MP3 / MD740Strategy & Information Systems

Sept. 15, 2004Computing Hardware – Moore's Law, Hardware

Markets, and Computing EvolutionNetwork Effects, Standards, and Competition:

The Microprocessor Market, Operating Systems and Computer Hardware Markets

Topics Covered

• Components of an Information System– Changing IS landscape & managerial implications

• Hardware– Moore’s Law & the Evolution of Computing Competition

• Network Externalities– Defined, Strategic Importance, Examples

• The Microprocessor Market– Intel vs. the Competition

• Operating Systems & Hardware Markets– Competition Among Operating Systems and Computing

Platforms– The Linux Challenge

FoxMeyer

Massive System Projects

Regulation & Deregulation

Globalization

The Internet

Skills Crunch

Mergers & Acquisitions

Technical Advances

5 Components of an IS

Data

Procedures

Software

Hardware

People

InformationSystems

InformationSystems

Source: Intel Corp.

Types of Computers(the distinction is blurring)

• Personal / Microcomputers– single-user, usually single processor, compact– desktop, laptop, palmtop, PDA, specialized

• Mid-range Systems (Servers)– may have more than one microprocessor, typically

multi-user & focused on a functional area or task (marketing, plant management, web server).

– Vintage midranges (proprietary OS): IBM AS/400, DEC VAX

– Servers (UNIX/Win): Intel-based, Dell, HP, IBM, Sun

Types of Computers (cont.)

• Mainframes (IBM)– large, expensive computer, supports multiple user groups,

terminals, run several applications at once.– costly: support staff, air conditioning, software– secure: centralized programs & data are relatively easy to

backup, maintain, upgrade, and monitor

• Super Computers (NEC, IBM, Hitachi, HP, Intel, Cray)– massively parallel and/or clustered– used to solve problems requiring long, difficult calculations

(e.g.airline scheduling, advanced modeling - biotech, weather, risk management)

– evolution to grid computing…

Network Externalities(a.k.a. Network Effects, Metcalfe’s Law)

• A product or service becomes more valuable as its installed base expands• Why do consumers care about installed base?

– Exchange opportunities– Stability– Extrinsic, complementary benefits

More Exchange Opportunities

More Members

Why are Markets for Network Goods Different?

• Market competition occurs very early and is particularly fierce

• Markets are ‘tippy’ and subject to bandwagons

• Markets exhibit monopolistic tendencies

• The ‘best’ technology or highest quality product doesn’t always win

SoftwareOperating Systems

control hardware and provide an environment in which applications execute

Application Programsend-user program that performs a specific function

Individual examples: word processor, spreadsheet. Collections of apps: Office (suite), SAP R/3 (ERP)

Appletssmall application programs which execute within a

larger environment (e.g. Java applets within browser)

operating system

applications

Competition in the OS Space

PersonalComputersWindows XP

Apple

Mutli-UserSystemsWindows 2000Windows Server2003

Unix (Sun, IBM, HP / Compaq)Linux

ConsumerDevicesWindows MobileUltimate TVXboxTablet PCWindows XP Media Center Edition

Palm (handheld)Liberate (set top)Sony

Microsoft

Competition

The Microsoft Stimulus Package

• Microsoft will return $9 billion to individual investors that hold the stock (excluding all the institutions & funds).

• The Bush child tax credit returned $14 billion.

• Bill Gates has pledged all $3.4 billion to his charitable foundation.

Comments from Windows Source Code

private\genx\shell\inc\prsht.w:// we are such morons. Wiz97 underwent a redesign between IE4 and IE5

private\shell\ext\ftp\ftpdrop.cpp:// We have to do this only because Exchange is a moron.

private\shell\shdoc401\unicpp\desktop.cpp: // We are morons. We changed the IDeskTray interface between IE4

private\shell\browseui\itbar.cpp:// should be fixed in the apps themselves. Morons! .