Hardware and Software–The Lines Are Blurring
Over the years, it has been smart business strategy in the computer and consumer electronics industries to specialize in either hardware or software. But that’s changing.
Microsoft created one of the greatest business successes in history by fiercely sticking to software, dabbling only in minor hardware products, such as mice and keyboards, which were designed to propel its core software business. I have even been told by very senior Microsoft officials, in private, that hardware was a sucker’s business, a combination of low margins and big headaches.
Sony was perhaps the opposite case, turning out world-class, head-turning hardware, but paying little or no attention to software–and no, I don’t count “Spider-Man 3,” by the company’s Hollywood studio, as software, at least not in this context.
The only company that seemed to combine both skills was Apple, but it was widely regarded as a niche player that was slowly fading from the scene, partly because it didn’t fit very well into either world. By the late 1990s, it seemed clear that Apple couldn’t build hardware it could sell in large enough quantities, or license its operating system widely enough, to thrive, or even survive.
My, how times have changed. Now, with computers, the Web and consumer electronics all merging and blurring, Apple is looking more like a role model than an object of pity. The iPod has been a huge combined hardware/software success and Macintosh sales are surging, partly due to a great operating system and built-in software that Apple writes in-house and refuses to license.
Without announcing any big change in strategy, both Microsoft and Sony, as well as other companies, are racing to become combined hardware/software powers.
And everyone is also trying to add a third leg: tightly linked companion Web services–another thing that Apple has been skillful at doing, with its booming iTunes store and its smart, but badly underdeveloped, “.Mac” online service for Macintosh owners.
Microsoft has essentially set up a small Apple, called the Entertainment & Devices Division, run by savvy, strategic company veteran Robbie Bach, who was running Excel when I first met him many years ago. The division not only designs both the hardware and core software for the Xbox game consoles and Zune music players, but also operates online marketplaces and communities for both. And the company is considering other such end-to-end products, which would include Microsoft-designed hardware.
Sony, meanwhile, also taking lessons from both Apple and its own PlayStation game console business, has set up a software development group in California, run by a former Apple executive. Its mission is to develop distinctive Sony software that can run on most of the company’s products. And Sony is also trying to compete online, to match Microsoft’s great success with Xbox Live and Apple’s iTunes.
Other hardware companies are making similar efforts. Hewlett-Packard is designing some of its own programs for its consumer computers and engaging interfaces for its televisions. Nokia is trying to ramp up its software efforts for its nontraditional offerings, like the N800 Internet tablet, partly by tapping the open-source software community. Palm, which sold its operating system some years back, is getting back into that game.
This is good for consumers. Third-party software, hardware and Web sites are still vital. But nicely matched hardware and software platforms make things easier on average users than unwieldy efforts to combine different platforms, such as Microsoft’s failed PlaysForSure portable music system. Some of these combo products may flop (like the first Zune, or the Apple Cube). But the trend is a welcome one.
Comments
would apple success have been as great as it is today if it hadn’t made quicktime and the ipod/itunes compatible with windows? I doubt it. So, you cannot say that Apple success was due to its insistence on keeping its products exclusive to the Mac.
Posted by brian smith at April 30th, 2007 at 6:53 amI think that in addition to the tightly integrated nature of the iPod and iTunes, one of the major things that helped those products to succeed was the simplicity and ease of the pricing sceme and software. Between standardized (mostly) pricing and the ability to make CD’s out of the purchased music, it addressed some of the major problems with previous for-pay music download services.
Posted by Michael Swanson at April 30th, 2007 at 12:22 pmThe cube wasn’t a combo product, it was just another form factor for their desktops.
Posted by Mal McKay at May 3rd, 2007 at 11:50 ambrian smith:
“would apple success have been as great as it is today if it hadn’t made quicktime and the ipod/itunes compatible with windows? I doubt it. So, you cannot say that Apple success was due to its insistence on keeping its products exclusive to the Mac.”
Well, it’s good to see that even on brand new blogs people still miss the point entirely.
Walt’s not saying that the Apple’s success is due to keeping its products exclusive to the Mac.
He’s saying that Apple’s success is due to their insistence of developing both the hardware and the software of their devices.
True, opening up the iPod to Windows was integral to its success, however that’s not the point that is being made. Another thing integral to the iPod’s success is the user experience created through the tight iTunes/iPod integration.
That integration is a perfect example of what comes from Apple’s across-the-board development, which allows them to control the user experience from start to finish.
Posted by andrew harrison at May 3rd, 2007 at 3:25 pm@Mal McKay
I agree that pushing the Cube as a combo device is a bit of a stretch by Walt. I can see where he’s going with it though.
The concept of the Cube - a new attractive form factor with nearly silent operation, external power brick to keep the guts of the thing cool, and good looks to boot - is directly carried on by the Mac Mini. It benefited by the integration of the recently released OS X with the hardware.
Posted by Geoff Davis at May 4th, 2007 at 11:48 amUnless I am mistaken, I would question the statement: “Microsoft’s great success with Xbox Live”. It is after all riddled with hardware problems and failures, appeals mainly to serious geeky gamers and is now seriously challenged by Wii, let alone PS3. PS2 sold massivley more than Xbox ever has too. Despite the huge ‘money is no object’ investment, it hasn’t made a blue bean of profit for Microsoft. Define ’success’ I guess.
A second point to make is whether making end to end products is easier or proportionately more difficult than sticking to either hardware or software.
It seems to me that Apple have stuck with the more difficult route and achieved a) the simplification of massively complex software and b) designed hardware that’s to be appreciated if not loved, not just used and abused as a tool.
I suspect it’s even harder to achieve great combo products than it is to focus on one part or the other.
Posted by Jonathan Tilney at May 30th, 2007 at 2:48 amAfter listening to the Jobs-Gates podcast at All Things Digital, a couple of things struck me.
Posted by Karl Zachar at June 20th, 2007 at 8:47 am1) MicroSoft invented the software company business model.
2) I attribute Apple’s success to Apple’s ability to design software and hardware that makes sense. Bill Gates said, “Steve Jobs designs “things” that he himself would love to use.”
3) In describing the iPhone, Jobs described it as a great piece of software (not hardware). However, the point of the original blog is well taken - Apple’s genious is great software and great hardware and (most importantly) great software and hardware working together. It’s almost as if Jobs didn’t trust (or didn’t find) anyone to build the perfect hardware to deliver his great software applications so he built the hardware (iPhone, iPod, iMac, iBook, etc.) himself.
When I travel, there are two things I can’t live without: my Blackberry and my iPod. I love my Blackberry because I can get email and surf the internet (albeit poorly). I love my iPod b/c it has all my music but more importantly, my video iPod has movies, audio books, and recordings of important conference calls that I didn’t have time to listen to live.
Here’s my question: will the iPhone replace both my video iPod and my Blackberry? Will the iPhone dethrone the ‘Bery from the corporate market? If it does, could this be the Trojan horse that allows Macs to gain marketshare in the corporate PC market? At this point, I’m not betting against this possibility!
Posted by Karl Zachar at June 20th, 2007 at 8:55 am