Apple, Google, and Microsoft Are On a Collision Course

I watched with great interest recently the resignation of Eric Schmidt, Google's CEO, from Apple's board. The FTC had opened up an inquiry into possible conflicts of interest in Schmidt serving on Apple's board, and while this most likely was a factor in Schmidt's resignation, it wasn't the prime motivation. It has become clearer that since Google is moving into phone and computer operating systems, the company is on a collision course with Apple; it would eventually be impossible for Schmidt to effectively serve both Apple and Google at the same time.

However, while most saw each company's OS and smartphone OS as the key reason for this potential conflict, I believe it goes much deeper than that. A new trend in product development is taking shape that is both fascinating and a bit frightening at the same time. To understand what that trend is, it is important to look at the company that appears to be leading this trend and then look at how the others are following suit.

The poster child for this trend is Apple. And it is Apple's overall approach to a hardware, software, and services solution that is at the center of Google's and Microsoft's envy. If you look closely at the way Apple has approached this market, the company has created an ecosystem of products that revolves around the Mac OS and/or user interface in some form or other. In fact, the OS, UI, and the services component have emerged as the real crown jewels in Apple's kingdom. At the hardware level, Apple controls design and form factors, and while in most cases the company uses industry-standard components, they are hardwired together around Apple-specific IP. Some consider this system a closed architecture, although Apple views it as an integrated approach to a total consumer solution. This hardware approach extends to the iPod and the iPhone as well.

At the OS level, Apple controls the UI and has developed a rich underlying structure that lets the company deliver powerful applications that take full advantage of the Mac's UI—that's why the Mac is considered the most user-friendly PC, and why Apple can claim that everything "just works." And then Apple has the services layer. This comes in the form of iTunes, as well as the Web links to key products like iPhoto, iMovie, etc. Put them all together and you have an Apple ecosystem that is making Apple into a powerhouse and industry influencer in ways we could never have imagined even two or three years back.

Of course, this approach to success for Apple has not gone unnoticed by Google and Microsoft. However, they have a very different approach to the market at the moment. Microsoft controls the OS experience, but does not have much control over the hardware. This is doled out to the PC vendors, whose role it is to bundle Microsoft's OS and be its delivery mechanism. Google, meanwhile, is focused around a Web-based world and has absolutely no control over any hardware at all. But both companies have come to the realization that much of Apple's approach to this market is something that they need to emulate if they are going to have success in the future.—

To that end, I think both companies are working on their own ways to deliver a "closed" approach to at least the services component, so that they can tie users to their ecosystems in the future.

In Microsoft's case, the services layer is evolving out of its cloud-based apps and its Zune Marketplace. At the apps level, Microsoft has recently announced that its popular Office apps will soon go online, and there will be a free version as well as a paid version that has more features, functions, etc. With the Zune store, Microsoft is very much following in Apple's iTunes footsteps, using it to lock people into the Microsoft ecosystem of software and services tied to its partners' hardware. And while I am sure the hardware folks will have the option of not offering any of Microsoft's services, only the big guys could do without the financial rewards of participating in Microsoft's ecosystem if Microsoft makes it worth their while.

Google also wants to drive more people to its Web properties and applications. In fact, if you look hard at the new Chrome browser, which as I pointed out in an article here last October is actually an , Google is setting things up for its apps to work the best within the Chrome OS and browser. The company is laying the groundwork for a Google ecosystem of its own that will tie people to its services. And if you look at the recent acquisition of On2 Technologies, you see a level of video codec controls that could be integrated into Chrome in such a way that some videos would only work in Chrome.

Some have suggested that buying On2 technologies was done to lower Google's costs by sidestepping YouTube's current streaming technology, which uses Adobe Systems' Flash software. But Google doesn't have to pay Adobe fees to use Flash for YouTube. And some think that using On2 technology could trim YouTube's network bandwidth costs. All are likely possibilities. However, in the long run, it is possible that getting On2's technology accepted as a built-in Web video standard could help both YouTube and Google's grander ambitions for the Web. And while Google would probably deny this, you can't count out the possibility that the company is working on ways to tie this technology to the Chrome OS, so these apps and video solutions either would work only on a Google platform, or at the very least, they'll perform the best when within the Google OS.

While all three companies approach hardware, software, and services differently, it seems to me that they are on a collision course; trying to create three different digital ecosystems around specific software, OS, and services.

At the technical level, this could be exciting in that it could spawn a lot of new applications and services, and create some really cool integrated products. But at the same time, it could be scary in that it could be driving our industry into at least three special camps instead of moving us towards a more open-source approach. It will be interesting to watch these companies fight for the exclusive loyalty of business and consumer users in the future.