|It's hard to predict the future because we humans prefer to think in terms of familiar paradigms. Even the most brilliant of our species are subject to this flaw. Now, Microsoft faces its turn. The owner of the operating system that likely runs your personal computer, the company that achieved monopoly with Windows and ducked the Department of Justice's scythe to keep it, faces a midlife crisis as the world goes gaga over portable consumer devices. This is the story of what's happening to Microsoft in the handheld operating system markets -- and how it parallels the earlier, similar journeys of IBM Corporation and Digital Equipment Corporation. Can Microsoft achieve dominance on mobile devices?
Small Devices Grab "The Buzz"
Handheld consumer computer devices are the computing story of the
decade. They are wildly popular.
For example, Gartner Group pegs last year's smartphone
at 24% (1).
Netbooks only became
classified as such in 2007 and yet they already
account for perhaps 20% of the laptop market (2).
Apple Inc.'s tablet PC,
in April 2010 and is projected to sell 20
units in 2011 (3).
What trends are hidden inside this crazy pell-mell growth?
Here's one. For the past two years, mobile PC sales have increased
desktop PC sales have gently declined. By "mobile PCs" we mean laptop,
notebook, netbook, and tablet PC's.
Portable devices are gaining sales at the expense of stationary ones (4).
Here's more. Smartphones are cannibalizing the mobile phone
experts predict that they will
eventually replace today's more common, but less capable, feature phones (5,
smartphones. They continue to be the fastest growing segment of the
mobile phone market (7).
other devices of their size that lack telephone functionality (8).
All this has led to speculation that smartphones may displace laptop
computers to some degree or another (9,
say smartphones have already replaced their laptop:
Here's the history on how smartphones
laptops and taking over the mobile phone market:
While smartphones thrive, the technology phenomenon of the year is the
iPad. Within four
months of its introduction in April,
Apple sold over 3
million of the devices (13).
popularity has made it, overnight, into the public's very definition of
This leads many analysts to state that
tablets have finally -- after two decades -- become a large,
market segment. Analysts believe tablets are undercuting the
market for personal
A CNet survey found that 32% of consumers say they no longer need
laptops and netbooks due to their iPads (15).
Here is Forrester Research's take on this trend. They see shrinking
market share for desktops and laptops, a stable share for netbooks, and
growing a share for tablets:
What Does It All Mean?
We're witnessing an historic shift in
The buzz of excitement, money
and innovation is focusing on a two new markets, that at long last are
becoming better defined after decades of trial and
niche sales and gestation. One market is the smartphone. It's
that's also a computer. And a camera, browser, email
client, texter, tweeter, geolocator, and ... whatever else fits in a
The other new market is the tablet. It's bigger than a smartphone but
a netbook. The key differentiator is
its interface. The iPad has no
stylus or keys or mouse. It's a multi-touch touch screen, with
proximity and ambient light sensors, 3-axis accelerometer,
magnetometer, and headset controls.
By this measure, netbooks are nothing new. They are just small laptops.
Netbooks are traditional personal
computer technology with the
interface. The tablet is a radically different approach to
understanding how people use and interact with computers.
For years a small but vocal group has bemoaned the lack of innovation
in the PC interface. Well, now they have it. But it's not in their
laptop or PC.
It's the tablet.
Microsoft Missed the Boat
What's interesting about handhelds from the operating system
perspective is that
the dominant personal computer OS supplier is a minor player. Microsoft
missed the boat.
Take smartphones, for example. Here is Gartner's 2nd quarter 2010
estimate of world-wide OS market share (17, 18):
Windows is at 5%.
How about U.S. numbers? Here are the American market share
leaders, as of July 2010:
Microsoft is in fourth place (20,
In tablets, the story is the same. While the term "tablet PC" has
been around for years, it was, ironically, a Microsoft product
announcement in 2001 that first made the term popular (22). While
there are many opinions as to why Microsoft's Tablet PC flopped in
2002, most agree the company's
desire to impose Windows on it was key (23).
In contrast, Apple introduced its iPad tablet this April, with
explosive sales of millions of units in the months since. Apple and its
define what the tablet has come to mean. Apple will sell 10 million
iPads this year and an estimated 20 million in 2011 (24).
Competitors are scrambling to catch up to this newly accepted
definition of what the public now considers to be a tablet. The first
group of iPad competitors are Android based systems, with Windows
following behind (25,
So there it is. The company that monopolizes the operating system for
personal computers has lost that dominance when it
the smaller consumer devices that represent the future
of computing. Microsoft will be a part of the story to be sure, and a
tough competitor, but it's already lost the chance to extend its OS
monopoly downwards, into the newest devices creating all the industry
More on this, and possible outcomes, later. First, some useful
We've Been Here Before
History? One normally does not look to history to predict computing
trends. Nevertheless, knowing history sometimes works wonders for
understanding the present. Several industry leaders once
faced the exact same dilemma Microsoft faces today. Their stories are
First up: IBM. Back when
dinosaurs ruled the earth, the IBM Corporation gained a monopoly over
the sole segment of business computing in its heyday, mainframe
computers. In fact, IBM was so dominant that analysts
referred to the market place as "IBM and the seven dwarfs." But the
dwarfs couldn't stand up to IBM's dominance for long. By the 1970's
the dwarfs were dead and IBM's
only competitors were the "plug compatible manufacturers" -- companies
that made IBM mainframe clones. Alternative architectures had all but
IBM monopolized both mainframe hardware and the operating systems it
a result, the United States Department of
Justice pursued IBM for monopoly violations in a famous case that
spanned the terms of four U.S. presidents -- from 1969 to 1982. DOJ never
succeeded in even slowing IBM down (27).
against IBM over
mainframes last year, a full 27 years later! (28)).
The mainframe market was huge and all-important in its day. Then
arose. IBM failed to appreciate the new technology or see the
competitive threat, and as excitement shifted to this new market
segment, new leaders came to the fore. Digital Equipment Corporation
(DEC) led this booming new technology, trailed by its own collection of
minicomputer dwarfs (the "mini dwarfs" ?).
And IBM? It eventually entered the minicomputer fray, with the
System/7 in 1971 and the Series 1 in 1976. But it had forever
lost its chance to extend its mainframe monopoly down into the new
Not until the early 1990's did IBM
gain major market share in what was by then called the "midrange
market," with its AS/400 and RS/6000 lines. By the 90's IBM had fought
and hard enough
to earn its way into a three-way market share tie with Sun
Microsystems and Hewlett-Packard for Unix servers. But it never
extended its mainframe
monopoly down to the mid-range market.
Next up: DEC. The same
company that stung the mainframe giant during the rise of minicomputers
entirely missed the boat when it came to facing its own technology
shift. They were called "microcomputers" at first, though
everyone knows them as personal computers. Ken Olsen, DEC's founder and
famously dissed PC's in 1977 (29).
DEC's eventual, belated
forrays into the PC arena were disastrous. (Remember the Rainbow?) The
gave up altogether on
the PC market by 1986 (30).
DEC's minicomputer business was ultimately cannibalized by the personal
computer technology it disdained. Ken Olsen was ousted in 1992 and the
defunct by 1998 (31).
And now: Microsoft. Who
benefited from DEC's inability to adjust to the personal computer?
Initially there was a three-way alliance:
Microsoft eventually broke from the alliance with IBM, and emerged as
the clear winner in
the area of operating systems. The company attained the holy grail of
monopoly with its Windows OS
family. Microsoft also obtained monopoly status for its Microsoft
As it did IBM during the mainframe era, the U.S. Department of Justice
confronted Microsoft with charges of monopolistic behavior. First,
Microsoft signed a consent degree in 1994 (32). DOJ
did not believe that Microsoft held to that agreement.
Therefore, it sued in 1998 for anti-trust violations.
Judge Thomas Penfield Jackson rendered a two-part verdict in 1999 (33).
Findings of Fact were that
Microsoft had committed illegal
monopolistic activity. His Remedy
was that the company should be
Microsoft would be dissected just like the U.S. Supreme
Court dismantled Standard Oil in 1911.
On appeal, the D.C. Circuit Court of Appeals upheld Judge Jackson's
Findings of Fact but over-turned his Remedy. The court turned the
case over to Judge Colleen Kollar-Kotelly for a new Remedy. On
2001, the Department of
Justice stated it was no longer seeking the breakup of Microsoft and
would accept a lesser antitrust penalty (34).
At this point, the terrorist attack of 9/11 occurred. From her comments
at the time, it seems clear that this
event greatly influenced Judge Kollar-Kotelly's view of this court
weeks she ruled that the two parties must now settle,
saying ''The court cannot emphasize
too strongly the importance of making
these efforts to settle the case and resolve the parties' differences
in this time of rapid national change.''
Judge Kollar-Kotelly stampeded into a Remedy based on her reaction to
the events of 9/11. The Remedy
completely failed to address the reasons Microsoft obtained monopoly
methods it employed to keep it.
Nine states' Attorney
Generals refused to sign on
to the resulting agreement
federal government and Microsoft. They believed that it was
insufficient to create competition in PC software
markets. They were correct. The inappropriate remedies failed in the slightest
Microsoft's monopoly position with Windows and Microsoft Office.
More importantly, Microsoft has not changed it business practices away
from monopolistic behavior. Its continuing losses in overseas
litigation since 2000 over its business practices -- ranging from the
E.U. (twice) to Russia to South Korea to India -- substantiate this
in the details of Microsoft's anti-competitive actions, Dr.
Roy Schestowitz's TechRights
web site chronicles many of them.
Microsoft still holds its personal computer OS monopoly, just as IBM
still holds its mainframe OS monopoly. But like IBM in the 1970's and
DEC in the 1980's, Microsoft now faces a threatening platform shift.
Will it meet the challenge?
Thus far, this article has been factual with substantiating
But in predicting the future we're drifting into
the realms of opinion and informed speculation. Here
are some possible future scenarios:
Best Case for Microsoft: Dominance in
Handhelds -- The argument for this scenario is that the very
definitions of these relatively new markets are
unstable. Microsoft (or any other big player) could potentially disrupt
and change the landscape very quickly. As proof of this -- Apple just
did it in 2010, with its introduction of the iPad. Who's to say
Microsoft won't do the same?
Microsoft has earned experience in these market sectors going back a
And it has competitive product in the brand-new Windows Phone 7.
the point. If
Microsoft can leverage its huge
base of personal computer software to mobile devices by glueing them
inseparably together, it can extend its OS dominance to the newer
The goal for Microsoft is to exert its monopoly market force, as it
does on personal computers, and to negate or void consumer choice.
Another point in its favor: Microsoft has proved it can react very
quickly to a perceived threat.
When netbooks came out in 2007,early reports claimed top market
share for Linux. Microsoft
swiftly overturned this situation. It kept Windows XP in sales and
support longer than initially planned, and released its new Windows 7
operating system with a limited-resource Starter Edition (41).
Today Microsoft leads share in netbook operating systems (42,
Arguing against the scenario of Microsoft dominance are several key
facts. First, let's talk
about netbooks. Netbooks are nothing but smaller footprint laptops.
personal computers in their interface and design -- not something
radically different, likeiPad tablets or smartphones.
Microsoft was able
extend its monopoly to netbooks because the same manufacturers and OEM
relationships are involved with netbooks as with laptops. These
unequal relationships with OEM's are the basis for Microsoft's personal
47, 48). Microsoft also works a win-win
with these partners
through its strategy of planned obsolescence (49).
monopoly to netbooks.
If Microsoft could
have used monopoly power to extend its OS dominance into smaller
devices it would certainly have done so already. The companies you need to have
relationships with and cut deals with are completely
different in the smartphone space. Thus far, this applies
to the tablet space, too.
The competitors Microsoft
faces in these new markets are big enough to hold their own.
This is not a case of small
innovators beach-heading a new market now ripe for takeover by major
players. The major players are already in town... and beating Microsoft.
Apple is wildly innovative and deeply groks consumer cool. With the
iPhone, and the now the iPad, Apple jujitsus Microsoft by introducing
new concepts and pioneering entirely new markets.
new to the small-device game but showing great product with Android
and Chrome OS.
Google supports their OS's with Google Apps and a huge stable of
mobile apps, disrupting possible ties to
Microsoft Office and the personal computer software sector Microsoft
dominates.Google's efforts will likely thwart Microsoft's desire
to super-glue its personal computer software
to the new smaller device markets.
In the smartphone space, competitors like BlackBerry
OS and Symbian
It's what they were designed for. And RIM has just come out with
its own tablet, the PlayBook,
running BlackBerry Tablet OS (based on QNX).
this kind of varied, muscular opposition in a relatively established
marketplace, it appears very unlikely that Microsoft could achieve
monopoly in handheld OS's as they
did for personal computers.
Probability for this outcome: Low.
Worst Case for Microsoft:
Failure in Handhelds -- In this scenario, Microsoft drops from
contention as a major player in the evolving world of small
The argument here is that the Windows family of operating systems has
little organic applicability to handhelds. PC's are
fundamentally different from consumer handheldsand
Microsoft doesn't understand their differences. Microsoft shows its
lack of understanding by promoting its offering as "Windows," a label
associated with the prior technology wave, personal computers. The
Windows brand is a negative, not a positive.
Those arguing this view cite the declining market share for Windows Mobile
and extrapolite this decline into an irreversible trend (50, 51).
computer industry trade press
and the popular press have voiced sentiments such as these (52)
- "For all practical purposes,
Windows Mobile is a dead platform" -- ZDnet (53)
- "Windows Mobile has now been
relegated resolutely to has-been status" -- CNet (54)
- "[Windows Mobile] is bleeding
market share in the space, and its future looks grim" -- Washington Post (55)
Several facts argue against the worst-case failure scenario for
Without getting into an evaluation of Windows Phone 7, the important
that this is a brand new offering, unrelated to Windows Mobile.
The comments above are history. They are not about Windows Phone 7 and
Microsoft is not retrenching or retreating from the smartphone market.
trying harder. It's re-entering with new, completely re-engineered
product. This is a company that wants market and is fighting for it.
Small devices are still an evolving amorphous
category, with plenty of niche specialities and segmentation yet to be
finalized. It seems very unlikely that a company with Microsoft's deep
pockets and highly skilled technologists can't grab good chunks of
market when it
invests and fights
Lastly, Microsoft has shown
it can enter a market late, after years of flirtation and research,
then step in and do well. Witness Microsoft'ssuccess in the
market with the Xbox /
Xbox 360 line.
It seems very unlikely Microsoft would fail badly in handhelds unless
it backs away from these markets voluntarily -- which Windows Phone 7
proves it has no intention of doing.
Probability for this outcome:
Most Likely Case for Microsoft: One of Several Giants Duking It Out
most likely future scenario for Microsoft in the still-maturing world
of small devices is also the optimal case for consumers. This is the
Microsoft is one of several large, well-financed and highly capable
companies slugging it out in a truly competitive marketplace.
In personal computers, Microsoft easily holds its monopoly in the face
of aggressive challenges from Apple and Linux. This is because
competitors can not
break a monopoly -- even in the extreme case when they offer
product (witness Linux and its 10,000 applications). A monopolistic
market lacks competition.
Microsoft exercises its monopoly power through unequal relationships
with manufacturers and OEMs. Microsoft also works a win-win with these
through its strategy of planned obsolescence (56).
company so quickly overturned Linux's early lead in netbook
Substantiating this view is
Microsoft's higher market share
the United States -- where it has essentially achieved status as a
versus overseas markets, where it is still regularly litigated and
The situation is completely different in the arena of small consumer
devices. Microsoft has been unable to
extend its monopoly power to devices
smaller than netbooks, as market share statistics prove.
Its OEM and manufacturer
relationships don't apply to these
markets. Instead, the company must build new alliances,
distribution channels, and marketing strategies, competing
head-to-head with companies of its own throw-weight, like Google and
During its American anti-trust trial, Microsoft executives repeatedly
stressed that all they wanted was fair competition. In these new
markets, they face
Some predict Microsoft's future in these markets based solely on their
personal evaluations of
Windows Phone 7. But to judge Windows Phone 7, one must wait
for the introductory hype to die down, and for real sales numbers to
to twelve months before pronouncing the product's impact.
More importantly, Windows Phone 7
alone no more dictates Microsoft's future
in small device OS's than did Windows Mobile. By replacing
Mobile with Windows Phone 7 Microsoft signalled they are willing to
explore new directions and introduce new product to compete. The
company intends to tie its future to success -- not
any one product.
In the big picture, the most likely outcome in the OS competition for
small devices is that Microsoft won't
achieve monopoly or
market dominance in these new markets, but it will
be a major player.
I believe Microsoft will fight its way back
to be one of a small group of key players. The best historical analogy
is how IBM achieved
success in the
mid-range Unix server market by the 1990s. Very late to the game, they
fought back to a three-way tie with Sun and HP in the Unix server
market they initially undervalued.
is a best-case outcome for consumers. They will enjoy the benefits of
fair and full competition that are still largely lacking in the OS
personal computer market.
Probability for this outcome: High.
Why This Matters
Why does all this matter? Competition benefits consumers.
If you're a potential purchaser of
smartphones or tablets, the more you know about these markets before
you buy, the better decision you can make. You don't want to bet
your dollars on a product that may be orphaned or a company that loses
out in the
market place. You want a product with the critical mass to attract tons
If you're employed in the fast-moving computer
professions, where the required skills rise and vanish many times over
of an individual's career,
predicting how markets evolve is critical to your career health. Those who make poor judgements risk the
of their livelihood.
In my career I've seen several major technologies rise to prominence
only to disappear some years later. Careers perished with them. The
first step in
keeping your career on track is to accurately identify market trends.
Whether you feel this article is insightful or off target, it has done
job if it
you to consider this subject and come up with your own analysis.
Please contribute by attaching a comment with your views. Thank you.
As some readers know, I've been writing a monthly series of OS News
articles on how to keep mature computers useful and in service (listed
article gets us back on track in the series. It addresses a valuable
technique for making older computers useful again -- running multiple
operating systems. This couples all
the advantages of the existing Windows install with the
benefits of free and open source software. The article will describe
and compare different techniques for running multiple operating systems
on a single
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Howard Fosdick (President, FCI) is an independent consultant who
databases and operating systems.He has occasionally consulted for
software vendors as an industry analyst (although never about
small devices!) You can
at contactfci at the domain
name of sbcglobal and the
domain extension of net.
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