, that only 4% of phones were “other” than Android, Apple or RIM show just how tough the task of selling Windows Phone is going to be, something that won’t be helped with dumb marketing stunts.

Google’s apparent success in mobile isn’t all that it seems either; while the Android platform has nearly half the smartphone market it doesn’t appear to be particularly profitable.

The Guardian’s Charles Arthur looked at a number of legal cases involving Google’s mobile patents and extrapolated the claimed damages to get an estimate of how much Google earns from Android.

Arthur estimates Android has earned Google $543 million dollars between 2008 and 2011 which, given Google’s mobile revenues last year were claimed to be $2.5 billion last year, indicates Google makes more money from Apple devices than it does from its own products.

While Arthur’s estimates are debatable, they show how Apple’s profits dominate the smartphone market. Google, like Dell in computers, are locked into the commodity, low margin end of the market.

Just as Dell have learned that entering new markets doesn’t guarantee success, Google may have to learn the same lesson.

To be fair to Google, at least management are aware of being too dependent upon one major source of revenue.

Whether mobile services built around the Android platform can provide an alternative cashflow of similar size to their web advertising services remains to be seen.

Insanely profitable

Apple change the game again with some major ramifications

Apple’s announcement that they will start paying dividends to shareholders changes a number of things in Apple’s business model and those of many other businesses.

The sheer size of Apple’s cash reserves also illustrate how profitable the outsourced manufacturing model is as well the contradictary nature of special pleading by affluent corporations.

Moving a cash mountain

Not only is Apple’s business insanely profitable, but sales are growing exponentially. In the company’s conference call, CEO Tim Cook reported that 37 million iPhones sold last quarter and 55 million iPads sold in the last two years.

Apple’s CFO Peter Oppenheimer pointed out the company’s cash reserves increased $31 billion in 2011 and 2012 is on track for a similar result in 2012, leaving them plenty of money for investment along with a “warchest for strategic opportunities”.

Paying a dividend

The reluctance to pay dividends has been a feature of the US corporate for the last few decades and Apple are certainly not alone in not distributing their profits to shareholders.

Companies like Microsoft, Google and Oracle -even Yahoo! once upon a time – have been just as profitable as Apple and their efforts to shrink their cash mountains has had some perverse effect.

Many of these companies have squandered suprpluses on poorly thoughtout and badly executed buyouts of smaller businesses, this urge to avoid returning money to owner has been one of the drivers of the Silicon Valley VC Greater Fool model.

Another result of fat profits is the rise of flabby, overstaffed management ranks at some of these companies. Although this certainly isn’t the case at Apple where Steve Jobs ran a very lean machine.

The retail model

Unlike their major tech competitors Apple is a manufacturing and retail business as well. In 2012, 40 new stores are planned around the world.

This vertical control of their markets, from the beginings of the supply chain  to “owning” the end customer is anathema to modern MBA thinking and probably the area that gives them the greatest competitive advantage over their hardware competitors.

Justifying Mike Daisy

In some ways this announcement justfies Mike Dasy’s discredited criticisms about Apple’s Chinese suppliers.

The reason for manufacturing these goods in places like China, India or Vietnam is the vastly cheaper cost of doing business, not just in labour rates but in reduced environmental and safety standards.

Plenty of brand name clothing, footware and fashion accessory companies make similar massive profits to Apple with their ten, twenty and sometimes hundred fold markups on their products.

Repatriating profits

One of the big changes of Apple repatriating money is that is undercuts the special pleading by these extremely profitable companies that they should have a US tax holiday so they can repatriate their riches.

It’s now clear these companies can easily afford to pay the taxes of their home countries and it’s time they started to, along with returning dividends to their shareholders.

Once again Apple have changed the way others do business, how these changes affect the way we invest and governments treat companies is going to be one of the most interesting developments over the next decade.

So you call that journalism?

Is it time we drew a line between journalism and entertainment?

On  the revelation his expose of Apple’s employment practice contains “significant fabrications”, Mike Daisy reached for the  “I am not a journalist and “my work is entertainment” excuses.

This gutless and disingenuous defence is a common one used by those caught distorting facts or outright lying to advance their causes and enrich themselves.

Perhaps the Mike Daisy expose, along with the sad events around the Stop Kony campaign, should make us consider who is a journalist and what journalism is.

Is journalism reporting the facts as we seem them or describing the world around us? If so, does a “journalist” have to work for an established and recognised media outlet?

The modern idea of warrior, professional journalism was born in the 1930s with celebrity journalists like Ernest Hemingway or Evelyn Waugh reporting from Spain or Ethiopia.

In the 1960s we saw this idea become established through the Vietnam war and reached its peak in the early 1970s with the Watergate scandal.

Today, someone who is an actor by trade can be appointed as the technology correspondent by a newspaper and automatically become a credible journalist in their field.

At the same time someone with years of experience in their field — it could be food, travel, technology or anything else — is sneeringly derided as a “citizen journalist” by those who draw a cheque from the established, and dying, media should they decide to self publish.

The sad thing is much of what is published as “journalism” by the established media outlets is entertainment and many of the “facts” reported are self interested propaganda promoting the latest music star or pushing a political agenda.

All too often, those claiming to be credible journalists are being used to give the illusion of of credibility on things that simply aren’t true at all.

We need to re-evaluate what journalism is and how misleading and self-interested reporting distorts debate, markets and the democratic process.

A start would be in ditching the “journalism as entertainment” meme.

Who will be the future Betamaxes?

A modern version of the video tape standard wars is being fought on our phones

This morning Paypal announced its PayPal Here service, a gizmo that turns a smartphone into a credit card reader.

On reading PayPal’s media release in the pre-dawn, pre-coffee light I found myself grumpily muttering “which platforms?” as the announcement kept mentioning “smartphones” without saying whether it was for iPhone, Android or other devices.

It turns out to be both Google Android and Apple iOS. It adds an interesting twist to the Point Of Sale market we’ve looked at recently.

The omission of platforms like Windows Phone raises the question of which platforms are going to go the way of Betamax?

Sony’s Betamax and JVC’s VHS systems were the dominant competitors in the video tape market in the early 1980s. They were totally incompatible with each other and users had to make a choice if they wanted to join one camp or the other when they went to buy a video recorder.

On many measures Betamax was the better product but ultimately failed because VHS offered longer program times and Panasonic’s licensing out of their technology meant there were more cheaper models on the market.

A few days ago Bloomberg Businessweek listed the Betamax device as one of the “technology’s failed promises”

With a superficial comparison, Apple would seem to the Betamax while Google and possibly Microsoft are the VHS’s given their diverse range of manufacturers their systems run on and Apple’s refusal to license out iOS, which was one of the reasons for Sony’s failure.

But it isn’t that simple.

In the smartphone wars, it’s difficult to compare them to VCRs as the video tape companies never controlled content and advertising the way smartphone systems do – although Sony did buy Columbia Studios at the peak of the Japanese economic miracle in 1987.

This control of content is what makes the stakes so high in the smartphone and tablet operating systems war. A developer or business that dedicates their resources to one platform could find themselves stranded if that platform fails or changes their terms of services to the developer’s detriment.

Another assumption is there is only room for one or two smartphone systems; it could turn out the market is quite happy with two, three or a dozen different systems and incompatibilities can be overcome with standards like HTML5.

In a funny way, it could turn out to be Android becomes the Smartphone Betamax due to having too diverse a range of manufacturers.

One of the first questions that jumps out when someone announces a new Android app is “which version?” The range of Android versions on the market is confusing customers and not every app will run on each version.

More importantly for financial apps like PayPal Here and Google Wallet, smartphone updates include critical security patches so many of the older phones that miss out on updates pose a risk to the users.

In the financial world confidence is everything and if customers aren’t confident their money is safe or will be promptly refunded in the event of fraud they won’t use the service.

Whether this uncertainty will eventually deal Google out of the game or present an opportunity for Microsoft and other companies is going to be one of the big questions of the mobile payments market.

Channel blues

Cloud computing is changing the IT industry

“We do the pre-sales work then they come along and steal the customers. It’s wrong, just wrong” growled the sales manager of an IT integrator while talking about one of the leading cloud computing services.

The business model of systems integrators is to be a company’s, or home’s, trusted advisor on IT and make money from charging for their services and the profit in selling software and equipment.

In the last few years that model has become tough – the collapsing price of hardware has made the profits on selling systems leaner while the increased life of systems has meant the big lucrative upgrades have become scarcer.

At the same time services have become less lucrative as more participants have entered the market, many using offshored cheap labour to provide remote support. It hasn’t helped that computers have become vastly more reliable, particularly since Microsoft have largely solved Windows’ gaping security holes.

The icing on the cake has been the end of boxed software and corporate licenses. These were extremely profitable for the systems integrator – a big sale of Microsoft Office or Oracle licenses to a government department could see an IT salesperson pay for a holiday home or cover the kids’ school and college fees.

Cloud computing has largely been the driver of all of these factors’ decline and now it is really hurting those integrators and their salesfolk who were used to a very profitable existence.

While that’s good news for computer consumers – and even better news for hapless shareholder and taxpayers who’ve been largely dudded by big IT sales pitches to gullible directors and ministers – it does beg the question of how customers now get advice and support.

Largely cloud based services rely upon customer self service and many of the providers would struggle to include user support in their list of core competencies.

There’s a business model there for systems integrators, but it’s difficult to see how many those used to fat profits in the past can, or will, adapt to the new environment.

An interesting side effect of this change is how it affects companies like Microsoft where their channel partners – largely those big and small systems integrators – are one of the most important distribution networks for their products and probably their best defense against competitors like Google and Apple. That strength is being steadily eroded.

It’s tempting to think that change affects just “old” industries like retail, publishing or car manufacturing; in reality it affects all sectors and sometimes the most modern might be hurt more than the established players.