UPDATED 12:44 EDT / AUGUST 22 2011

Microsoft Should Stay a Platform Company

Guest Post by Todd McKinney

Recently Todd McKinney wrote what I felt was an excellent rebuttal to my post asking if Microsoft was being forced by events into becoming a hardware company. (See the comments tied to the link below.) I asked him if he would be willing to flesh out out his thoughts on the idea in a post to which he agreed. – Steven Hodson

In considering Microsoft in the hardware business, and asking whether they should place a big bet by pursuing HP’s PC manufacturing business, the most important question to ask is why? What would be the strategic gain from making such a bold move?

Tight integration and control certainly seem to be key points in support of such an approach. The thinking here is that just as Apple can produce compelling, well integrated systems because they control the entire production chain from top to bottom, Microsoft should do the same. I don’t buy this integrated platform approach as a winning strategy for Microsoft.

The vast majority of the PC market is not primarily looking for a premium priced piece of art when they buy a computer, they really just need a useful and affordable tool. This end-to-end integration story is not compelling enough to most users to outweigh the cost benefits of the PC.

If this integrated experience were as important as the theory implies, then the vast majority of computer purchasers would already be buying Macs. Even with the significant market share growth the Mac has had over the last few years, it has captured roughly 5 percent of the market. The Windows ecosystem accounts for around 90 percent of the market, and HP itself is the biggest player, with a 20 percent share.

It also seems worth looking at the factors that actually are driving Mac share growth if we want to understand whether this integration is the key competitive differentiator. That integration has been part of the Mac since day one.

The recent market share growth for Apple correlates more closely with two other events. First, there is a “coolness factor” that comes from disruptive devices that are direct compliments to the traditional computer system. The iPod led the charge, and has now been joined by the iPhone and the iPad in making the Mac seem more desirable to more people.

This product pull-through from other purchases is an important part of the strategic picture, but it is not something that Microsoft can fix by becoming a PC hardware OEM. The second important driver of Mac market share growth, and really the big one, is both ironic and clever. Switching from the PowerPC architecture to Intel hardware brought with it some cost advantages, to be sure. The big win, however, was in being able to easily support Windows in a reasonably performant way.

Now that we have taken a quick look at the “Why?” question, it’s time for “Why not?”

The biggest reason why not to do something like this is more about being a platform company and how best to achieve success than it is about being a hardware company or a software company. It is a risky thing for someone to build a business based on someone else’s product.

At the heart of the Microsoft approach to building platforms is the idea that it is better to get a part of a huge pie than it is to take all of a small one. There are two benefits to this idea. One is that you get more pie. The other is that you have a lot of other people eating pie that want you to continue to succeed. In this case, it’s all those other companies that are not HP that are collectively selling 70 percent of the PCs in the world.

If I was one of those companies, I would certainly not want Microsoft becoming my largest competitor. That is a good way to make enemies out of people who are on your own team. What I would want to see from Microsoft is better software. I would want to see a better experience for users. I would want to see more risk taking and entrepreneurial spirit in complimentary markets. I would not want the 800 pound gorilla setting up shop in my banana tree.

As a consumer, I would want much the same thing as the hardware OEMs. Having a vibrant, competitive PC ecosystem is a wonderful thing. It drives down costs and promotes the availability of choice. To me, that is much more useful than being one of the cool kids.

 

[Cross-posted at Winextra]


A message from John Furrier, co-founder of SiliconANGLE:

Your vote of support is important to us and it helps us keep the content FREE.

One click below supports our mission to provide free, deep, and relevant content.  

Join our community on YouTube

Join the community that includes more than 15,000 #CubeAlumni experts, including Amazon.com CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger, and many more luminaries and experts.

“TheCUBE is an important partner to the industry. You guys really are a part of our events and we really appreciate you coming and I know people appreciate the content you create as well” – Andy Jassy

THANK YOU