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Business

When you see Chrome OS think business model

Chrome OS isn't an attack on anyone so much as it is an effort to crack the Netbook business model.
Written by Dana Blankenhorn, Inactive

The trolls are out for Google Chrome OS, months before the first delivery of beta code.

It's as bad in its way as Windows, stealing your privacy and adding proprietary tweaks. It's going to destroy Android, Google's Linux for smart phones. It's an attack on Ubuntu. It's an attack on Microsoft.

Here's my two cents.

Chrome OS isn't an attack on anyone so much as it is an effort to crack the Netbook business model.

I have tried both Windows and Linux Netbooks and they both have problems.

  • The Linux kit can't deliver a business model that works in the sales channel, so if you're talking about this attacking Ubuntu there is nothing to attack.
  • Microsoft has tweaked its business model to fit the Netbook, but that model doesn't really work for either Microsoft or users.

The problem is that Netbooks are cheap and, while they will gain in power they will stay cheap. I spent $270 on my HP Mini and that's about right.

Microsoft has reportedly cut the price of Windows to $3 to capture Netbook OEMs, and it's offering a cut-rate price on Office, too.

But when you consider the $50/year price to license an anti-viral, the $30/year to license a malware program and the additional $30/year you need for a registry cleaner, the software price of a Netbook gets completely out of line with its hardware cost.

Chrome will solve the channel problem because Google has the cash to subsidize it at retail. Chrome hopes to solve the software problem by moving as many functions as possible into its cloud.

Amazon's cloud has a great business model, based on Web hosting. Google's cloud has been struggling to build a business model beyond advertising.

Netbooks, and the Chrome OS, are that business model.

The idea is that the Netbook is a true client, which syncs its files regularly, via WiFi or a cellular data link, with the Google cloud. That cloud, in turn, can sync necessary files back to a Google Android phone.

More important, the cloud can manage the Netbook. Security can be handled centrally, whenever the device is connected.

These are valuable services, well worth paying for. Netbooks will create larger files than phones, they're editing rather than data gathering devices, so now it starts coming together.

You use Google free, and you use many Google services like mail and calendaring free, but now Google can sell syncing, security, and integration with your corporate resources at a designated price.

Think of it as the third leg of a cost triangle, one being the device, a second being the connection, and a third being the online service behind the connection.

WiFi in a coffee shop can reduce that second cost, but as more cellular carriers (or Clearwire, which Google has invested in) offer all you can eat (or at least high bandwidth and high bit limit) pricing plans you start to see how it works.

A Chrome OS Netbook thus has a revenue stream that can let it subsidize the initial price. Just as Android phones are subsidized by a contract on the cellular link.

We make a mistake in the tech business when we focus too much on the technology and the rivalries among various companies. We should focus instead on the business models, how investments will come back in ways that are attractive to customers.

And in this case it comes back in monthly fees.

They say life is all about the Benjamins, but when it comes to Chrome OS Google's plan is that we all be Aaron Burr, killing all the Hamiltons. The money comes out of your pocket by tens, for services you're happy to pay for, because you save hundreds in up-front costs.

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