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Linux and Open Source

Steven J. Vaughan-Nichols & Paula Rooney

Open source pulls a Gates in Jobs

By | July 19, 2010, 4:37am PDT

Summary: Apple defined the modern smartphone market, but it could not dominate because in time a “good enough” solution appeared that the OEMs could build and sell in their own way.

Android is succeeding in doing to Steve Jobs exactly what Bill Gates did two decades ago.

It’s making him a niche player.

This fact is becoming increasingly clear as Android phones begin to outsell iPhones. Just as with the Mac and PCs, Jobs’ insistence on control over his ecosystem is becoming his undoing.

Today’s phone OEMs are much like the computer OEMs of 25 years ago. Historians (and those of us with graying hair) will recall that the Mac had nearly a five-year lead on Windows’, in terms of a practical Graphical User Interface (GUI).

Yet somehow the market suffered DOS all that time, and once Microsoft delivered Windows 3.0, breaking the now-quaint “640K barrier,” the market followed.

In the case of Android, the wait has not been nearly that long. But the Android does apps, and video, and most of the other things the iPhone can do. So the OEMs of our time, HTC and Motorola and the rest, grabbed what they could control and have started making money from it.

Apple defined the modern smartphone market, but it could not dominate because in time a “good enough” solution appeared that the OEMs could build and sell in their own way.

All this holds some interesting lessons for the next phase of our struggle, between the insanely-great iPad and whatever Google delivers as a Chromium OS.

Insanely-great will always lose, in the end, to good enough, unless insanely-great is willing to compromise. Compromise is really what open source is all about, as I explained earlier today.

It’s the willingness of open source to adapt that gives it strength. Just as is true with America itself. Steve Jobs is a great American, but America is bigger than Steve Jobs.

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Topics

Dana Blankenhorn has been a business journalist for 30 years, a tech freelancer since 1983.

Disclosure

Dana Blankenhorn

Dana Blankenhorn has been a journalist, writer and part-time futurist for over 30 years.

At the present moment I run only a personal blog in addition to my ZDNet open source blog.

DanaBlankenhorn.Com has the subtitle The War Against Oil. In the past I have used it to write about political history, e-commerce, personal matters, some ideas related to open source, and The World of Always On, which is the idea of using sensors, motes and RFID to turn WiFi links into platforms for applications which live in the air.

My IRA account at Schwab holds a few tech shares, most notably some Intel and Applied Materials, but there are no open source companies in it. I don’t even own any CBS stock.

Biography

Dana Blankenhorn

Dana Blankenhorn has been a business journalist for nearly 25 years and has covered the online world professionally since 1985. He founded the Interactive Age Daily for CMP Media, and has written for the Chicago Tribune, Advertising Age's "NetMarketing" supplement, and dozens of other publications over the years.

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RE: Open source pulls a Gates in Jobs
Cyberjester 27th Jul 2010
@DanaBlankenhorn

Which is the biggest thing Apple has going for it.

A single consistent platform.
all the best for him.

Jobs want high margins. Only a monopoly or a niche player can get that.

Aplpe makes money on its margin higher than the market, on its content distribution system, and on its licensing strategy.Apple consumers have full wallets, they spend on hardware, on content, on accessories. You annot say that of HTC clients
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Good Point
DanaBlankenhorn 19th Jul 2010
@s_souche Margins are always more important than share to Jobs. And that may be his undoing. Because as products run through the mass market, the optimal price for maximum profit falls, from "what I might pay" to "what I want to pay."
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yes
s_souche 19th Jul 2010
@DanaBlankenhorn
That's why apple will have to re invent itself and move forward, or dwindle
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@s_souche

The cut throat competition in an open market will cut cost and expand volumes. High volumes will attract developers. Apple's margins and volumes will slowly decline until apple is a low volume niche player. As a niche player, developers will leave and the platform will slowly die. Content distribution can ameliorate this to some degree, but Apple does not own content. Again price competition and volumes will mean that the dominant platform will probably win in the end. You can not sell a lot of content into a niche market.

It is in fact surprising to me that Jobs does not seem to have learned much from his first failure. Very few players get a second chance in essentially the same market. Jobs may blow it for a second time.
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@Economister
Apple bet, which was right up unteil now, is that high margin hardware consumers also consume more content. Apple offer content providers a distribution channel that offers high margin because of the profile of targeted clients. This was successfull with ipods and itunes, and is succesfull with iphone/app store.

These distribution channels are of real high value for content providers, because mass market consumers are more expensive to target and less profitable. There is a place for an economic equilibrium on this business model.

Back in its PC era, apple did not posses this two legged model
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@Economister Please explain the iPod. There are no subsidies there and it controls 70%+ of the market. If Android were even remotely ready to compete with iOS, it would be gaining market share on the iPod Touch.

No such thing is occurring. People predicted for years that, Microsoft's Plays for Sure would defeat the iPod. Oops.

Now everyone is busy predicting that Android will kill iOS, by counting only U.S. smartphone statistics and ignoring worldwide OS share across all devices. When Android starts outselling iOS (currently at 100+ million devices) call me. You won't, because it won't happen.
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RE: Open source pulls a Gates in Jobs
Cyberjester 27th Jul 2010
@Ted T.

There is no competitor to the iPod.

There, explanation done.

Way back when, when we had Creative and Sony offering large capacity music players, Apple stayed afloat because they were seen as fashionable. It's still seen as a fashionable statement to own an iPod. It's shiny and we like muchly.

Since then, there really is no alternative. I can't find a Creative player anywhere, Sony seem to max out at 2GB.

It's a monopoly so good that the competition is dead. :P
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RE: Open source pulls a Gates in Jobs
Cyberjester 27th Jul 2010
@s_souche

No, Apple isn't a "high margin hardware comsumers will consume more content", it's "high margin hardware consumers cannot escape the monopoly and thus guarantee income. PC you can use whatever parts you want, whatever office suite that has .doc format and whatever music player you want. Apple you use a Mac with Office for Mac and an iPod. :P
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is the iPhone's lock-in with AT&T. Some (many?) have issues with AT&T or are loyal to, or locked in to, other carriers that presently only carry Android, BBerry, others.

Once (if) the iPhone moves to other carriers (ie, Verizon, etc), expect the Android growth to level off or decline vs the iPhone.
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Disagree
Economister 19th Jul 2010
@MacCanuck

The large number of HW vendors developing Android and later, Chrome devices is a bigger advantage. Standardization of the HW platform will ultimately drive volumes and hence prices to levels where Apple will not be able to compete very successfully. When smart phones become the low cost "standard" (feature phones and lower will essentially disappear) the SW cost will also matter, and for Android and Chrome it is basically free.

In other words, when smart phones (and tablets for that matter) become commodity items (say $100 for a smart phone WITHOUT a subsidy), Apple will slowly fade away, just like they did last time. All the subcategories like MM players etc will basically disappear. A smart phone will become a chip, a screen, a battery and maybe a keyboard (and an antenna wink )

If Apple had opened up its platform, the future could have looked very different, but it is probably getting a bit late already.
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Think it through..
Wolfie2K3 19th Jul 2010
@MacCanuck
Ok... So let's say that come Jan 2011, Verizon will be given the option of putting the iPhone in it's stable. Now, given the mild clusterfrack of the past couple of weeks with the iPhone 4, "antennagate", the bluetooth issue, the proximity sensor issue, etc..., do you really think Verizon would really, really want the iPhone in it's stable? Unless Apple gets it's collective act together in the next 5 1/2 or so months, and can produce a more flawless CDMA version, I think Verizon just might pass on the bloody thing - again. While it's true that there are plenty of current iPhone owners who would gladly jump ship given the chance, does Verizon really need/want the drama that comes along with the phone? Android is pretty much drama free. Verizon is doing fairly well with it's Droid lineup.
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@Wolfie2K3

Verizon is a business like any other. Until a significant chunk of the 3mil and counting iPhone 4 users return their phones, the iPhone is very much appealing to Verizon.

Truth is, and the techno-wannabe-geeks refuse to acknowledge is that the "antennagate" issue isn't as big an issue as everyone makes it out to be. It's been blown way out of proportion by the blogosphere and media that picked up on it. Sure there's a real issue, but its not as big as everyone complains it is. And for those that actually experience issues, they now get a free case.

If you really want to dive into the geek-aware issues, why not discuss the often denied but true fact of fragmentation of the Android OS. Sure, Android is selling more then the iPhone, there are way more phones out there. How many of those phones are at the iPhone type level? EVO, Incredible, Droid X ... have the sales of any one of those phones met the iphone sales #s? Have all of them combined?

In terms of developers, the issues with the different android phones are very real. Screen size, keyboard no keyboard, this feature that feature. Two Android users my visit the market place to grab an app for their "RECENT" phone and one may find that the app is unavailable due to a missing feature. Sure, iPhones get obsoleted but you won't have someone buying two brand new released iPhones and having a different selection of applications because of different features of the phone. (iPad and iPhone are different devices, obviously, so there should be little or at least less confusion as to why an app is not available for the iPhone when it is the iPad).

What about OS level? iPhone 4 was released with the latest version of the OS that Apple has to offer. For better or worse, it came with a lot of new features that people were looking for. Why does the Droid X that my brother just picked up only come with Android 2.1 with a promise of 2.2 by the end of summer? Google announced 2.2 and Flash support, but yet a brand new phone just released doesn't have it?

I'm not going to say either is better then the other, each side (iOS and Android) have pro's and cons. But to say that Verizon wouldn't be interested in the iPhone due to insignificant reasons is just plain silly.
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RE: Open source pulls a Gates in Jobs
Cyberjester 27th Jul 2010
@Wolfie2K3

Well said.

@tk_77

No, people can't return their iPhones. When their contract ends however, they may well move to a phone that has less drama and less network congestion. A HTC Dream on Verizon or Motorola Droid.

You argue that the iPhone is a single phone whilst no other single phone competes with it?

I'll use a well known example here, with an argument of just two words.



Microsoft Windows.
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RE: Open source pulls a Gates in Jobs
Cyberjester 27th Jul 2010
@MacCanuck

Maybe. Because Apple was so control obsessive, they may have lost their advantage over Android. Keep in mind that Apple has had their reputation tarnished, the same that AT&T have. Samsung, Nokia, HTC, all are moving in on Apple since customers are reaching the end of their contracts and ditching both A's.
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Android, found on phones of all networks is barely outselling the iPhone, one phone, on one network.

What happens to your theory once the iPhone become available on Verizon and other networks?

My guess is alot of Android phones will make their way to the trash at that point. I would honestlly hope that won't be the case, but I have a inkling on that.
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@John Zern
The thing is - Android phones do seem to be getting better, MUCH better, MUCH faster than the iPhone. Have you seen the new Samsung Galaxy S series - for instance? It may be truer about older models - like the G1, but I don't see many people who just bought a brand new phone would dump it for an iPhone. The economy isn't THAT good. Come think of it, neither is the iPhone 4... Apple will have to do MUCH better.
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It will probably be too late
Economister 19th Jul 2010
@John Zern

The iPhone has been on the market a lot longer than Android phones, and is already being outsold. Most of the the people who really want an iPhone have already made the purchase and switched carrier if necessary. There are more and more compelling iPhone alternatives on the market WITHOUT the iPhone's negatives, including the antenna issue. The market forces I outlined above will apply regardless of whether additional carriers are selling the iPhone.

The smart phone is still a relatively new and low volume product category when compared to the huge cell phone market. When virtually all cell phones are smart phones, Apple will again be a niche player.
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@Economister Apple has having 5% of the personal computer market share, and reaps over but over 35% of the profits from said market.

Apple has roughly 3% of the market share for all phones (not just Smartphones), and already reps over 60% of the profits from the market of selling phones.

I believe Apple is fine by having a "niche" if you look at the market share, as long as they are profitable and the customers actually buying their products are happy enough to trust Apple and buy their products again.

I have no doubt that Android devices will outsell Apple's phones and pads by a factor of 10 in a few years. But I also have no doubt that this will have close no no influence what so ever on the business of the market. Just as 2 billion sold JavaME enabled devices, or Symbian having 50%+ market share of Smartphones, makes any difference.

What Apple lack in market share, they have in spades when it comes to mind share, and revenue share.
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Good Enough
Tim Patterson 19th Jul 2010
It's even worse for Apple. Forget "good enough". Android is better.

Have you even ever seen an Android device Dana? Clearly not!
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RE: Open source pulls a Gates in Jobs
DanaBlankenhorn 19th Jul 2010
@Tim Patterson Sure, I've checked out Android. I like it. Most commenters think it "good enough" in that it does most of what the iPhone does, but nothing the iPhone doesn't.

But "Android phone" is a broad category, remember. An Android phone bought a year ago is far different from what you can buy today. An iPhone from a year ago -- not so much.
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RE: Open source pulls a Gates in Jobs
Cyberjester 27th Jul 2010
@DanaBlankenhorn

Which is the biggest thing Apple has going for it.

A single consistent platform.
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Lets look at real numbers and facts, iPhone two models (4 and 3GS) one network in the US - vs Android manufactures (and all carries in the US) - The iPhone outsells them worldwide.

The only time Android have out sold iPhones is in the US only during the two months while people were waiting for the new iPhone!

Unless things change considerably Andoird will be a niche player if Verizon were to offer the iPhone.

The people I know who have Android phones basically make excuses why they can't get an iPhone. No one would actually say that existing Android's running 2.1 or earlier is in the same class as an iPhone.
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RE: Open source pulls a Gates in Jobs
jeff.fostermedia@... 20th Jul 2010
I don't think is proof positive, iApple is a smarter, wiser more agile firm than Apple Computers was. They as the same with regard to risk and innovation, but they have a lot of weapons for reaching consumers than they had previously. iTunes and the Apple Store make the stranglehold on consumers possible.The real competition to Apple was/is Amazon. They have offered content solutions to break the virtual monopoly Amazon has on consumers. iOS simply not the same as Android and it's only going to get harder for Google to copy Apple. What they offer is the best techie experience to Apple's intuitive mobile universe. iOS is much more than software, it's an industry and consumer ecosystem. Android is not!

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