Monday, January 11, 2010

iPhone and Android, Deja Vu All Over Again

Apple introduced the Macintosh in 1984 putting it light years ahead of competing DOS machines. That's right, when the Macintosh first came out with a mouse and graphical interface the competition (IBM / Microsoft) lived in the stone age requiring users to punch in DOS code to interface with the operating system. Mac's were bulky machines with the monitor housed in the same casing as the CPU, RAM, and other guts of the machine but, again, the competition was worse.

Bill Gates and Microsoft were privy to early development details of the Macintosh because Apple needed Microsoft applications for the Mac. Result, Microsoft launched Windows a year later in 1985 but Windows was a far inferior product out of the box. The quality of the user experience was completely different on the Mac and early Windows versions. As late as 1988, I remember working at an accounting firm packing up our Mac's in huge backpacks (pre-Mac laptops) to take them to client locations because we literally couldn't do our work without them. So with a commanding lead in technology for a number of years, one would think the Apple Mac just buried Windows, right? Not exactly. Apple refused to license the Mac operating system keeping tight control over integration of the hardware and software. Without cheap clones of the Mac, Microsoft gobbled up market share with an inferior product. To this day (over 20 years later), the Apple Macintosh is still a superior product to Windows yet Windows has gone on to be a far more successful product. Apple, meanwhile, retains a profitable niche at the top of the personal computer market.

I've read recent reviews panning the Google Nexus One phone as a nice machine but not quite as good as the iPhone in all areas. That's not really the point. The Nexus One is likely to drive the growth of the Android mobile operating system which is open source. Think of the Nexus One as Google's proof of concept, i.e., that Android smartphones are not that far behind the top dog. iPhone is a notoriously closed and locked environment. Google is, well, open. I predict it won't be Google pushing Android innovation. The company will pass the baton to other, more nimble partners. Consider further the situation with the iPhone only being available in the USA through AT&T. That relationship has gone so far south for consumers that AT&T stopped selling iPhones in NYC for a period. In my view, consumers hate AT&T.

Where will all this go? Unless Apple adapts, market share shall get gobbled up by cheaper rival phones running Android. The writing is on the wall. The Android app offerings will grow exponentially with help from Google. Sure, the iPhone will remain the better phone for the foreseeable future but will the bulk of consumers pay a 30% premium in ownership costs to own an iPhone as opposed to Android? What about a 50% premium? Right now iPhone is king but it won't last. The Androids will keep getting better and the prices fall due to intense competition on the platform. In five to ten years, the iPhone will control only a niche at the top end of the smartphone market just like Macintosh does today.

Update: Nexus One already experiencing user push back. Google better get on top of this user support issue pronto.