The Three Big Tech Battles of 2007: Who Has the Edge and What Is the Winning Strategy?
Jan 1, 2007 4:00 AM PT
For this last column of 2006, I thought it would be interesting to look ahead to 2007 and explore the battles that are to come. The three big ones are the Battle for the Digital Home, the Battle for your Pocket, and the Battle for Your Lap.
The fighters include Apple, Microsoft, Samsung, HP, Dell, Gateway, Sony, AMD, Intel, Linux supporters, Motorola, Nokia, Palm, Research In Motion, Cisco and IBM. We are not talking lightweights and the battles will be long and likely bloody.
The winner(s) will be those that can focus unerringly on real customers to provide the solutions the market does not yet know it wants but will lust for once it realizes it wants them -- rather than competitors that may be clueless.
Battle for the Digital Home
There are a number of battlefields in the digital home. In order, they are distributed music, distributed video, and home automation/security. The players we tend to watch very closely are traditional consumer electronics vendors like Sony and Samsung, and the emerging class of technology vendors looking at this space, which include Apple, Microsoft, HP, Dell, Sony and Cisco.
Behind the scenes we have technology vendors like AMD, Intel, Texas Instruments and Motorola. We'll mostly focus on the majors, but Intel in particular does have enough power to change the outcome if it can use that power wisely and effectively. Strangely enough, I think AMD may be doing more to move the ball even though it really lacks the resources necessary to do so effectively.
The big impediments are the Recording Industry Association of America (RIAA), the Motion Picture Association of America (MPAA), and the content owners that are so concerned with piracy they have almost made it impossible to create a solution that offers an experience that the market will find compelling.
It is interesting to note that those who are getting this experience now are probably doing so by bypassing the controls that these bodies have put in place, which actually makes high quality pirated media more valuable than that which is legally acquired. My personal opinion is that both the RIAA and the MPAA are inadvertently promoting piracy as a result, and that makes no sense to me.
The user experience goal is this: With TV-like ease, I can in any part of the house or car listen to or watch the media I have rights to at any time I want -- except while actually driving. It's a simple goal: Sit down, turn on and enjoy. Both Microsoft and Apple seem too involved with keeping the media owners happy to provide that experience.
The tech and CE vendors are too concerned with keeping the retail channel happy to provide the hardware that will make this work. I think Dell, because it is its own retail outlet, could steal here if it executed. Virtually no one is including the car in the overall solution -- strangely, an exception is Intel, which is doing some work in this area.
Of the products I've been briefed on, the most compelling -- and often the most expensive -- are those that are either based on Linux or have a proprietary platform and allow you to rip CDs and DVDs into an encrypted repository and then distribute them around the house. For music, Sonos has been the technology leader, but it lacks video, and its solution lacks the bandwidth to pick it up.
So far, home automation largely sits on the sidelines, with companies like Smart Labs, which is quietly working to integrate this into its existing platforms. Of the big players, were I to handicap all of the efforts, I'd currently lean toward Cisco, because it has the power and the technology -- and doesn't seem to be particularly enamored with keeping anyone in the way of a good solution happy.
Strangely enough, Sony should own this space unchallenged. Its capability to build compelling products is unmatched in all of the segments it would have to embrace, but it can't seem to get its different divisions to cooperate. Plus, it made so many potentially suicidal mistakes -- at least in 2006 -- that rather than betting it will own this market, many seem to be betting it will be out of business by year end 2007.
The Battle for Your Pocket
I've concluded that just as PDAs (personal digital assistants) stand alone, MP3 players will be on their way out in 2007, replaced by phones that pick up this capability. This is one of the reasons Apple is expected to enter the phone space, and since it owns the MP3 space, it has an advantage coming in. Still, it is questionable whether music or messaging will drive the next wave. While RIM (Research In Motion) is hardly in Apple's class, it is growing strongly and had -- almost despite itself -- a very good year in 2006.
The right answer to the media or messaging question is probably "yes," because people will increasingly want both. Apple, because it got out of the Newton business, doesn't have an edge in messaging -- though, were I to pick one, music has the bigger edge.
Here, I think the power players will be Microsoft, Nokia, Motorola, Apple and Google. Apple will lack the ability to pick up the critical corporate market for professional volume but will be the early favorite for consumers -- and consumers, not corporations, still buy most of the phones currently in use.
Microsoft and its partners have the edge in corporate, but they simply have been unwilling or unable to do what it takes to win a segment like this. They generally underfund the effort and lack the will -- Plays for Sure is a recent example of this behavior -- to stay the course until success is realized.
Nokia and Motorola are wild cards, they could both step in with or without Microsoft to pull the whole thing together. However, they too seem to lack the marketing strength to pull off what is necessary. An even bigger wild card is Google, because it is expected to release a phone fully funded by advertising that will have many of these capabilities. If it does that -- particularly if it does that with, as opposed to against, Apple -- everyone else may need to go home and start over.
Given that I think marketing and hardware excellence will make the difference here, I'd give Apple the early handicap. If it can do for phones what it did for the MP3 market -- and it clearly has a strong track record -- it should be the early favorite.
There is some potential cross leverage between these first two battles; winning one may provide a significant advantage in the other.
The Battle for Your Lap
This is really the Battle for the Desktop, but given that most of the PCs sold will be laptop computers, it just seems to make more sense to talk about the Battle for Your Lap. In terms of the goal, we'll focus on those that buy their own machines, because IT typically buys largely on price. The goal, then, is an attractively priced and attractive line that covers the range of what people want and will allow the highest degree of personalization.
It is fun to position Apple and Linux against Microsoft, but at fractions of market share, neither will really make much of a difference in 2007 to anyone outside of the Apple or Linux loyalist camps. The real battle in platforms will be between Windows XP and Vista, and it won't go easy. Despite what you may read, most folks seem rather content with XP, and content folks are difficult to move.
We could chat a bit about why Microsoft should have used a penetration pricing strategy around Vista and use as a foundation the fact that the operating system is a keystone product that enables the sale of much of the rest of its portfolio and creates the greatest completive barrier to entry. We could also point to Apple as apparently understanding this better than Microsoft does -- and the Internet Explorer strategy as a case that proves this point -- but you can't do anything about it, and Microsoft probably isn't listening.
According to those working closely with Microsoft on the Vista launch, the marketing team is the best it has ever had; however, the effort also appears massively underfunded. Critical positive reviewers are not getting the support they need, and they seem unable to even match Apple, whose Mac vs. PC campaign is probably doing more in a positive vein for Microsoft's image than anything it has ever done to drive the upgrade dialog.
So, unless they increase their resources, I give the edge to XP for the rest of 2007 with regard to platform. For the PCs themselves, the top players are HP, Dell, Gateway, Toshiba, Acer, Lenovo (in China) and Sony. While I really think that if Lenovo execs put their minds to it, the company could pull an upset, there are two vendors who took my advice and built a product designed for Vista. Only one of them developed a laptop -- the other is a lot larger.
Unfortunately, I can't tell you who they are, because I'd then have to shoot myself, but I'd give the edge next year to the company that embraces Vista and creates the product that comes closest to doing for that platform what Apple will be doing with Leopard and its product lines. In a few weeks, you'll know who that is.
With that, I say farewell to you for 2006 and hope to see you back here in 2007. Happy New Year!
Rob Enderle is a TechNewsWorld columnist and the Principal Analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.