On the Rise and Fall of the Hi-Tech Godzilla.


Hi-tech monopolies come and go and their rate of rise and decline is proportional to the rate of change in technology. IBM, the almighty Big Blue, has given way to Microsoft and Intel (the WinTel duo). These days, we are seeing the decline of WinTel, and the rise of Google, Apple, and Facebook. Interestingly, the main reason for the ascend and descend of these monopolies lies in a fundamental paradigm shift rather than the arrival of a direct competitor with better technology, or a specific court injunction against the monopoly.

The upshot of this is that trying to beat a hi-tech Godzilla through direct competition by offering better products is futile. It may be a plausible path for a startup to make an exit. The market size makes it tempting for other wannabes to attempt to take a bite. But historically, even when a superior product exists, users are painfully slow at adopting it, and by the time they do, the world has moved on and the previous market is no longer interesting. Think of IBM and mainframes, DEC and mini-computers, Internet Explorer and the Web browser wars (yes, IE is finally loosing its dominance, but frankly, who cares). Anti-trust law suites also have done little to stop hi-tech monopolies, as by the time the deliberations end, a decade after the suite was filed, the case is no longer relevant.

On the other hand, hi-tech monopolies of a given technology era seem to have a difficult time carrying their success whenever the shift occurs. It appears that they are over occupied with protecting their own domain, and by the time they realize that the world has changed, it is too late for them – a new monopoly has emerged. In fact, quite possibly the emergence of the new monopoly is what finally convinces them that someone has moved their cheese.

At the same time, trying to turf a hi-tech monopoly is doing a great service to the community. First, it forces the monopoly to constantly improve its products and keep its prices at bay, helping out the consumers, who even though are still loyal to the monopoly, at least are getting better return for their money. Second, this keeps the monopoly occupied protecting its status, taking away some of its energy in noticing the inevitable paradigm shift that would lead to its decline.

For example, as noble as Microsoft’s Bing and Live related efforts to compete with Google in the search and e-mail domain are, they do not stand a chance of winning. This is not because Microsoft does not have great engineers, but rather because that is the way of the world. Microsoft would probably do a much better service for its stock holders if it were to shut down this operation, and spend most of the money saved on buying more Facebook equity. At the same time, if you are a Bing/Live engineer at Microsoft, don’t make a dash to the nearest head hunter yet. The good news for all Bing and Live engineers is that you have nothing to worry about your job security. Microsoft has invested too much bravado in these products to shut them down. The bad news is that your role in history is not to beat Google, but rather to harass them enough so they miss the new trend. The somewhat sweater news is that Google has already did exactly that.

While Google is the almighty queen of the Internet, these are old news. For a huge (and growing) fraction of the population, the Internet has become Facebook. For youngsters, e-mail seems sooo 90s, and whoever controls it is as important to them as who was the record label for Madonna during that time period. I was very surprised to learn that many youngsters do not even realize that the Internet can be used as a source of information for just about anything in life, and that Google can be used for other things than finding the people you know on Facebook. If you are skeptic, try to think of recent commercials you heard on the radio, watched on TV, or read in the newspaper. Which address did they give, the URL of their own Web site, or their Facebook page? In this arena, Google’s attempts to create cool social networks seem to be as hopeless as Microsoft’s Bing.

There are two additional new disruptive technologies, smartphones and cloud computing. In the area of smartphones, Apple currently seems like the big winner. While some phones claimed to be smart-phones before the iPhone arrived, from the day of its appearance, the iPhone has become the definition of a smartphone that everyone tries to imitate. As an operating system, Google’s Android seems like an extremely strong competitor, but it is spread thin among dozens of hardware platforms. Upcoming operating systems like Samsung’s Bada and Nokia’s MeeGo are promising to give the iPhone a serious fight, but unless a major shift in the way we use mobiles occurs soon, I do not think the iPhone dominance as a complete platform will be seriously threatened.

As for cloud computing, in my opinion, the only way to become a 200 Billion plus company is to control an important consumers’ market. In the days of IBM, there was only corporate computing, so the consumers were the corporate users. Later, WinTel came and dominated the personal computer world. Google has seized the Internet search and e-mail leadership, which up until recently, where the most dominant consumer applications, and now it is Facebook. Interestingly, once a high-tech Godzilla dominates the consumers market, it is gradually drawn toward the enterprise one. Even Apple, whose resurrection started with the iPod, a music player of all things, has used its consumer awareness to increase its enterprise position, and today Macs can even be found in cloud computing data-centers, something unthinkable only a few years ago. Based on this theory, I speculate that none of the future hi-tech leaders will come from the cloud computing infrastructure and hosting players. In particular, while Amazon is the current leader in cloud computing, its market cap will not surpass 100 Billion dollars anytime soon. True, Kindle is a consumer’s product, but it targets a niche market.