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Has Microsoft Leapfrogged Apple?

2012 May 9
by Greg Satell

What a difference ten years can make!  Merely decade ago, we were just getting used to the idea that Apple would survive as an independent company.  Now it’s the most valuable business in the world.

Microsoft, on the other hand, went from being the dominant player with monopoly power to the gang that couldn’t shoot straight.  They’ve seemed to miss every major trend, stumbling, bumbling and putting out inferior products.
The funny thing is, among all the failures and screw-ups, Balmer and team seem to have finally put all the pieces together to gear up for a major resurgence.  Over the next few years, it looks like Apple and Google will be the ones playing catch up.  Right under our noses, Microsoft might just be pulling of one of the great turnarounds in history.

The Rise and Fall of the PC and Wintel

The 1990’s were the age of the “Wintel” duopoly.  When I first started my career in the early 90’s, computers were just beginning to make their way into the workplace.  There were a few PC’s scattered around the office and us younger folks would show the old-timers how to use word processing, spreadsheets and clip art.

Microsoft and Intel rose to dominance as corporations began to invest in IT and by the end of the decade there was a computer on every desk.  When the internet came, Microsoft stumbled for a moment, but then developed Internet Explorer in record time, bundled it in with their Office software and hardly missed a beat.

Apple missed out and by the end of the decade was on its last legs.  It was only saved, ironically, when Steve Jobs convinced Bill Gates that Apple’s failure would only add to the anti-trust problems Microsoft was having at the time and got him to invest $150 million in Apple.

Thus began the first great comeback in of the digital age.  We’re about to see the second.

The Post-PC World

Microsoft, of course, is in no stretch of the imagination in the kind of shape Apple was back then.  They have about $50 billion in the bank and will generate another $30 billion this year.  Their operating margins are north of 30%, return on equity is an astounding 42% and they have almost no debt.

Still, Microsoft, the icon of the PC era, finds themselves in a Post-PC world and that’s been a problem.  While consumers and even enterprises are snapping up smartphones and tablets, computing has become increasingly social, local and mobile.

Microsoft has remained, for the most part, tied to the desktop while Apple’s strength in smartphones and tablets has created inroads to the enterprise market. Their share of connected devices has dropped from 95% to less than 50% in just a few years.

It might seem that Microsoft has missed the boat, but I’m not so sure.  In an impressive act of strategic jujitsu, they appear to have gained the upper hand in the new digital battlefield of in-home entertainment and now are in the process of putting together an ecosystem that will integrate everything into one platform.

Xbox Live and Kinect

Apple’s resurgence was led not by computers, but by consumer products.  It was the iPod, after all, which was the first great product after Steve Jobs’ return and iTunes which provided the platform on which the iPhone and iPad thrived.  It wasn’t just the products, but the ecosystem.  The whole became vastly more than sum of the parts.

In much the same way, video games have been the key to Microsoft’s great comeback.  In 2001, they launched the Xbox and shortly afterward went to market with Xbox Live, an online gaming service that allowed gamers to play top games against others in the network.  The video game, in essence, became a social platform.

Since then, Xbox live has become much more than a gaming platform.  While Apple and Google have been racing to create the new TV interface, Microsoft is already there.  Xbox live integrates TV, Skype (which provides voice and video communication), a marketplace and just about everything else you would want a connected TV to do.

Further, the Kinect system, which allows for voice and gesture control was launched well ahead of Apple’s Siri and remains superior.  In a very quiet way, Microsoft has built out the next generation computing ecosystem under the guise of a video game platform.

Windows 8

The problem up till now is that the Xbox ecosystem has been separate from the PC environment in which Microsoft excels and they have had no real presence in the post PC environment.  That’s all about to change.

As I wrote earlier, Windows 8 is a mobile first platform, which will integrate mobile and desktop into one unified interface, something Apple has yet to achieve.  They are also launching Kinect for Windows, which will be available on smartphones, tablets and PC’s. Early reviews have been overwhelmingly positive.

Will it be better than Apple?  I’m not sure, but it doesn’t have to be.  It just needs to be better than Google’s Android.  

While iOS is available only on Apple products, every other manufacturer in the world needs an operating system.  Microsoft still dominates productivity software and the potential of platform that incorporates everything into one interface is compelling.

Open Innovation and the New Web of Things

Playing well with others has always been Apple’s Achilles heel and it is here that Microsoft has a distinct advantage.  Microsoft’s strength is its modular, collaborative approach. While Apple is famously prickly, Microsoft encourages third party development.

For instance, they partnered with Ford on their successful Sync platform.   When hackers started fiddling with Kinect, they released a software development kit (SDK) and offered prizes for the best hacks.

Moreover, they have decades long relationships with manufacturers and are skilled collaborators.  Neither Google nor Apple have been able to prove that they are.  In the next era of computing, that may be the crucial skill.

The new hotbed of innovation is the Web of Things, a mash-up of the virtual and the physical.  It’s unrealistic to assume that one manufacturer will adequately service smart homes, smart cars and smart retail.  There will however, need to be a unified platform and it appears that Microsoft has put more of those pieces together than anyone else.

A Tale of Two Architectures

Since the beginning of the computer revolution, Microsoft and Apple have traded places as the dominant player.  Apple won the 80’s, but failed in the 90’s.  Microsoft dominated the 90’s, but has faltered over the last decade.  Now Microsoft looks poised to take the lead again.

However, it has not been simply a rivalry between companies, but two very different approaches and philosophies.  Apple has always been tightly integrated, controlling every aspect of the user experience.  Microsoft has been modular, focusing on software and partnering with manufacturers to develop the end product.

Integrated architectures are superior for building something completely new, when standards are weak.  Modular architectures win out when technology becomes mature and standards become more clear.  It seems to me, that we are entering an era where Microsoft’s collaborative approach will be favored.

Much of this is still in the works, we’ll know if I’m right in 12-18 months.

– Greg

21 Responses leave one →
  1. lane connors permalink
    May 9, 2012

    Wow, they got to you. Sad.

  2. May 9, 2012

    Yes, I know. But I gotta call ’em as I see ’em:-)

    – Greg

  3. May 9, 2012

    Well you will never be called a fan boy… LOL. A fair piece with some interesting and not obvious insights. Thank you

  4. May 9, 2012

    Greg: See the first post in Daring Fireball it seems to underpin your premis above.

  5. May 9, 2012

    Thanks Mark! Glad you liked it.

    – Greg

  6. May 9, 2012

    Thanks for pointing that out, although I somewhat disagree with what is written there. First of all, as far as I know, Windows 8 will be compaitble with HTML5, so it will actually be easier for developers (many now create in HTML5 and then convert to Objective C (iOS) and Java (Android).

    Further, Microsoft is courting developers – hard, offering incentives to develop for the new platform. You don’t need all the apps, just the ones that people want. Take a look here:

    – Greg

  7. paz0r permalink
    May 9, 2012

    Greg, great article! your stuff seems to me clearl true 🙂

    couple of points:

    1. html5 (shit inside browser) is far from tech-side perfection (2 years at least i think), in usability issues i can’t even imagine how it can be at least close to native apps – and it’s a problem of any OS as it is.
    2. if apple will innovate continuously (in what they’re best) – microsoft will be again in trouble. just imagine apple shows smth really revolutionary again. and again. and again.

  8. May 9, 2012


    Couple of responses:-)

    1. I’m not sure about the technical details, but when I met with Microsoft in January they said that HTML5 is the base technology. Obviously it can’t be only HTML5 because the protocol won’t be fully released until 2014. I asked about it and they just said that it’s fully HTML5 compatible and would build out (i.e. native apps, but HTML5 code base).

    2. The issue isn’t so much with Apple, because I doubt the Microsoft product will be as good (it never has been, so no reason to think that it will be now). So it’s really a contest between Windows 8 and Android for who will get the highest adoption from OEMs. I’m betting on Microsoft, it’s their core business and they are really, really good at it.

    Besides, like I said, Microsoft already has the lead in smart TV’s, smart cars and they just came out with something for smart homes, but I have no idea whether it is any good yet.

    – Greg

  9. May 9, 2012

    Great post as usual Greg,

    The next 18 months will be very interesting indeed – indeed winter 2012 – 2013 maybe crunch time.

    Its a bit complicated though – there is another axis of analysis – the corporate – consumer one.

    Microsoft PCs are primarily corporate. While Apple will be unaffected by corporate attitude – they will do well anyway as consumerisation of IT continues – the issue is how will corporates accept Metro – it can be so hard to shift corporates off tradition – they aren’t like consumers wanting the next big thing.

    I have to have it to Microsoft – they are being brave with this – looks like windows 8 will play big with the whole HTML 5 web apps running on metro rendered by IE.

    I’m not sure one size fits all – this is what broke Microsoft – trying to leverage desktop to mobile – leveraging mobile to desktop seems a good idea but it may not work – given the nature of corporate desktop users.

    I think Windows 8 has a “legacy” mode – this may save them.

    And then there is Google.

    And ten there are Tablets.

    Microsoft have a lot of ground to make up – they are paying people to write apps for without apps on their platform then ….

    My dealing with Microsoft are that they still beleive the world revolves around them – they have everything you need – you don’t need to go anywhere else – this was fine back in the day but … in this respect they are the same as Apple … and many others too.

    I blogged about this ” Superstacks beyond the WIMP” at the start of 2011

  10. May 9, 2012

    Good points, Martin.

    As I wrote in my previous post about Windows 8 (, I don’t think they are trying to make it fully compatible, I think they are basically abandoning the desktop and focusing on mobile.

    Like you said, they are trying to mitigate the damage by adding a legacy mode, but it’s pretty clear that desktops won’t be around that much longer. Besides, who is going to invest the money to compete for a declining platform?

    I don’t see a problem with tablets. The demos I saw ran fine.

    I think the big advantage they have is that, while they are coming from behind in mobile, they are ahead in the new digital battlefield (i.e. Smart TV’s, Smart Homes, Smart Retail).

    Great post on WIMP, btw.

    – Greg

  11. Ronald Lindeboom permalink
    May 9, 2012

    You need to read The Elastic Enterprise. Your comments about Apple NOT having any real developer network (of any long lasting or proven consequence) is completely negated by the points in that book. Since I’m busy, I’ll point to the book and save some typing.

    For years, you have been exploring these ideas, Greg, and for years you have to keep saying “This Time For Sure.” But, for example, the only phone company of any importance (and it’s the weakest of the majors) that is pushing Windows, is Nokia. As smartphones continue to grow in importance, Windows is getting progressively left behind as iOS and Android (not to mention RIM in the Enterprise sector) push it into last place.

  12. May 9, 2012

    I said that Apple doesn’t have a developer network? Funny, I don’t even recall thinking it.

    – Greg

  13. May 9, 2012

    You said: “Playing well with others has always been Apple’s Achilles heel and it is here that Microsoft has a distinct advantage. Microsoft’s strength is its modular, collaborative approach. While Apple is famously prickly, Microsoft encourages third party development. For instance, they partnered with Ford on their successful Sync platform. When hackers started fiddling with Kinect, they released a software development kit (SDK) and offered prizes for the best hacks. Moreover, they have decades long relationships with manufacturers and are skilled collaborators. Neither Google nor Apple have been able to prove that they are.”

    I think that’s a pretty good implication as to having no developer network or other relationships in place. But the proliferation of iApps — which like McDonald’s are served by the billion now — laughs at that assertion, as the writer of “The Elastic Enterprise” points out. Things are getting smaller, cheaper, more ubiquitous and in that Microsoft has no idea what to do. They remain stagnant and that is sad because they are a great company.

  14. May 9, 2012

    Well, I guess you misunderstood. Click on the Windows 8 post that I linked in to see what Steve Jobs had to say about the issue.

    – Greg

  15. May 9, 2012

    I don’t doubt that I could misread your intent, Greg. It is pretty rough to read people’s intent when you are racing across the internet and read people’s titillating titles, so you swing by to see what the argument is.

    But the point you didn’t address which I raised is “What is Microsoft doing in the face of all of this iApp fever and modularization of things?” They are completely out of sync (but they have the Ford Sync, admittedly) and while the world races to the Cloud with all kinds of models that are catching lift — Microsoft is tethered to a mobile OS that has yet to prove its mettle in the marketplace. iOS and Android are way ahead of it.

    Don’t get me wrong, I wish Microsoft well. I like the company. I like many of their products. But they haven’t had a truly fresh “home run” in a long time now. Your downplaying of iOS’s numbers from 95% to 50% is something that ALWAYS and PREDICTABLY happens when a company demonstrates a new idea and dominates the space while other well-funded giants jump into the waters — vis-à-vis, Android. Microsoft is tied to Nokia as the only major vendor really pushing Windows Mobile, the rest are really behind Android and have cursory involvement with Microsoft.

    That is a key point you left out of your report. But the mobile space and having real mindshare in apps, etc., is something that Microsoft has yet to make any real marketshare into.

  16. May 9, 2012

    Thanks for sharing.

    – Greg

  17. May 9, 2012

    Thanks for the exchange, Greg. I hope all is well with you and yours.

  18. Ronald Lindeboom permalink
    August 2, 2012

    In the past few months since you penned this on May 9, 2012, Microsoft appears to NOT have lived up to your expectations as seen in this report from the Wall Street Journal.

    Some of the key points the WSJ commentators make address MS’s inability to succeed in any real tenable way against Google. There are other key points but why type them out when they say it well in the video…

  19. August 2, 2012

    Yes, the jury is still out. Windows 8 hasn’t even been launched yet.

    There have been a variety of opinions in the press. Some seem to agree with me, some don’t.

    We’ll just have to see…

    – Greg

  20. Scott permalink
    July 18, 2013

    Actually, I think you nailed it. Xbox One may very well be the next home computing platform. Why bother with a touch screen when you can just bark orders at your Kinect and use gesture support to drive it? Consider that it can drive all your media and entertainment seamlessly combined with clustered computing through the likes of Azure and you have to wonder whether the console will he the next, “form factor” because to some extent, it won’t really have one. Xbox One could be the equivalent of a fully scalable terminal emulator with built-in future proofing. It could get interesting.

  21. July 19, 2013

    Thanks Scott. That’s really nice to hear. People were very skeptical when I posted this last year.

    – Greg

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