“We support two platforms at Apple. Two. The first is HTML5 […] and the second is the AppStore”

–Steve Jobs, WWDC 2010

War of the platforms 1.0

A lot has been written about the “platform wars” between Apple and Microsoft. The quick summary is as follows:

Apple has established the dominant position in mass market personal computing in the 1980s. It has been able to establish this position by integrating its hardware and operating system into a single package – the Macintosh. Popular applications such as VisiCalc, the first spreadsheet software have been created for that platform thus forcing consumers seeking to use those applications to chose the Mac platform over its competitors.

Microsoft chose a different strategy. By licensing its Windows operating system to many hardware manufacturers Microsoft managed to establish a wide hardware footprint, which translated into a larger install base, which in turn made independent software vendors prioritize development of Windows applications over Mac ones. Furthermore, this strategy commoditized the hardware market thus enabling Microsoft to extract tremendous profits from the ecosystem that it nurtured.

In the mid 1990s Apple tried to adopt the Microsoft strategy by licensing its operating system to other hardware manufacturers – the so-called clones. However by that point Microsoft market domination was too large and Apple’s market share continued to slide.

Upon his return to Apple, Steve Jobs quickly killed the clone program and started to gradually rebuild the company by focusing on trendy esthetically appealing computers as well as the Mac OS X, the new operating system. Jobs also took care to make sure that Microsoft will continue developing its Office Suite for Mac.

War of the platforms 2.0

With the introduction of its iPhone, which came with the new operating system iOS, Apple kicked off the post-PC era. Google quickly followed with the Android operating system starting the current platform war for dominance in mobile devices.

Seemingly taking the page out of the Microsoft playbook Google opted to license Android to hardware manufacturers. Google succeeded in getting most major phone and tablet manufacturers to use Android. Today the Android market share exceeds that of iOS. The two companies are competing for developers and independent software vendors. While first-mover advantage allowed Apple to establish a sizable ecosystem, Google is gaining. Majority of popular mobile applications today are available on both iOS and Android.

Adobe Flash

Adobe carved out a niche for its Flash technology. Primarily used for creating rich web-based applications especially those with video, Flash is basically a platform within a platform. An application written in flash will work on Mac, Windows, Solaris and other systems as long as the user has downloaded the Flash player. So by choosing the Flash technology developers don’t have to choose development for Windows versus Mac versus another platform thus diminishing the importance of the operating system as far as flash-based applications are concerned. Adobe in turn is able to sell expensive developer tools, which developers are forced to buy in order to be able to reach the Flash install base.

Apple refused to support Flash on its iOS devices. Adobe accused Apple of stifling cross-platform development, while Apple motivated its lack of support for Flash by purely technological choices (See Steve Jobs’ Thoughts On Flash).

HTML 5 and its long-term impact

HTML 5 is going to allow creation of web-based applications by enabling the browser to run more complex processes such as video rendering, complex data operations and others, in effect making the browser the operating system. Just like with Flash, an application developed for HTML 5 will work on any device that has a browser with HTML 5 support. Unlike Flash however HTML 5 will not be controlled by any one company. It will be a completely open standard meaning that anybody will be able to create an HTML 5 browser and anybody will be able to create an HTML 5 application.

If we assume that majority of software applications will in the future become web-based and if we further assume that HTML 5 will become the dominant platform, that means that the majority of software created in the future will be completely operating-system agnostic. This has two important implications:

1. Because developers won’t be choosing between competing platforms, no company will be able to muscle its way to dominance by aggressively signing on developers.

 2.Because most applications will run on most devices, consumers will not be locked into any specific platform.

This will fundamentally shift competitive dynamics between technology platforms. Instead of competing to establish platform dominance and then protecting that dominance the way Microsoft did in late nineties, competition will increasingly be based on hardware. The role of the hardware operating systems will be to optimize the fundamental hardware characteristics such as battery life and usability. This means that hardware will play a more important role in the competition of technology platforms and will cease to be a commodity.

Steve Jobs’ quote in the beginning of this post as well as the fact that Apple is one of the major contributors to the HTML 5 format, suggests that Apple believes in the above turn of events and prefers competition on hardware to that of competition on third-party software ecosystems.

Google’s recent acquisition of Motorola Mobility suggests that Google too believes that that’s where we are headed. Google understands that it needs to create hardware that’s tightly integrated with software and that will be able to stand on its own in competition with Apple and other hardware manufacturers.

Microsoft is late to the race (again). The company recently introduced its touch operating system – Windows Phone. In its marketing materials Microsoft is touting compatibility with popular Microsoft applications such as Office and Xbox Live. Microsoft is also reaching into its developer community to ensure broader software availability as well as partnering with major hardware manufacturers to produce devices that run on Windows Phone. Microsoft is also investing heavily in Silverlight, a proprietary platform that competes with Flash.

What this all means for consumers?

I think that the consumers will benefit from the new competitive dynamics. By not having to worry about whether a particular device will be able to run our favorite applications we will be a lot more free in choosing which devices to buy. I also believe that smaller device manufacturers will proliferate. Who knows, maybe there’s another Apple in the making.

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People who have long been expecting the release of iPhone 5 may be disappointed to hear from today’s “Let’s talk iPhone” event that there won’t be one. Apple is instead releasing the iPhone 4S, which, from physical appearance, is exactly the same as the iPhone 4.

Nevertheless, the iPhone 4S has a few noteworthy features – be it the dual-core A5 chip, which makes the phone run twice as fast, or the 8 megapixel camera that comes with an f/2.4 aperture. This camera improvement is impressive given that most DSLR kit lens don’t even offer the same aperture. The most talked about feature, however, is the “Siri” artificial intelligence voice control, or what Apple describes as your “humble personal assistant”

 Siri will recognize voice commands such as  “what is the weather today?”, “reply to Susan”, “text my wife”, or “set up meeting with John tomorrow evening”. It will then manage these tasks for you without you having to even touch your phone. Sounds pretty cool?

In theory, one can find many uses for Siri. How convenient would it be if you could get directions, make appointments on your calendar, or text someone in just a few seconds? As people are spending more and more time on the road these days, the ability to instruct your phone to do these things without having to even look at it can be very useful. It can also reduce the many accidents that come from texting while driving.

But in practice, we have yet to see whether Siri can really live up to its promise. How effective will it be in recognizing voice commands? Will it work with accents that aren’t American or British? Will it recognize specific pronouns and foreign names? Can it really, as Apple claims, “get better” as it learns your voice?

Another challenge that Apple has to keep in mind is the fact that Siri isn’t all that new. Android’s Vlingo voice recognition app has been around for sometime, and Windows phones also have a similar speech recognition feature. Both of these systems have been praised by many users. This time around, Apple has already disappointed many customers with the lack of an iPhone 5 upgrade. With Siri being the only key innovative feature, Apple’s got a lot to prove that iPhone 4S is worth the upgrade.

Is the iPhone 4S worth buying for you? Guess we’ll find out on October 14^th.

Looking at the smartphone market, it is easy to see how many people are bullish about Apple’s prospects. Ever since the company launched its iPod, Apple has seen a huge turn in its fortunes. Today, Apple currently has a much larger user base for its iPhone, a thriving app store, and abundant content at its iTunes store. All this has allowed the company to build huge network effects in its favor, but will they be sufficient to safeguard Apple’s dominance? In this specific case, I believe they won’t.

One can explain Apple’s early dominance in the smartphone industry by borrowing theory from the book “The Innovator’s Dilemma.” According to the book, when a product or service is still in its early stages and is not yet good enough for consumers, an integrated company will have a competitive edge in the market. Apple leveraged its integrated architecture to build not only the hardware, but also the system (iOS), and provide users with content from its App and iTunes store. By having control over the entire process, Apple was able to differentiate its products in terms of performance, convenience, and ultimately user experience.

This early advantage gave Apple the opportunity to build huge network effects, as more users made the iPhone platform more attractive to developers and content providers. However, could the theory that explained Apple’s rise also predict its downfall? As the theory goes, once a company overshoots and builds products that are too good for consumers, the situation changes and starts favoring a modular industry architecture, where companies specialize in one or two segments of the industry. As the technology becomes more mature, the industry begins developing better specifications and standards, and firms start to specialize. Products improve quickly, and differentiation becomes harder to attain. Just like the PC industry in the 80’s, we are starting to see this happen with companies such as Samsung and HTC (hardware), Google (Android), and Amazon (content provider).

I believe that Apple’s network effects will not be enough to sustain its dominance. First, we sometimes overestimate Apple’s App store network effects. While developers do want to reach the largest number of consumers as possible, the same is not true for consumers. Apps are a great example of a long-tail business, with few top-selling apps representing the vast majority of downloads, and it would be fair to say that we can find the same top-selling apps in both Android and iPhone platforms. In addition, in terms of content, at the same time that Apple’s platform is much more attractive to content providers given its size, we also see content providers pushing for the emergence of a second player to balance Apple’s negotiating power.

The outcome of this story is yet to be seen, but more likely than not, I believe Apple won’t be able to out-innovate specialized and focused competitors and its network effects will lose its effectiveness.