Saturday, July 22, 2006

Microsoft announces Zune is this the way forward?

Microsoft confirmed their plans to launch digital media player and associated ecosystem which looks similar to ipod ecosystem.Ok this news is reported extensively in media my aim is not describe zune or predict weather it can make a dent on Apples ipod market share .But the idea here is to explore what does this move mean for future of digital players (which can include mp3 players, Internet tablets, Smartphone’s or so called converged devices) ecosystem.

If you go back in history to the time just before PC revolution the whole concept of horizontal hardware and software platform concept (i.e. like Windows + Intel platform (Wintel)) was not in existence .Apple, IBM and many other companies at that time introduced PCs with both HW and SW built in house, Infact this kind of system is known as closed systems and even Microsoft came into existence as a subcontractors to develop DoS OS for IBM PC. It was later that Microsoft and to a Large extent Intel which joined forces to create this new ecosystem of hardware and Software platforms, i.e. Microsoft and Intel by themselves will not produce PC but will supply horizontal platforms so that any other player can combine both these platforms and produce PCs.As result of this new ecosystem new players like DELL could enter and change the entire competitive landscape of the PC segment .I would attribute the high rate of growth of PC to this ecosystem because this lead to competition in market place which in turn lead to reduction in prices. But at the same time if you look at Apples Mac story during the same period even in spite of being technically superior product lost market share and was relegated to a minor niche player in PC segment .Some of the business pundits call Apples reluctance to give its superior OS as software horizontal platform to others including competitors as on of the biggest business blunder as they predict that if apple had horizontalised the sw platform Microsoft had no chance of survival .But that is any way history .one thing that is clear is Microsoft strategy of horizontalisation was more superior and successful strategy to Apples closed ecosystem strategy .

So my big question is Microsoft strategy of horizontalistion (Microsoft’s Music SW which is licensed to many HW mp3 vendors like iRiver) or Apples closed ecosystem (ipod is another great example of closed ecosystem) is most suitable for new digital world?

Ok now you may say that Microsoft had already embraced closed ecosystem in gaming console market by successful introduction of XBOX to compete against Sony’s Play station .But my point is Microsoft entered gaming console market dominated by Sony and Nintendo for the first time with Xbox they never tried to change ecosystem unlike in music player segment were first it took PC like approach relaying on many other players to make digital media players by just providing Software .But by the announcement of zune it has accepted that the old model was not working and it is forced to take Apples approach of closed system to compete with iPod .So big question is Microsoft going to revisit its strategy in many other segments were it has tried to play pure software vendor role and has not faced any considerable success .one such very lucrative segment on top of my mind is Smartphone segment so far it has licensed it its windows Mobile platform to many vendors like Motorola and Samsung without much of success to gain considerable market share from Nokia in that segment .Whatever little success that it has got in Smartphone segment has been in Enterprise segment and that to especially in North America. While Nokia which seems to be main rival to Microsoft in that space has not only has 60+% market share by its own phones but also played Microsoft horizontalisation game by licensing Nokia Smartphone SW platform (S60) to many of its competitors like Samsung,LG, Lenova etc.

Though I have raised more questions then answers but one thing is for sure all companies are fundamentally reevaluating their ecosystems and business models so that they are not left irrelevant in new digital converged world. Consolidation that is happening in industry (see earlier postings on this topic) is one such measure after reevaluations. Who knows it may be the time for Apples closed ecosystem to succeed.

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