microsoft and the transformation of the computer industry - 1980-2002

Transformation in the Computer Industry: Insights and Implications

Professor N. Venkat Venkatraman Boston University School of Management

IS714: Fall 2014 @NVenkatraman

Processors

Computers

Peripherals

Networking

OS

Tools

Applications

Consulting

Computer Industry (1980s)

Bill Gates Testimony

Processors

Computers

Peripherals

Networking

OS

Tools

Applications

Consulting

......(2002)

Bill Gates Testimony

Strategies of Key Players

Resellers of computer hardware based on Windows-Intel (“Wintel”)

architecture} }

Processors

Computers

Peripherals

Networking

OS

Tools

Applications

Consulting

......(2002)

Bill Gates Testimony

“How do we define these layers?”

1.Distinct sources of value in the interconnected system

2.Well defined marketplace with a set of alternatives and multiple companies

3.Articulated links to the adjacent layers

Defining the Value Layers

Processors

Computers

Peripherals

Networking

OS

Tools

Applications

Consulting

......(2002)

Bill Gates Testimony

Degree of IntegrationVertical Virtual

Ownership Relationship

Control Coordination

Tight Loose

Hierarchy Network

Technology Linkage

Marketing Agreements

Financial Investments

Joint product/service

Ownership

We can look at a variety of linkages between layers {

Processors

Computers

Peripherals

Networking

OS

Tools

Applications

Consulting

“WindowsIntel”

“Wintel”computers

“Drivers”

“StrategicInvestment”

Microsoft’s Logic of Linkages

Processors

Computers

Peripherals

Networking

OS

Tools

Applications

Consulting

Microsoft’s virtual

integration of the

PC Ecosystem

......(2002)

Positions in one or more layers

Relative market positions in each layer

Nature of links across layers (exclusive versus non exclusive)

Competes and cooperates with other companies within- and across- different layers

Role of each company {

Microsoft orchestrated the PC ecosystem by

• Co-creating the Windows Intel (‘Wintel’) PC architecture

• Controlling Windows OS and Office Applications

• Attracting a set of PC manufacturers to create the hardware (PCs)

• Coordinating the development of drivers for peripherals

• Extending the PC from Consumers to Enterprises

• Evolving the scope of influence to include Enterprise network

The Golden Age of the ‘Wintel’ Ecosystem

1991 2000

In the Bill Gates representation, the layers were static (unchanged)

1 When do new layers of value emerge?

2 When do existing layers of value reconfigure--split into sub-layers or morph together?

POST-PC SHIFTS IN THE

COMPUTER INDUSTRY

Browser Search

Mobile Social

Cloud

1 Role of ‘Browser’

Netscape innovated by introducing Netscape Navigator 1.0 (December 1994) as gateway to the Internet on top of the desktop OS

Microsoft launched its Internet Explorer 1.0 in August 1995 (bundled free of charge with Windows)

What role did Microsoft’s dominance in other layers play in the acceptance of Internet Explorer?

1 Recent Trends in Browser Usage

0

17.5

35

52.5

70

2008 2009 2010 2011 2012 2013*

IE Firefox Chrome Safari Opera Others

1 Role of ‘Browser’

Google’s competitive advantage with its Chrome browser’s dominant market share?

OS

2 Role of ‘Search’

1995 19981996 2000

2009

2 Recent Trends in Search Engine Usage

0

25

50

75

100

2009 2010 2011 2012

Google Yahoo! bing Ask Jeeves Baidu Others

3 Role of ‘Mobile OS’

1996 20101999 2000 2002 2005 2007 2008

4 Role of ‘Social Web’

2002 20102003 2004 2011

Mainframe to PC PC to Internet Post-PC

1985 Now