John Tate takes a look back to see what the future of computer technology may hold.
I have been doing some overseas travel this year and am currently sitting in a hotel in Seattle writing this column. Seattle is the home of Microsoft – hence my visit. I am sitting within a few miles of where Bill Gates (the founder of Microsoft) was born. During my time here I’ll learn about the latest and greatest from the Microsoft developers and be pondering on where they will go in the next few decades.
Microsoft was founded in 1975. By contrast, in 2011 IBM is celebrating its 100th year in business and its review of a century of activities makes interesting reading.
IBM has successfully re-invented itself over the decades. While many of us know IBM for its hardware, it is now in fact the world’s largest business and technology-services provider with over 190,000 staff in this division of their company.
Over the years there have been many great ideas from IBM. However, several of these were picked up by other vendors who subsequently gained the lion’s share of the market. For example, Microsoft took over the dominant position with PC operating systems and office productivity applications, although IBM was an earlier player in these markets. It is well known in the IT industry that the first organisation to market with a new product often gets overtaken by the second, or third wave of alternatives from other vendors.
This can seem unfair on the organisation that came up with version one of a new technology as they are likely to have invested significantly in the R&D for the new product, and to have created early customer demand. However, in the case of large organisations they have often benefited from a quasi-monopoly for their earlier products and reaped a huge return on this investment. For instance, IBM dominated the mainframe market for decades and enjoyed gross profit margins on product lines of over 60 per cent – producing billions of dollars of profits.
Other corporate giants have enjoyed similar success with market dominance: Oracle with its database software, SAP with its ERP application and, closer to home, BT with its historic dominance of the UK telecoms market.
In terms of defining technologies, the mainframe brought computing into the corporate space and the subsequent mini-computers, and then PCs, brought computing power to the masses. Office productivity suites changed the working lives of accountants – where spreadsheets and word processing replaced the need for large amounts of manual work. Step forward to the last decade or so and, from a technology perspective, it is the internet that is creating the most change to our working lives.
All the giants are at play with internet technology, and there are sub-sets of market growth in a range of areas. Cloud computing is trying to get us to run our applications on central servers – some would argue taking us back to the days of mainframe computing. Social media is offering new ways to communicate with others – think Facebook, Twitter and LinkedIn. Google still dominates internet search technology but continues to come under threat from many new players, as well as the likes of Microsoft. Apple has taken a dominant market position with mobile devices including the iPad and iPhone.
So where will Microsoft go next, particularly with internet-based technology? It is trying to gain a strong position in most of the above areas with a huge push on its cloud offering. It is buying Skype to develop its presence in social networking and continues to push Bing as an alternative to Google. It has a mobile-phone offering which it is pushing hard and a tablet computer which is competing with Apple. Quite a handful of products/markets to compete in.
For the next five years at least I see Microsoft holding a strong position in its core products – ie operating systems and Microsoft Office. I suspect, like IBM, it will look very different in a longer timeframe. However it does have one advantage. It is not at the forefront of developing new web-based solutions and, if it gets its act together, there is a chance it could piggy-back off some of the ideas created by others and bring out second or third-generation products that win market dominance.
A number of IT analysts are predicting gloom and doom for Microsoft longer-term, as newer entrants to the market put the company under pressure. However, I think it is too early to write it off. Like IBM, Microsoft is likely to still be in business in 65 years, but what it looks like then will be very different from today.
John Tate is MD of ChangeBASE, IT adviser to the CFDG and a visiting lecturer at Cass Business School