Google or Microsoft? That is the Question

on February 26, 2013
Reading Time: 3 minutes

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If you are a technology company—not named Apple—then the answer to this question is vital to your future. The fact of the matter is that all technology companies, other than Apple, do not solely control their own future. Samsung, HP, Acer, Dell, Lenovo, LG, HTC, Nokia, etc., must rely on either Google or Microsoft for their operating system for the smartphones, tablets, and or PCs they choose to make. So the answer to the question, Google or Microsoft, is as strategic as it gets. Making a wrong decision could mean the end of your company.

Google

Right now Google’s platforms are the hot ticket item. But they come with a price, or a lack of a price for that matter. Google would prefer that all hardware that runs their software be virtually free. That may seem counter to the logic of them releasing a ChromeBook for $1200 but that is simply a strategy to take advantage of a particular market and get early adopters to pay them for their own market research. It is actually quite brilliant.

The long game, however, for Google is one where their services are running on every device and getting there requires the hardware be practically free. This is the world I firmly believe Google wants to see happen. So if I am one of the aforementioned brands trying to make money in the hardware game, I should be mindful of betting my future on a company who would rather me not make any money on my hardware. Also, Google gets almost all of the ad revenue that comes through Android devices. In Samsung’s case, they get 10% but the rest goes to Google. Who really makes money in this case? If you say Google, you are correct; this is part of their end game. How do others make money?

Microsoft

Microsoft on the other hand genuinely wants their hardware partners to make money. This is why they offer a healthy premium on the license of their software. The assumption is that Microsoft software adds value and is therefore valuable. That value should translate into a reasonable price willing to be paid by the mass market in order to capture that value. This was how it worked for nearly two decades in the peak of the PC era so is there reason to believe it will not work again with devices in the post-PC era?

The challenge with Microsoft is that their ecosystem, mainly in apps, is well behind that of Google. To put all your eggs, or even most your eggs, in Microsoft’s basket brings with it the assumption that they will yet again get it right someday, after many tries. Maybe they will.

The Universal Downside

There is a downside to licensing someone else’s software as the main software interface your customers will be using. Actually there are several. First the hardware manufacturer does not actually own the end consumer. This creates platform loyalty but not hardware loyalty. In this scenario, the next time a consumer needs to by a new PC, smartphone, or tablet, they may stay loyal to Microsoft or Google, but said hardware manufacturer must now compete for that customer each time they go back to buy new hardware.

Building out the downside of platform loyalty for the hardware manufacturer comes with it the other challenge of licensing someone else’s software. Your competitors may also license that software which makes standing out or differentiating much more difficult. It is this differentiation, which must go beyond hardware, that can begin to create customer loyalty. But when all your competitors, not named Apple, are running the same software as you, it makes it difficult to stand out in a crowd. I call this the sea of sameness and its getting bigger and deeper every year. Standing out in the sea of sameness is the biggest downside of licensing someone else’s software.

This is why there must be and there will be consolidation in the hardware side of this industry. The current players can not keep going the route they are going forever. Companies may make a go at building their own OS, but they risk losing time and resources to the dominant players. The platform providers like Microsoft and Google, may also start making more of their own hardware, which will complicate matters even further and cause consolidation to happen even faster.

These are certainly tricky waters to navigate and for those who have done this before they are in uncharted territory. The companies that survive the turbulent waters of the sea of sameness will either sail through or sink with the flag of Google or Microsoft mounted high on their mast.