Jan 122011

I believe there’s a pattern appearing throughout the last four decades of competition for the market domination among various software and hardware manufacturers, and it can be seen once again on the current smartphone market. Recently I saw an article on CNET.com about a brief history of Android phones. So many of these phones have been released in the past two years, and since the number of Android devices bought in the last quarter of 2010 is unsurpassed by any competitor, it’s just a matter of time (few months most likely) when Android will be the leading mobile phone OS in the USA. My new HTC EVO is one of the most successful and best Android phones ever, and it comes from a manufacturer who up until recently only made Windows phones, and didn’t hit it big until they chose to try their luck in the Android waters. Why is this platform so successful?

Rapid Growth

To mention some main contributing factors, Android already has a plethora of developers and apps, and unlike its competitors, it has open and consistent standards, multiple manufacturers who keep providing new quality phones, a rapidly growing base of users and a liberal app approval policy.  Its main competitor, Apple’s iPhone, is based on a proven technology (actually an iPod touch with a phone module), but it is a quite closed, rigid and controlled environment (if you don’t believe me ask some iPhone app developers, or try to get AT&T to unlock your iPhone when you’re traveling overseas). RIM’s Blackberry, a great phone and email machine, a shining star of the first decade of this century is falling behind and losing users, and barely anybody takes Windows phones seriously any more (their market share fell into single digit now and aside from them being slow and buggy, it seems to be virtually impossible to update a Windows phone OS to a new version without buying a new phone), and Nokia Symbian for some reason is not a true competitor in the USA.  Most of all, all of the above mentioned systems except Android are produced by one single hardware manufacturer and their software is proprietary and incompatible with anything else but their previous models (and even that is sometimes questionable). The ground is so fertile for Android that it’s almost scary how fast it is expanding and seemingly threatening to gobble up everything else. It will probably never get all the faithful Apple and Blackberry users to migrate off their favorite platforms, but still, the growth is so startling that it’s catching many corporate giants on the wrong foot. For example, it seems Skype has just abruptly woken up with a deer in the headlights look, and it had to buy its Android competition to catch up. Android platform is open source, powered by a Linux kernel, it is wide open to all manufacturers and due to its compatibility it has gained so much momentum, respect and good buzz that not only geeks like us, but even everyday users are massively switching over.

I believe that whenever new and similar technologies clash on a free open market, the more open and least restrictive one will win, provided the difference in quality is not significant. (I also have an example how some big manufacturers are playing dirty games behind the scenes trying to fight the inevitable free market reality, but that’s another post.)  Let me show some examples from history where respectful, shared, innovative and collaborated manufacturer-manufacturer-consumer relationships resulted in a win-win-win situation and prevailed over sheer narrow-minded greed.

Betamax vs VHS

Sony Betamax initially owned 100% of the VCR market in 1975. However, due to various reasons, some being the court battle that kept it off the shelves for a year allowing VHS to catch up, lower prices of initially inferior VHS equipment, and longer recording times on VHS, by 1981 U.S. Beta sales dropped to 25% of all sales. But there is another, less frequently mentioned cause of this market shift: Sony tried to limit competition and wanted to keep the biggest piece of cake to themselves. They also wanted to charge the very few chosen manufacturers high royalty fees for Beta technology. Instead of going for short term profit, Sony could have been more flexible and adopting new improvements, and could have allowed more manufacturers under their umbrella, but no, just like every monopolistic giant, they instead tried to limit the competition and hence lost the format war and the market in the process.  JVC on the other hand, got a consortium running with bunch of manufactures who couldn’t afford, were not allowed, or didn’t want to work with Sony. VHS technology improved gradually with collaboration and increasing competition, and VHS systems became simpler to operate, cheaper, got a TV tuner (Beta was invented as a closed system and Sony kept stubbornly refusing this addition for a while) and slowly but surely, the greed cost Sony a lot of money. JVC was not charging huge fees for licensing their technology and instead of limiting, it accepted every single manufacturer who wanted to manufacture VHS tapes and VCRs what resulted in so many more allies that in the long run, just because they were open and affordable, they made billions in royalty payments and ended up dominating the market. It was a battle between the near-sighted giant and a bunch of little guys. Surprisingly, or not, the arrogant giant lost.

PC vs Apple Macintosh

Apple computers were a big hit in the 1980s for a reason. They seldom hold the market majority, but have very often been the visionary and the trend setters. However, PCs got to dominate in the 1990s as they got so much more open, devised universal compatibility standards followed by many manufacturers and allowed an insane number of peripherals and hardware and software manufacturers to work together on one machine.  In fact, Windows, in spite of Microsoft’s networking and browser monopolistic tendencies, is such an open system that it is amazing how well everything works, considering the number of hardware and software manufacturers whose stuff coexists on every PC (remember how many times you stopped product’s further installation just because it wasn’t certified with Microsoft – I’ve never done it at work or at home, and everybody proceeds and installs software although most of it is not Microsoft certified).  Sure, Apple can say that their system is more stable, but think about the level of control they keep over their system and how many few manufacturers make and sell Apple equipment and you’ll understand why their products are so stable, but so limited (and why they yell so much at Adobe Flash, one of few “strangers” they allow on their systems) that it’s a niche market, with great consumer value for people who can afford it and are willing to pay so much more for less, comforting themselves that less is more ;-).  In addition, Apple’s markup for all accessories and simple tools was so high in the last and this century that most people got fed up with this ripoff and went to where the value was, which is the PC.  Same is happening to iPhone with more and more users going to Android, me being a recent convert.

Compaq et all vs IBM PC PS/2 and MCA

PCs (A.K.A. IBM PC Compatibles) had their own dark age period when they were not so much compatible and the PC industry went through its own “controlling” war with IBM.  After being successful with initial models that were reverse engineered and cloned by many manufacturers (Compaq being the leader), IBM decided they were big enough to change the standards and use proprietary technology to protect its market share and get the biggest piece of cake.  They came up with its own new fancy but expensive technology, PS/2 and MCA.  This was good stuff, but incompatible with existing peripherals and much more expensive for consumers at the time, not to mention the hardware manufacturers, so it took many years for some of these components to become mainstream (and only some of them), and thus IBM lost an even bigger chunk of the market while the rest of the manufacturers and end users continued using the slower but standardized, universal and much cheaper ISA bus and a plethora of ISA expansion cards. Again, a giant thought they could call the shots, rip off more users in the process, but lost to bunch of little guys instead.

I didn’t have time to research this yet, but it brings a feeling similar to the other examples. It was a better technology but it was more expensive and more controlling. However, it seems there were many more than usual dirty games in the background and I won’t go into that unless someone wants to comment and start a discussion.

Blu-ray vs. HD DVD

Sony learned their lesson during the video tape format war and was far more careful with Blu-ray technology. They were much wiser this time, and planted a “trojan horse” of the new technology in many houses throughout the world, the engineering marvel, Playstation 3 gaming console. Although the first models were quite expensive and well over $500, in the beginning they were still much cheaper than any standalone Blu-ray players. This was the ultimate gaming machine, but also the best and the most affordable of the few media players that could fully utilize new 1080p high definition big screen TVs. Sony was so well far-sighted that they were moreover ready to sacrifice instant profit and instead lose money on every sold PlayStation 3 console, hoping they will make it up with software/games and increased revenue after Blu-ray wins the format war. Very, very smart move, but they did far more – this time they didn’t fight the battle alone and were not as arrogant – they gathered a large number of manufacturers ready to produce Blu-ray players and formed a Blu-ray consortium. Together they were far more powerful, and the users saw the value, and were more likely to adopt this technology. HD DVD on the other hand was supported by Microsoft and manufactured by Toshiba and very few others, but it had less storage capacity (again, remember Beta) and lower signal bandwidth than Blu-ray. This time it was Toshiba who showed arrogance, thinking they could pull it off alone. A lot of money was burned during the war, Toshiba managed to win or buy some studios’ (Universal, Dreamworks and Paramount) allegiance in the Summer of 2008 when they saw the numbers were not as favorable, but that only put their product on life support and prolonged the agony. Statistics used during the war was skewed, and when they were counting competitors’ (Blu-ray) players, they would omit the immense numbers of PS3s, counting only super expensive and rare standalone players, but counting PS3 consoles when representing statistical numbers of Blu-ray disks per player purchased. All these attempts resulted only in prolonged war, but the studios gradually started losing money and patience as consumers weren’t buying DVDs, HD DVDs, or Blu-ray movies, waiting to see who the format war winner will be. Finally, in January 2008 Warner Brothers studio decided to stop publishing titles in HD DVD. Many others followed and in matter of few weeks everybody knew the format war was over and the HD DVD ship capsized. Toshiba and HD DVD project had just one last kick – while kicking the bucket, they tried to sell their players at less than half price, hoping to win consumers in mass numbers in a desperate attempt to influence studios to pull back from exclusive Blu-ray support. But most of the early adopters are not naive, so it didn’t take long before the HD DVD player assembly lines had to be disassembled. In this case again, the format war winner kept improving quickly, had a much broader support from a great deal of manufacturers, and gained a great momentum with a lot of devices, while the (two) arrogant giant(s) lost.

Android – Consumers: Win-Win

Unlike other giants whose solutions seem to work as fly traps, Google seems to be one of few who stay away from proprietary stuff and keep the door wide open, not only for the ones who want to enter, but also for the ones who want to leave. They want their customers to be certain it’s easy to move away from their solution if and when it’s needed, and that they can easily integrate with another open system or solution based on open standards. They make data imports and exports easy. This applies to Android platform as well: “their'” phones sync to “the cloud” (internet) and in theory moving from one Android phone to another is a fairly easy exercise which doesn’t require a computer with huge resource hog software like iTunes – your phone is already a computer and all it needs is an internet connection and the new Android phone you chose will get populated with your contacts and phone settings automatically after signing into the same Google account. Moreover, this is just one and the most seamless of the various backup/restore options. I purposely wiped out my new phone many times to test it and each time I reconnected it to my Google Gmail account, all my contacts reappeared automatically. This reminds me of the two extreme types of IT experts I know, one being very protective of their knowledge, not willing to share anything with anybody, but the executives and coworkers always keep praising and rehiring the other expert who is like an open book, sharing everything with whoever wants to know. Similarly, Android is gaining such an impressive market share so rapidly because it’s beating the proprietary products and arrogant giants the same way they were beaten in the past, and this is good for us, the customers. Meanwhile, Google keeps showing significant respect to developers and engineers, it provides and keeps updating the tools, and makes the Android SDK (software developer kit) available free of charge. Moreover, I was amazed to see a great amount of almost fearful respect towards the blogging community from some Google employees I happen to know from my previous life as a Deputy CIO. I would never expect this from an Apple or a Microsoft person, but it seems these guys know what the new type of marketing is about, and I believe it is clearly present in their corporate culture. They try not to annoy the developers, software engineers and IT executives and unlike others, they are not trying to be less competitive and more controlling and make their stuff more proprietary than it needs to be. It seems that both Google’s leadership and employees understand many more things about the market, far above and beyond just how the technical stuff works. This awareness keeps them away from making the same mistake that many greedy and near-sighted giants made in the past by attempting to control the market instead of adjusting to it, which often resulted in huge market share losses and shifts throughout the last decades. Instead, Google seems to stick to open standards and universal compatibility. That’s what got Android to where it is today and where it is going tomorrow.

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