Technology analysis of the latest gadgets, consoles, and computer architectures.

Thursday, October 07, 2010

Computing Titans of Today (Part 1)

There are many computer technology companies that can be considered innovators and market drivers both in the past and even into the present, but there are only a notable few who really stand out and simultaneously frighten and inspire both their counterparts and their customers. It is interesting to note that these companies overlap so much that for all intensive purposes they are competitors, yet they all find themselves developing for one-another's platform to remain relevant to all of their customers.

If you are a 2010 computer user, you likely know which four companies I am about to talk about. But first I would like to break these companies into their respective financial markets to try and account for the driving forces of these companies.

Hardware - The original primary driver of the computing industry. When there is a need to create and compute, the first thing required is good hardware. What began as a calculator evolved into a general purpose computer, handling any task from accounting to communications, graphic design to writing, and launching a rocket to feeding a person's lungs and heart. Regardless of whether a company wants to sell a mainframe, a desktop, or an embedded device, software is required to unleash the true potential of the device. The greater the profit margin desired, the more value that must be extracted from the hardware in the form of higher quality parts and design, better firmware and software design and implementation, and mechanical and industrial design. But ultimately the goal is to sell more hardware.

Software - The next big driver of the computing industry. When the hardware was readily available but the hardware companies could not keep up with the demand for more applications, the software development had to be incentivized independent from hardware sales. This was and continues to be a difficult item to sell as there is no physical object being sold; instead, a license is sold with no guarantee on usability for a large period of time. The value of software is dependent upon what currently exists that can also accomplish a similar task compared to what time efficiency, usability, and flashiness its derivative or replacement can provide. And finally, the value of the product and/or continued development and features depend on how much work is required to develop that software, all of which is driven by the hardware and the engineers or developers. On the other hand, the profit margin can be higher than hardware by increasing sales and with exposure to parallel functions and applications. So the goal is to sell more of the same software without requiring too much free support and updates (or to give out software but charge lots for support and updates).

Direct Sales - The dotcom boom led to another big driver of the computing industry. In order to increase profit, a store needs to sell large quantities of stuff with low overhead. Selling certain types of physical goods can garner a decent margin, but increasing variety encourages larger orders and repeat customers, and selling virtual goods, especially when these virtual goods are homegrown, provide the greatest revenue potential. Focus is on ease of purchase in all manners possible, anywhere the customer happens to be.

Advertising - The main driver of radio and television is also the latest big driver of the computing industry. More eyeballs equate to greater revenue, and the more technology a company owns that attracts attention, the larger the profit margin. Rapid adaptation is required to retain and increase mindshare, which certainly makes it the most difficult avenue to pursue, but with the potential for greater exposure and reward.

The positive aspect of having four driving forces in the computing industry is that the technology must adapt rapidly, which in turn leads to convergence as, in the end, all computers have similar hardware and software but different system implementations that produce similar results.

The negative aspect is that small technology innovators will struggle to survive in this landscape unless they manage to find a niche slightly outside these four domains, are acquired by a company with strengths in one of these four domains, or steal enough mindshare away from a weakened technology player to gain enough wealth to compete with a dominant player in of these four domains.

This leads me to formally introduce the four dominant leaders of the technology industry in 2010. Once again, this is likely to change in future years, but all these companies have either acquired enough wealth, mindshare, or both to continue to innovate, dominate, and compete effectively. If it wasn't for the existence of these four driving forces, there would be a technology monopoly (think Microsoft in the '90s). Despite the antitrust rulings against Microsoft being fairly weak and too late, the resurgance of Apple and the arrival of and Google have led to enough competition to provide some sort of balance to the consumer computing industry.

To be continued...