Netbooks causing Low-end Disruptions

Asus Netbook
Asus Netbook
In my lectures at Reykjavík University I talk about how free market companies that dominate over their competitors any given field, only hold temporary position and will eventually loose their dominant position. This is due to technology changes as well as organizational structure of companies.

Last week, we saw yet another evidence of this. Software giant Microsoft reported on Thursday (January 22, 2009) that client revenues are down 8% as result of a PC market weakness and a continued shift to lower priced netbooks. The company is eliminating 5.000 jobs, which is unusual, but not surprising in the economic environment of today. Of course Microsoft still has strong revenue streams (maybe not from Zune) and is still dominant in the field of software.

It is the shift to netbooks that I find interesting. While Microsoft still dominates as an operating system for these low-end computers, the revenues are lower for a cut-down 10-inch netbook than a full-blown Vista machine. It turns out that many people would like a $500 option for a small compact computer, something less feature rich than a laptop, and more powerful than a small-screen smartphone. It turns out that there is a market for this that was not being fulfilled by any technology. This is a classic case of disruptive technology where companies enter a market with low-end product since the current products are “too good”.

This is signaling another trend. As we move beyond personal computers on every desk (long time Microsoft vision) we see people find owning multiple computers necessary. Thus we might have our office computer, home computer, travel computer, game computer, entertainment computer and so on. One size doesn’t fit all needs.

25 years of Mac

January 24 marks the 25th anniversary of the Macintosh. Introduced by Steve Jobs, this revolutionary computer was the first successful computer with a mouse and a graphical user interface (GUI). The first Mac was pretty low-end, with 128 KB memory and a processing speed of 8 megahertz, and could barely mange to run the new type of operating system. But it marked a change in operating systems, moving from arcane command line interfaces to graphical interface based on a desktop metaphor.

Although the Mac was easier to use it was fighting an uphill battle with giant market leader IBM. The war of the OSes was highlighted in the Ridley Scott superbowl ad:

Today, the Mac has managed to capture about 10 percent of the market.

Back in 1984 the computer was an infrastructure product. Programs written for one platform don’t work on the next. By selecting one platform you were limiting all software written for any other platform. Microsoft understood this and emphasized open API architecture encouraging developers to target is API.

This is of course still true today but there are some suggestions that the computer and the desktop metaphor are becoming increasingly more like a commodity. With the web the platform has moved and which OS you use is not so important.

Wired has an interesting article on the Mac’s anniversary.

Innovation of the Year 2008

For my New Technology course I talk about technology trends and in the first lecture I look at some important events of the previous year. I talk about trends such as explained in Technology Trends of 2008. I also select the Innovation of the Year 2008.

For 2007 it was the iPhone. Not because we had not seen a smartphone before – in fact the iPhone had similar features as many smartphones at the market at the time, it was because of the impact the iPhone had – the iPhone Effect. Even before the iPhone hit the market it had changed the telecom industry.

This year I present three innovations that I think were important in 2008.

First is the Apple App Store. The App Store is to iPhone what iTunes is to iPods. Apple did good job on this store and made application downloads very easy to use. With over 10.000 apps, it is reported that 300 million apps have been downloaded. And if you look at the numbers, iPhone users are far more likely to download apps than users of other smartphones.

Second innovation is hulu. Hulu, although it got a bit hyped last year, is an example of a revolution. The revolution is about separating the form and distribution from the content. While the industry was fighting format wars of disks, Hulu is providing alternative distribution format. In fact, Hulu is offering the same stuff as tradition ad-driven TV stations. It is just using different mediums. Hulu is of course not the only site providing on-line streaming of content, but what is interesting is that the owners of Hulu include content providers such as NBC and others.

And the third and last is Google’s Chrome. After few years of slow action in the web browser fight, we see something new. Again, this is not a new product but it might be the beginning of a new browser war. It might become a one of the more important fights of Internet technologies as it will determine how applications run over the network. After reviewing Chrome on my Vista driven PC (doesn’t work on my Mac) I found it to be a nice browser but I’m not sure if it is faster or more secure. At least not for my browsing.

I chose these innovations since I think they signal change. A change in how the mobile world is converging into the internet, computers and devices. How content will be delivered (and maybe the content owners are realizing this) and how applications will be deployed on the Internet.

2009 will be interesting.