Microsoft being in the software business pretty much relies on the fact that they deliver compelling platform value to the hardware vendors to whom they sell their client OS. What strikes me most about the iPhone / Palm Pre development is the fact that they subsidize their hardware to such an extent that it doesn’t make any sense for hardware vendors to sell their bare hardware with Microsoft Software (priced separately) on top of it. You cannot get hardware of the class of iPhone / Palm Pre at the aggressive price point of $200 without already being locked into a platform.
Microsoft cannot just use their old “sell software platform” over commodity hardware to get to the feature list of iPhone / Palm Pre. They will have to partner with somebody or make their own hardware. This already happened with game consoles.
Google Chrome OS is possibly a similar shot at consumer notebook / netbook platform business. Here is a hypothetical scenario: Somebody makes a really slick 3G/4G/WiFi capable netbook. However, instead of them scrambling for a free Linux distribution, Google pays them to install their OS on their netbook and subsidize its price for consumers. It is not such a crazy idea given that Google already pays Mozilla to make Google search the default and subsidize Firefox (making it free, actually) and many craplet providers pay notebook sellers to put craplets on your notebook. The netbook OS itself is locked in to Google technologies and Google webapps. Google makes money off their web platform. Suddenly, there is a price difference (a huge one actually… given Microsoft’s Windows OEM pricing is high compared to netbook prices) and Google has an advantage in consumer netbook space.
However, its not that rosy for Google yet. Though I talked about “Google technologies” and “Google platform”, there is none right now which makes as much money as search. It would be better for Google, if they come up with a bunch of popular webapps that make ad money for them… something which people would use most of the time. Google would then be able to play its huge and successful ad network to its advantage.
What can Microsoft do? Given that its significantly behind Google in advertising revenue, it should play on its other strengths. It is investing heavily in Azure and providing ways for enterprises to transition and operate off the cloud. However, this article is about consumer devices. If Microsoft focuses on integrating Windows with Azure specific services then they will have a way to subsidize notebook / netbooks similar to the above scenario and make money from Azure services. However, its situation is also similar to Google’s… they don’t have a highly successful (money generating) “web platform” yet.
What kind of web platform am I talking about? Some basic services are essential:
- Single sign-on across web applications
- In-built Internet wide notification mechanism (nice interface over email / IM).
- Collaboration platform (not very different from Live Mesh, though something like Google Wave is probably better)
- Some basic apps like blog publishing, photo sharing etc.
Microsoft already has such services under the Live branding. However, the critical step really is to release Azure frameworks to enable other developers to tie in to Live web applications. It may not be a bad idea to showcase such apps in an App Store much like the iPhone App Store and make money off that.
Google has an edge that it starts to make money immediately over its search the moment Chrome OS gets into consumer hands. Also, it has Google App Engine which competes with Azure. In a sense, Google has two sources for making money, ad revenue and Google App Engine, and it is strong in ads. Microsoft is not so strong in ads and like Google, is just starting with Azure.
It is also interesting to note that Facebook already has a way for applications to be rolled in a highly popular social network. However, its inability to make money through advertising and keeping the social graph closed inside Facebook makes me feel that its necessary to look at providing Cloud infrastructure as a means for making money. Instead of keeping a closed social network, may be its a better idea to open up the network and compete for webapp developers who would target your cloud platform. Of course, all of this is great for the consumer who gets more and more free applications and subsidized hardware. However, this also means that traditional desktops like the Windows desktop, Mac OS X, KDE and Gnome don’t cut it for the netbooks… and the difference between netbooks and notebooks widen as the developments in the two different ecosystems deviate from each other.