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The Fall of Google, the Rebirth of Microsoft and the Changing Face of Apple and Linux

By Rob Enderle
Jul 14, 2008 4:00 AM PT

Sometimes it's the little things that can cause you to step back and rethink how you look at a company. For much of this decade Microsoft has been the "evil empire" with Apple, Linux and Google on the side of the Force (sorry for the "Star Wars" metaphor).

The Fall of Google, the Rebirth of Microsoft and the Changing Face of Apple and Linux

With Microsoft actually doing some positive creative things for once, Apple's decision to raise iPhone prices in the face of declining consumer income, Google's attack on single parents, and Richard Stallman's attack on Bill Gates' philanthropy (which follows an earlier anti-U.S. positions), it appears these entities' images may be changing.

Let's chat about these things this week and close with my product of the week, Microsoft Equipt, which is the first desktop bundle since the original Microsoft Office that potentially could change the entire market and the broad perception of Microsoft.

The Fall of Google

My general sense when I looked at both the age of Google's leaders and the way Google was structured was that Google's biggest short-term exposure was not competition but entitlements. Like many dot-coms, they seemed to go a bit overboard and without the experience as to how to manage these entitlements were likely going to get in a lot of trouble when economic conditions forced them to cut back.

Well, that may have just happened. Apparently, one of the first cutbacks was on day care, increasing prices to employee parents using this program from US$1,425 to a whopping $2,500 per child per month. Parents with two kids saw their annual expense jump from $33,000 to nearly $60,000. With reported comments from Google's executive staff that reminded me of the "let them eat cake" comment that supposedly helped start the French Revolution (the woman this comment was attributed to, Marie Antionette, was guillotined to death) you have to wonder what the folks at Google were thinking.

If you search on Google on the words "Day Care and Google" you'll see this thing has hit a global nerve with words like "Mutiny" and "Discontent" common. At a time when the executive staff seems to be flitting around in the company 767 "party plane" and prices for everyone are growing out of control thanks to gas increases; hitting parents, many of them single parents, with something like this really caused a lot of people to look at the company differently. I don't know what your definition of "evil" is, but to me, going after parents and kids during hard times while vacationing in a company-paid flying palace would be more evil than anything I can recall Microsoft ever doing to its employees. I'd suggest they get rid of the plane if they really need to save costs before they attack their employees' kids.

I think this forms the basis of a Google decline and the first big step down that path.

The Changing Face of Apple and Linux

In many ways, both of these entities have benefited by being anti-Microsoft. I can't argue that this has mostly been Microsoft's own fault but it becomes risky for anyone to depend on the other guy screwing up as they typically don't forever.

For Apple, I think the strategy of colluding with AT&T to increase prices for the new iPhone, bring out an incomplete product, while reducing the cost of the phone to Apple during a time when consumers are in financial distress is a bad one. While I'd often agree with Steve Jobs that most consumers, including me, don't do as much homework as they should when making a purchase, taking advantage of them during hard times isn't wise. It could cause many who aren't dyed-in-the-wool Apple fans to look at the firm differently. I mentioned this last week when I said it was "OK to Say No to the New iPhone." Add this to the reports that Apple charges customers 200 percent more than Dell for similar upgrades to Macs, and recall that taking advantage of customers who were locked in was a large part of what caused IBM to fall in the '80s. People under financial pressure just don't respond kindly to any vendor taking advantage of them.

For Linux, Microsoft's strategy of embracing and interoperating with the platform has created an interesting conundrum. IT managers really like this strategy and generally operate mixed environments. They really have no problem with any vendor who isn't misbehaving and is providing good value. In short, peace has broken out -- but for a product that was marketed as a weapon in the war against Microsoft, peace is a poison.

However, to fuel a war, Microsoft has to play, and generally Microsoft doesn't want to. To fix this, Richard Stallman just went after the Bill and Melinda Gates Foundation, challenging its work and taking shots at Apple and Adobe in the process. Going after a founder might upset Microsoft, but this has got to be one of the stupidest things I've ever seen anyone who wants to help their cause actually do -- well, maybe number two.

Recall he had previously shown up in Cuba apparently positioning Linux as a weapon against the West, which was equally unwise. What's next? Helping Iran? Oh wait, he did that too. Have to admit the guy is on a roll.

Apple and Linux, at least Richard Stallman's Linux (fortunately he speaks for the minority), seem to be drifting from White Hat players to Black, and this bears watching.

Product of the Week: Microsoft Equipt

One of the big problems any company that reaches a high level of dominance has is growing profit. Unfortunately, both the most foolish and the easiest path to do this is to allow their products to become more expensive than the value of that product to the buyer.

This, I believe, goes to the core of the problem with both Windows Vista and Microsoft Office. It is a suicidal, at least long term, misuse of power, and I've seen a number of companies do this -- the first being IBM, and the most recent being Apple. The only company I've seen put in place a formal process to prevent this mistake is EMC, and I think every firm should do this.

Microsoft Equipt actually provides more value than it costs and may be the perfect accessory that makes Vista, for most of us, work. I'm a big believer in subscription pricing because it gets vendors off the path of having to break aging products to get you to buy new ones while placing emphasis on assuring reliability and ease of use (customers don't renew subscriptions for things they no longer value).

A subscription model also focuses companies more on services than core technology creating a better balance between features that only developers love and experiences that consumers' need. Finally, a subscription ties the vendor and the consumer into a long-term relationship, which tends to both improve information going to the vendor and makes them more responsive to the consumer.

The product itself bundles Microsoft Office Home and Student (all most people really need), Windows Live OneCare (security, performance, help), Office Live Workspace (collaboration), and Windows Live Services (communications) under a $70 annual fee for up to 3 machines. That's under $6 a month for 3 machines or under $2 per machine per month. Hard to argue that isn't a good value.

I think Equipt will help change how people perceive Microsoft and it is a huge step in the right direction for the company. As such, it floats to the top as my product of the week and has a good shot at being my product for the 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.

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