|Ravi Pandya software | nanotechnology | economics||
Thu 21 Nov 2002
I've been following the debate between Steven Den Beste and Brian Tiemann with interest. Steven makes the quantitative argument that due to the high capital cost / low marginal cost economics of both software and chip design, Apple is just not going to be able to keep up. Brian counters with a variety of emotional, anecdotal, and qualitative arguments. I think they're both right in their own frame of reference, but I think the key factor is something else.
Most people who use the phrase "disruptive technology" without reading Christensen's book seem to think it means a huge leap forward. In fact, his original meaning is almost the opposite: As a technology market matures, the industry leaders follow their most demanding customers past the point where the market continues to value marginal improvements in technology. This opens the opportunity for disruptive new entrants at the "low end" with products that are inferior by all the standard performance metrics but deliver superior value along some other dimension.
I think the desktop market reached this point a while ago. First of all, software: I've been developing in Windows since version 2.0, but several years ago the emphasis clearly shifted and my primary technology stack has been internet protocols and infrastructure, with the desktop as a minor component. About a year ago my Compaq laptop had accumulated enough DLL/registry cruft that it was due for its semi-annual Windows reinstall, and I decided just for the heck of it to install Linux instead. I had StarOffice, plus Windows running in VMWare in case I needed it. It was an interesting experience, and it became apparent that the latest Linux distributions provide enough usability and functionality to compare very well with the Windows 95 era of desktops - which many users still run quite happily.
After a few months I got tired of fiddling under the hood of the OS and fighting atrocious user interfaces. I had come to like having my familiar Unix tools to work with, and I wanted to edit DV footage of my baby, so I bought a used PowerBook G4 on eBay. I'm still quite happy with it. It does everything I need, with an aesthetically elegant user interface and industrial design. I fire up Virtual PC a couple of times a month to run a version of Quickbooks compatible with my accountant's, and I use my old Compaq to run Visual Studio .NET, but otherwise I'm just fine. I spend most of my time in the web browser, email client, Office, bash, Palm Desktop, Eclipse, and Emacs. There are a few applications I miss - like Ecco! - but some that I would really miss if I moved back - like OmniGraffle, which is even better than Visio for diagramming. Overall, there's very little disadvantage to me from being on a non-mainstream platform.
I'm not anti-Microsoft - in fact, I think they're one of the best-managed corporations in the world. But they're facing a challenge. They have a lot of brilliant people and they are sure to survive and even thrive, but the reality is that they're no longer the center of the computing universe like they were 5 years ago. In a competitive market, the equilibrium price of a good tends to its marginal production cost, which for software is zero. There are strong signs that many parts of the software industry are headed in that direction.
On the hardware side the story is similar. It's quite true that Macs are underpowered relative to PCs, but it really doesn't make a difference to most people once they put in enough RAM that it doesn't swap. I'm running a 550MHz G4, and I was sorely tempted by the new 1GHz TiBooks. But I've already upgraded to 1Gb of RAM and a 60Gb disk, and doubling my processor speed would make essentially no difference to my daily experience. Likewise, my old 500MHz P3 Compaq laptop was just fine with 640Mb RAM. When I really need computing power, a $100k Linux cluster of Athlons gives me Cray Y-MP class number crunching.
So I think if Apple can get their prices down to a level where the overall package cost is in the ballpark, which they seem to be doing, then they can be a very reasonable choice for many people. It's now more like choosing a BMW over a Toyota, not like choosing an amphicar over a normal vehicle.
Microsoft's attempts to stave off the spread of open-source software in India. This is serious. If India & China decide that Linux is good enough and cuts 30-50% off the cost of (legally!) setting up a productive desktop, then the network effect suddenly flips the other way and 85% profit margins on Windows are ancient history.
© 2002-2004 Ravi Pandya | All Rights Reserved