“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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You have a distinct online identity. An identity built through your interactions with Facebook, Twitter, Google, LinkedIn, and others. This identity knows more about you than your parents do. Your parents know a few of your friends, Facebook knows them all. Your parents know your girlfriend, Google knows everything about her. Your parents might know you went to Vegas last weekend, but Twitter knows everything you did while you were there. (Thank your friends for uploading those pictures…) Your parents know what companies you’ve worked for, LinkedIn knows every colleague you interacted with while in these roles. This might be a little scary to some, but the brave see the potential in this electronic identity to open up a world completely personalized to their needs.

In today’s world, this identity lives entirely online. You open your computer and upload status updates, pictures, and information about yourself to share with friends. When the computer closes or the smartphone is turned off, you leave this identity behind and head into the physical world. But what if this personal identity could be extended into the physical world as well? Let’s think about what a day would look like in this futuristic new world.

Your morning starts with your alarm clock (synced with your Google Calendar) waking you up an hour before your first appointment. As you stumble into the bathroom to take your morning shower, a sequence of events is triggered. First, your coffee pot checks the time of your last Facebook activity from the night before and realizes you only got four hours of sleep. It automatically starts brewing a double dose of dark roast to get you through a rough day. At the same time, a touch screen monitor in the shower loads your schedule, email, and a list of important items due today while simultaneously setting the water temperature to your personal preference of 112 degrees. As you get through your shower, the thermostat, aware that you like the bathroom a toasty 80 degrees when you exit the shower, raises the temperature. Your car, realizing you’ve got to be at work in an hour, begins checking the traffic and construction reports on your route to work. It notices a detour in your route and sends you an email, which you get in the shower, warning you to leave early. As you exit the shower, your closet’s built in weather center checks the weather and learns it is supposed to be a chilly forty degrees today. It automatically rotates the clothing to bring your favorite cold weather attire to the front, keeping in mind your preference for gray suits for client meetings like the one you have today. As you zip your coat, grab your coffee, and head for the car, the smart kitchen checks its inventory versus your standard lineup and automatically places orders for bread and cereal.

Not bad for an hour’s worth of work. And the best part is that this is just a start. As your personal identity continues to grow and more devices gain access to the cloud, there is no limit to the potential customization of the world around us. Imagine every device you interact with being tied to your personal identity and fully customizable to your preferences. Every couch has adjustable lumbar specific to the user. Every TV adjusts volume, brightness, contrast, and content to the user. Windows and fans in every room automatically open and turn on to suit the particular user. Every vehicle adjusts handling characteristics to fit the specific driver. Every restaurant adjusts the menu to fit your culinary preferences. The possibilities are truly endless. So in the end, maybe it’s a good thing that your personal identity is becoming so detailed. I would certainly trust it more than my parents to pick out my clothing for the day.

Mobile payment and NFC technology

Mobile payment refers to a technology that would allow consumers to use their mobile phones to pay for products and services. The technology has existed for a period of time in many different formats such as SMS-based payment, mobile web payment, and direct operator billing. However, these technologies face slow adoption as they often require significant changes in consumers’ behavior and more often than not, make the payment process more complicated than a traditional cash or credit card transaction.

The recent rise of smart phones has allowed yet another form of mobile payment based on contactless near field communication (NFC) technology. By using smart phones equipped with NFC technology, consumers can simply wave their phones in front of a contactless credit card reader to make payments. Given this simplicity from a user’s perspective, industry experts show optimism towards this technology. Some believe that the value of NFC-based transactions will approach $50 billion by 2014 (1).

Google Wallet and Competition

In an attempt to capture this lucrative market, Google has recently launched Google Wallet as a platform that combines mobile payment, royalty program and point-of-sales promotion. Although Google Wallet is only available on one mobile phone model at the time of its launch and can only be used at limited merchant locations, Google plan to aggressively expand Google Wallet by positioning it as an open system. This means that it can be integrated with any bank’s network and any mobile phone manufacturers and operators – free of charge.

Google is not the only company wanting to establish a dominant position in this space. Apple and Microsoft are reportedly working on this technology for their next generation smart phones. AT&T, Verizon and T-Mobile have also formed a joint venture to capitalize on this technology. Other players include Amazon and Paypal who also want to expand their dominance in the ecommerce market to the mobile payment arena.

Key success factors for Google Wallet

There are 5 key stakeholders in the NFC-based mobile payment ecosystem – customers, merchants, banks and payment networks, and mobile phone manufacturers – and within this ecosystem, there is a strong network effect. Hence, the following elements are likely to play a key role in ensuring successful launch of Google Wallet:

Availability of NFC-compatible phones – Currently, Google Wallet is only available in Sprint Nexus S 4G phones. This is rather limited and unlikely to trigger wide adoption even in the most optimistic scenario. To address this issue, at least in the short term, Google has been exploring an NFC sticker to be used with phones that are not equipped with NFC technology. This would certainly help alleviate the problem although the ultimate long-term solution would more likely be to convince cell phone manufacturers to accelerate the commercialization of NFC technology. Given many manufacturers’ reliance on Google’s Android operating system, this is certainly within the realm of Google’s influence.

Partnership with banks and payment networks – Citibank and MasterCard are the only partners at the time of the launch. This allows consumers to make payments using MasterCard credit cards issued by Citibank at over 300,000 MasterCard PayPass merchant locations. In addition, Google also offers its own prepaid card to be used on its platform. Despite this effort to attract broader group of consumers, Google will have to enroll additional banks and payment networks on its platform to ensure adoption among mainstream customers.

Merchants’ adoption – Participating merchants are those equipped with MasterCard PayPass technology e.g., Macy’s, Subway, Walgreen, CVS, McDonald’s. To encourage wider adoption of Google Wallet, Google can leverage its local advertising platform to enroll additional merchants by offering subsidized or free local advertisement. Also, Google Wallet is equipped with royalty program/gift cards/sales promotion functionalities. Sub-scaled or low-cost merchants will potentially find it attractive to outsource these functionalities by leveraging Google’s infrastructure and technology expertise.

Customers’ adoption – Google’s primary value proposition to the consumers is convenience and potential discounts at point of sales. This is probably attractive to young and technology-savvy consumers. To attract mainstream consumers, Google will have to ensure the availability of technology at an affordable price as well as to address consumers’ security concern. Having the Google brand already brings considerable trust. However, Google might consider providing additional consumer education through its own website and TV/YouTube commercials. Google might even offer insurance to protect consumers against potential security risks and fraud – similar to what PayPal have done to address a similar concern. Lastly, Google could potentially pay to acquire new customers by offering a free gift card, redeemable only via Google Wallet.

(1) – http://8.mshcdn.com/wp-content/uploads/2011/07/GLG_Goodbye_Wallets_FINAL-L_1841.png

The recent flurry of lawsuits regarding patent infringements has caused a stir in the tech community. This year alone we’ve seen Oracle v. Google, HTC v. Apple, Samsung v. Apple, Lodsys v. App developers (& now perhaps Apple), and so on. As an example of how out of hand the situation has become, just look at the mobile phone business (see picture). And, it’s not just the large corporations suing each other. Non-practicing entities (NPEs), also known as patent trolls, are firms that license patents without producing goods. Lawsuits from such entities have been associated with “half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies”. It doesn’t seem as though the wealth has been transferred to the little guys either, as we might hope.

Moreover, as a result of the seemingly endless slew of lawsuits, corporations are beginning to stock up on patents in order to better defend themselves in court (e.g. Google’s acquisition of Motorola Mobility).Not only have the acquisition costs of such patents skyrocketed, but one should question whether incumbents are using their portfolios to file legitimate claims or simply to protect their market position by stalling competitors’ activities (amid an incumbent’s own failure to innovate).

As you can see, corporations are wasting significant time and resources in litigation that could be better spent on research and development. Yet what choice do they have? Given the current state of patent law, they may not have any other options.Many critics argue the benefits of our current system have now been far outweighed by the costs; yet simply abolishing the patent system is not the answer. Society benefits from the patent system. In exchange for protection over a limited time period, the inventor must fully disclose the details of the patented product along with the best mode of producing it – even before the patent expires. Once the patent expires, everyone has the ability to recreate the product, and in the meantime, people can use the information provided in the filing as inspiration for further innovation. Because of the value provided to society as a whole, I believe our only option is to change the current law.

I am far from an expert on patent law, so I do not profess to have a clear answer. We should begin by acknowledging that there is no such thing as a software patent. The lines around what can and cannot be patented are fuzzy, and the laws have fallen far behind technology today (e.g. Patents are intended for physical products, and math cannot be patented. Unfortunately, software is composed of algorithms, which are basically math and often do not have a physical product associated with them). Sure, legal decisions over the years have attempted to update and clarify patent regulation, but it remains wholly inadequate and unclear as it relates to software. This isn’t surprising given how slow moving the legal system is in general, particularly when compared to the fast moving technology world. So actually creating patent regulation specifically for software should be step one.

Once we know what warrants a software patent, we can then focus on making other changes to the system that may reduce the frequency of frivolous lawsuits and/or level the playing field. For instance,

• The length of a patent could be shorter, lessening its value.
• We could amend the filing process as a whole, either by shortening it altogether or by allowing for a shorter, temporary filing that is easier and less expensive (thus making it easier for smaller players to file).

Again, I do not know the answer, and these suggestions are just a start. Either way, we can certainly acknowledge the problem is multi-layered and complex. From rent-seeking NPE patent trolls to panicky industry incumbents that have fallen behind, the improper application of traditional patent law to various facets of the tech sector has created a sideshow that threatens to curb innovation and stall progress. But, regardless of how long it will take to implement policy change, great near-term emphasis will continue to be placed on fuzzy portfolios of intellectual capital.

What’s the future of computer applications? Will it be based on the so called “web-apps” accessed through web browsers that run on terminal-like computers/mobile devices or there is still space for the classic model of applications that are actually “installed” into the devices (maybe in a more transparent way)?

A computer application was, for a long time, synonym of something that (i) either came pre-installed in whatever device you acquired or (ii) you had to buy physically (via the old diskettes/cds) and install it by yourself (or, as most users did, ask someone else to do so). The whole process of buying an application and install it was expensive and too complex for the average user, who ended up sticking to the pre-installed package that came with his or her computer.

With the development of the internet and the increasing number of people with broadband access, some companies started to question and evolve this classic model or buying and using computer applications, but in slightly different ways.

One of the first to challenge this concept was Google, who predicted that in the future all applications would run in a server and users would access only the front-end (or the interface) of these applications  directly through their web browsers. As part of its strategy, Google then engaged into developing web applications that would mimic the functionalities of classic applications, but running entirely on the web (Gmail, Google Docs, etc.). The big advantage was that users wouldn’t need to install those applications anymore, all the data would be in the “cloud” and in the future they might pay for using those as a “service”. Google went even further and also developed a web browser (Google Chrome) that would make those applications to look even more like the classic ones (better layout, capacity to run off-line and some in-device storage). However, it seemed strange that a person would need a full powered computer, with lots of software layers, just to run a web browser (since all other web-based applications would run from inside the browser). The missing part of Google strategy appeared with the launch of the ChromeBook (http://www.google.com/chromebook/). In these computers, the Google Chrome browser would assume the role of Operating System (replacing Windows, for instance), making the system cheaper and faster by eliminating all the unnecessary hardware and software. The concept was beautiful but the ChromeBook project is still far away to be considered a success. Most initial reviews classified it as “expensive for what it does” and “a good complement to your laptop”. The fact is that web applications are still far to be considered as good as their offline counterparts (just compare Google Docs with Microsoft Word), and users would still need a normal computer for their daily activities.

Apple took a different approach. With the launch of the AppStore for its mobile devices, Apple found a new way to take advantage of the broadband development to evolve the classic model of selling and delivering applications to users. In an iPhone, anyone could easily go to the AppStore, buy an application (usually at a cheaper price than classic apps), and install it instantaneously without any pain or external help. It seems like a small difference, but think about how many apps the average user buy for their iPhone vs. the number of apps they buy for their PCs. The difference is huge. In fact, the idea worked so well for Apple that it just incorporated the same concept into its new OS X Lion (for full-size computers) – http://www.apple.com/macosx/whats-new/app-store.html. But did apple forget the concept of cloud computing dreamed by Google by not investing into web applications? Apple’s answer is the iCloud – http://www.apple.com/icloud/ – a platform that would, according with Apple, seamlessly integrate the data used by all your apps, in all your devices. Therefore, Apple users could benefit from higher quality Applications (not confined into a browser) and similar benefits of web-based applications.

Other companies are also going into this direction. Microsoft has just released the beta version of the  new Windows 8 OS (http://www.youtube.com/watch?v=p92QfWOw88I), which looks a lot similar to the  Windows Phone  OS (their Operating System for phones) and we can expect that it will provide an easier way for users to install and use applications in the future. Even Google is exploring the same model through its Android OS for smartphones.

Is Apple on the right direction or will classic apps last only until web-apps become more advanced?