What Apple Knows, and Why "Choice" is an Issue

"Too much choice" can be as bad as "not enough choice." Ironically, having some choices generally is viewed as a positive by most consumers. But overwhelming choice is paralyzing. Those of you familiar with the Class 5 switch, and the modern business phone system, know something of the matter. Both types of switches offer hundreds to thousands of discrete features. But most end users, business or consumer, use only a handful of features.

You might wonder why suppliers both to add all those generally unused features. The reason is that a few key customers say they "need them." See Choice can be a problem or choice can paralyze

Apple always has taken one approach to features, while Microsoft and the "open source" communities generally have taken a different approach. For decades, developers have argued for and against unlimited choice or "openness." At the moment, it appears Apple's choices might be winning the argument.

When Google Android developers complain of "fragmentation," that's a downside, or problem, with "open" approaches. Apple always has taken the other view. It limits openness, limits choices, in order to enhance user experience. Where an open source or Microsoft approach is "you can do that," Apple essentially asks "why do you need to do that?" 

With so many projects, if the customer is willing to go without a small subset of the functionality they think they need, it can save a massive amount of effort, cost, and complexity and result in a much more elegant, hassle-free solution that makes them much happier in the long run, some would now argue.

Apple’s customers are often the sort of people willing to make these tradeoffs, because that’s how most of Apple’s products are designed: if you can compromise on some of the features and capabilities you think you need, you can get a product that works better and makes you happier with far less aggravation. And for most people, the benefits will outweigh the missing features.

Granted, there are trade-offs, as there always are in all engineering projects. “We know what’s best for you," Apple essentially says.

People who aren’t willing or able to compromise on their needs regularly are much more likely to be Windows customers. The Windows message is much more palatable to corporate buyers, committees, middlemen, and people who don’t like to be told what’s best for them.

But the world seems to be moving a bit more in Apple's direction. 

Apple might have it right

Metaswitch "Perimeta" is a Classic Business Case Study

The entry by Metaswitch Networks into the session border control business has been described by some as a move “into a crowded market.” "Crowded" market

Metaswitch would describe it as a move into a rapidly-growing market where customers are asking for choices. According to Infonetics Research, service providers are spending $350 million a year buying SBCs. By 2015 (just four years) they will be buying $1 billion a year worth of SBCs.



Acme Packet furthermore reports gross margins of about 82 percent. Huge gross margins

“Candidly, service providers are asking for alternatives,” says Patrick Fitzgerald, Metaswitch Networks VP.



Acme Packet has for years pointed to its dominant market share. Infonetics estimated that Acme Packet had 52 percent of the SBC market in 2009,  almost four times that of any competitor. Dominant market share Dell’Oro Group in 2010 estimated hat Acme Packet had 55 percent of the SBC market.



Metaswitch says Acme Packet has 65 percent to 70 percent share of the service provider and enterprise markets for SBCs.



Some 38 Metaswitch customers already have placed orders for “Perimeta” devices, says Fitzgerald. Perimeta



In many ways, the move into the SBC market illustrates some enduring issues in business strategy. In recent days, as intellectual property lawsuits have escalated in the mobile handset business, we have gotten a reminder of the potential importance of patents and intellectual property ownership. Patent lawsuits proliferate


In fact, some believe the older pattern, where many device manufacturers simply licensed operating systems, might be changing. Some believe it is possible that the dominant pattern will be “essentially proprietary” strategies where each major platform consists of bundled OS and device, on the Apple model.



Keep in mind that Metaswitch Networks has, for many years, been a supplier of the underlying original equipment manufacturer software at the heart of an SBC. In other words, as Microsoft powers many PCs, and Android powers many smart phones, Metaswitch already powers many SBCs.



That isn’t to say the smart phone or PC OS model will develop in the SBC market, but only to suggest that intellectual property ownership confers strategic advantages that are not always immediately obvious in the earlier stages of some markets, but can emerge as strategic advantages later.



Some might note that the move into SBCs illustrates another enduring business issue, namely “channel conflict.” There are many instances in the telecommunications business where a supplier has to make difficult choices. Where a supplier operates in both the wholesale and retail parts of a business, there always is some potential for conflict between a firm’s wholesale partners and the supplier’s own retail efforts. Channel conflict


The analogy is the growing suggestion that device manufacturers ranging from HTC to Samsung might have to develop or acquire their own operating systems as other significant portions of the market evolve.



Android now has a “special” relationship with Motorola Mobility. Microsoft has a favored relationship with Nokia. Apple is Apple. Research in Motion always has used its own proprietary OS.



Some would note that Metaswitch now faces channel conflict in a way it has not, in the past. But that’s part of the enduring business strategy discussion. What should any firm do when it is an OEM supplier, and end users start asking it to develop its own retail products based on the underlying intellectual property?



It is easy to say a firm should avoid channel conflict. But there often are cases where end users (the market) asks or demands that an OEM supplier also supply retail products. There might be other cases where an OEM simply sees strategic value of such scope that some amount of channel conflict is the price to be paid for some important strategic step.



In fact, Microsoft and Google both face some degree of risk in developing favored relationships with a particular contestant in the smart phone market, even as the advantages also are clear. The point is that Metaswitch faces classic business issues of the case study sort.



The analogy is that Metaswitch supplies an operating system the way that Google or Microsoft do. Both those firms have important business models built on supplying “open” software to many partners. But both those firms also have significant relationships with a single retail brand in the end user market. Metaswitch now will have that same sort of relationship in its OEM business and as a supplier of the “Perimeta” line of SBCs.



No firm would casually risk such channel conflict were the potential rewards not large enough to offset the risk. In this case, Metaswitch is making strategic moves on a number of fronts to reposition its business. Virtually all of those moves carry some degree of risk.



But it is hard to ignore 82 percent profit margins in a retail business where the firm already supplies the intellectual property, nor a business where Metaswitch routinely has sold and installed SBCs on behalf of its retail customers for quite some time, giving it a view of the real world deployment issues and perspectives of its retail customers, in the SBC space.



It is hard to ignore a product whose value is such that sales volumes could triple in four years. And it is hard to ignore getting into a business when a firm’s customers say they want the firm to do so. Channel conflict is one sort of issue. Ignoring the clear requests of a firm’s customers is another sort of danger.



It’s a classic business case study.

Microsoft Wants Broader Use of Virtual Currency in Australia

Microsoft is pressing the Reserve Bank of Australia to consider adjustments to the domestic payments markets to help consumers conduct transactions in virtual currencies, such as Facebook Credits and Microsoft Points.

Responding to the RBA's call for submissions relating to innovation in payments systems, Microsoft points out that virtual currencies have some key advantages driving their adoption including the removal of the cost of multiple card processing interchange fees for low value or micro-transactions.

"While these systems are generally closed at this point of time, it is foreseeable that consumers may desire in the future to exchange value between the various schemes and that they could well become more widespread and prevalent within online retail environments," Microsoft says.

That's an important thought. Credits and tokens, even when purchased with real world money, now can be used only within a closed application, typically a game. What Microsoft and many others seem to believe is that demand will grow, at some point, for methods to convert such virtual currencies into real-world currencies. And the regulatory scrutiny already has begun.

French courts are being asked to define the status of the virtual currency Bitcoin, after local banks switched off accounts for exchanges handling the currency on the presumption that Bitcoin should conform to electronic money regulations.

At the moment, Microsoft Points are not convertible to a monetary equivalent, but are used solely to gain licenses to digital products. However, implicit in its submission to the RBA, Redwood is clearly looking to a future in which the store of value inherent in Points can be used for transactions beyond the XBox Live and MSN community.

Microsoft on virtual currencies

Microsoft Buys Skype, Illustrates Changes in Access Business

Microsoft has bought Skype for $8.5 billion, in an all cash deal. It is the biggest acquisition in the 36-year history of Microsoft.

Microsoft might would want Skype for a number of reasons. Read more about the deal here: http://www.carrierevolution.com/articles/209963/microsoft-buys-skype/.

A decade ago, one could have found much speculation about the extent to which application providers such as Google, Apple, Microsoft or others might "want to become telephone companies." As it turns out, that was the wrong way to phrase the question. A better way would have been to ask whether firms such as Microsoft, Apple or Google might "want to become communications providers."

Clearly, the answer to that question is "yes." None of them want to be "telephone companies," even though video collaboration, voice communications and messaging have become core features for a mobile device, a mobile operating system, email, social networking and other apps.

But that also should raise new questions. What is a "telco, cable company or mobile service provider," when devices, apps and to a lesser extent operating systems also offer communications features?

As it turns out, the unique role in the application ecosystem for telcos, mobile service providers and cable companies is "access" to the global Internet. That doesn't mean those sorts of firms do not also create and sell apps; they do. Voice, texting and video entertainment are apps created and sold by the access providers.

But as the Microsoft purchase of Skype shows, communication applications can be supplied by any number of entities, so the app function is not the "unique" role. The unique role is "access."

That does not mean access providers are restricted from the applications role, simply to note that apps are not the unique role. That also suggests access providers might in the future find sustainable revenue models that build on that unique access role. And many of those applications logically will grow from the unique access role.

Each contestant also can build on a core "app" competency. For mobile providers, location is obvious. For cable providers, many of which also have become content owners, content is a core "app" competency. For fixed line telecom providers, business services remain an area of key competence.

But as Microsoft's move illustrates, "communication services" no longer are a unique competence for access providers. A key competence, to be sure; simply not a unique and irreplaceable competence.

Nokia Will Get "Billions" From Microsoft Deal

Nokia's decision to support the Microsoft Phone operating system will mean Microsoft pays "billions" to Nokia, the companies say.

Nokia will deliver mapping, navigation, and certain location-based services to the Windows Phone ecosystem. Nokia will build innovation on top of the Windows Phone platform in areas such as imaging, while contributing expertise on hardware design and language support, and helping to drive the development of the Windows Phone platform.

Microsoft will provide Bing search services across the Nokia device portfolio as well as contributing assets and expertise in productivity, advertising, gaming and social media. The combination of navigation with advertising and search will enable better monetization of Nokia’s navigation assets and completely new forms of advertising revenue, the companies believe.

Apple Sues Samsung Over Tablets, Smart Phones

Apple is suing Samsung, alleging the Galaxy line of phones and tablets infringe on a number of the company’s patents and trademarks.

The suit, filed on Friday in U.S. District Court in Northern California, alleges patent and trademark infringement, as well as unfair competition. Apple is seeking injunctions, actual damages and punitive damages, as well as a finding that the alleged infringement was willful

The smartphone industry is filled with patent actions, including an ongoing battle between Apple and Nokia, suits between Microsoft and Motorola, as well as a suit by Oracle against Google. See this, for example.

Apple Sues Samsung, Saying Galaxy Phones and Tablets Too Close To iPad and iPhone Design | Ina Fried | Mobilized | AllThingsD

Is Google Now Microsoft? Facebook Bull Thinks So

Rare is the company that keep up hyper levels of revenue growth forever. Even if you agree with this view, Facebook itself is going to be "legacy," sooner or later.

Steve Ballmer Explains Why College Grads Should Work for Microsoft

 Steve Ballmer gets asked by a Seattle audience why college grads should go work for Microsoft instead of some other firms one might think of.

Apple's IPad Getting Enterprise Traction

Despite its launch as a consumer device, the iPad, like the iPhone before it, is getting workplace adoption. That doesn't mean Apple is especially anxious to create enterprise products, but simply that the same attributes that appeal to consumers also appeal to business users.

Research in Motion and Microsoft are the two companies which have to worry about such trends, since those two companies tend to dominate corporate demand for smartphones and PCs.

Apple's IPad Wins Corporate Converts at Wells Fargo, SAP - Bloomberg

Microsoft Kin: Fast Product Life Cycle

Product cycles are quite fast these days, sometimes not by design. Engadget reports that Microsoft's "Kin" is being killed, essentially, after a couple of weeks on the market.

Apparently the Kin development team has been rolled into the Windows Phone 7 team and Microsoft does not plan to launch the device in Europe this year.

Microsoft Kin is dead -- Engadget

Google, Apple, Microsoft Trusted by Half of Adults, Just 8% Trust Media

Nearly half (49 percent) of U.S. adults trust Apple, Microsoft and Google, according to a new Zogby Interactive survey.

About 13 percent of respondents trust Facebook.

Almost nobody trusts traditional media or Twitter, each of which had a trust level of eight percent.

Google And Apple Trusted More Than Facebook And Twitter | jatiN mahindrA doT coM

What Becomes of Microsoft?

Investors largely believe Microsoft will gradually become the equivalent of a technology utility, a boring but necessary provider of the software that runs the world's business community, says Henry Blodget. A smaller, more optimistic crowd is still arguing that, one day, Microsoft will be able to turn its fortunes around, and fight its way back into an industry leadership position.

Blodget suggests a much darker potential scenario, where difficulties in the company's core operating system and Office franchises simply become less important in the world which seems to be developing, Blodget argues.

The Internet has continued to free app-makers from dependency on Windows or any other desktop platform while Apple's iPhone has revolutionized the mobile business, unleashing a whole new wave of personal computing devices.

Apple's iPad seems on its way to supplanting the low-end PC business.

Importantly, none of these trends depend in any way on Microsoft's original monopoly and cash cow, Windows, Blodget says. "Microsoft is nowhere" in mobile or tablets, he says.

Google, meanwhile, is trying to do the same thing to Apple that Microsoft did to Apple 15 years ago: Separate software and hardware and create a ubiquitous software platform for the world's developers to build

To be sure, lots of smart people thought that was exactly what would have to Netflix, and the doomsday scenario has so far refused to play out. But analysts get paid to analyze and create scenarios. This scenario might seem far fetched as anything other than a scenario many analysts get paid to imagine.

But it does illustrate the dangers for any dominant franchise when computing models shift, as nearly everybody now believes is about to happen. Nor does history offer much optimism. Never in computing history has the leader in one computing era emerged as a leader in the new era.

That will not stop firms such as Microsoft, Cisco and Apple or Google from trying. But they will have to make history to emerge as leaders in the next era.

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Is Microsoft About to Fall Behind in Tablets AND Mobile Phones?

Goldman Sachs analysts caution that Microsoft is at risk of falling behind the iPad in the same way that the company fell behind the iPhone.

"Given iPad’s success, tablet PCs dominate many investor conversations, as it has created the potential of a fourth consumption device (PC, phone, TV and now tablet)," writes Goldman Sachs analyst Sarah Friar.

Microsoft seems to believe the tablet is simply another form factor for the PC. Apple perhaps doesn't agree, and maybe doesn't have to worry about which view is correct. If all Apple can do is make the absolute-best tablet PC, then it wins. If it uncovers the fourth media device, and executes, it also wins, and maybe wins even bigger.

But it is hard to see how Apple can lose, at this point. The bigger question is whether anybody else can win, and if they can, how big they can win.

As Ballmer shrugs off the iPad, Microsoft risks another late start:

No More Windows at Google?

According to the Financial Times, Google has banned the use of the Microsoft operating system, company wide. read the story here.


“We’re not doing any more Windows," said one Google employee. New hires are now given the option of using Apple’s Mac computers or PCs running the Linux operating system.

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Apple Tops Microsoft Equity Value for First Time

You knew it would happen one day, and on May 26, 2010, it finally did: Apple's equity value eclipsed that of Microsoft, at least for the day. At the close of trading, a small decline in Apple shares combined with a 4% drop in Microsoft’s stock to leave Apple’s market value ahead — at nearly $223 billion compared with about $219 billion for Microsoft.

 Over the past year, Apple’s share price has nearly doubled to more than $244, as the computer and device maker has ridden a wave of success with its iPhone and new iPad.

The movement of Apple to the top position in market capitalization among technology companies perhaps reflects its growing stature in emerging product categories and services, ranging from new devices to mobile advertising.

Presumably, that is why regulators suddenly have taken an interest in Apple's market dominance as well.

No Skype for Microsoft 7

Microsoft has been having a tough time in the mobile market, it is safe to say, and now Skype says it will not develop a Skype client for Microsoft 7, says Dan Neary, Skype Asia Pacific VP.

Microsoft 7 is the successor to the Windows Mobile operating system.

Neary did not give a reason why Skype is taking that path, but Skype's demurral can hardly be good news for Microsoft.

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Smartphones Have Outsize Impact on Mobility Business

Despite the fact that smartphones have only about 19 percent share of the U.S. handset market, they have outsize importance simply because smartphone use is growing so fast, implies growth of mobile broadband revenue and is key to the hopes new suppliers have for cracking the handset market.

Browsers were used by 29.4 percent of U.S. mobile subscribers (up 2.4 percentage points), while subscribers who used downloaded applications made up 27.5 percent (up 1.8 percentage points).

Some 18 percent used social networking sites or blogs, up 2.9 percentage points to 18 percent of mobile subscribers. About 13 percent report they listened to music on a mobile device. About 22 percent say they played games on their mobiles., up about half a percentage point.

Some 234 million Americans age 13 and older were mobile subscribers, while 45.4 million people owned smartphones in an average month during the December to February period, up 21 percent from the three months ending November 2009.

In an average month during the December through February 2010 time period, 64 percent of U.S. mobile subscribers used text messaging on their mobile device, up 1.9 percentage points from November 2009 levels, says comScore.

Those differences also are reflected in market share of feature and smartphones. In the broader feature phone market, Motorola has 22 percent share, LG 22 percent, Samsung 21 percent, Nokia nine percent and Research in Motion eight percent.

In the smartphone market RIM has 42 percent share, Apple 25 percent, Microsoft 15 percent, Google nine percent and Palm five percent. Google grew the most over the quarter ending in February, gaining five share points. Apple's share was flat and Microsoft lost five points.

Apple iPad Ignites War Over Market That Might Not Exist

With rumors that Google, Nokia, Hewlett-Packard, HTC, Acer, Dell, Lenovo all are working on tablet devices in the same class as the Apple iPad, I suppose it has to be said that those companies do not want to take a chance on Apple having discovered a new mobile device category, and not moving early enough to participate in the segment's growth.

It's just that nobody has yet proven what the market is, or how big it might be. But nobody seems to want to take a chance that a market exists, and that Apple will stake out leadership before anybody else can mount a challenge.

That is not to discount Microsoft's historic interest in the tablet segment of the market, but simply to point out that, up to this point, the segment has not gotten much traction, perhaps because "different interfaces to the same functions" has not resonated. Microsoft's approach has been to envision a PC with a tablet design.

Apple's approach is more similar to that of the Kindle and iPad "touch," though, more a media reader and entertainment-driven Web appliance than a 'notebook with a different interface.'

The range of rumored interface, operating system and featured applications illustrates what happens when suppliers try to position a new device mid-way between smartphones and netbooks and notebooks.

Hewlett-Packard is said to be debutting a slate computer that it will offer by midyear. H.P.'s slate will have a camera and ports for add-on devices, like a mouse.  Apple's iPad appears to dispense with those options.

Under the hood, the iPad is powered by what might be called a "smartphone" processor, while others likely will try to use "netbook" processors.

Google might try to power its slate using Android software, which was originally designed for mobile phones.  Those hardware and software choices show some of the issues involved when trying to create a new class of devices mid-way between netbooks and smartphones.

Then there is the matter of "niche" to pursue. Apparently the first the idea was to create a device for designers and architects, but lately the company is thinking of a broader market of consumers and so would include e-books, magazines and other media content on the device.

Nokia is said to be designing an e-reader. The point is that there is so far no clear consensus about what the category is, how people will use the devices, or whether there is only one large, or multiple more specialized categories, to be satisfied. That accounts for the diverse choices about featured applications, processors and operating systems, among other choices.

All for a market that nobody knows exists, for sure.

RIM, Apple, Google Grow in Smartphones, Microsoft and Palm Drop

Over the last three months, Research in Motion, Apple and Google have gained smartphone market share, while Microsoft and Palm have lost share, comScore says.

42.7 million people in the U.S. owned smartphones in an average month during the November 2009 to January 2010 period, up 18 percent from the August through October period.

RIM was the leading mobile smartphone platform in the U.S. with 43percent share of U.S. smartphone subscribers, rising 1.7 percentage points versus three months earlier. Apple ranked second with 25.1 percent share (up 0.3 percentage points), followed by Microsoft at 15.7 percent, Google at 7.1 percent (up 4.3 percentage points), and Palm at 5.7 percent.

Google’s Android platform continues to see rapid gains in market share.

In an average month during the November through January 2010 time period, 63.5 percent of U.S. mobile subscribers used text messaging on their mobile device, up 1.5 percentage points versus three months prior.
Browsers were used by 28.6 percent of U.S. mobile subscribers (up 1.8 percentage points), while subscribers who played games made up 21.7 percent (up 0.4 percentage points). Access of social networking sites or blogs experienced strong gains in the past three months, growing 3.3 percentage points to 17.1 percent of mobile subscribers.

Social networking now is more popular than listening ot music, at least where it comes to mobile device activities.

More Evidence of How Hard it Is to Replicate Google's Success

It's an impressionistic, but useful take on Google's uniqueness among companies, that so few ex-Googlers have been able to replicate Google's success. Googlers are smart, there is no question about that. But Microsoft and many other firms go out of their way to hire "smart people." That fact alone does not seem to automatically produce out-sized results.

Think you can be the next Google?