UPDATE Aug 27 2013: It is now almost 3 years since we looked at this analysis. Since then Amazon and Google have most definitely shown that they are platform ecosystems (hardware, software, content and goods) that will compete for the hearts and minds of businesses and consumers alike. Even Facebook who entered the public sphere in the last 2 years is giving Amazon a good run for their money. This is the power of having millions of eyeballs look at your content daily. It is akin to a new massively powerful media company. While these companies are in decidedly different yet overlapping businesses, these 5 companies, in my mind, will form the different models of technology adoption and innovation for the rest of this decade. The real question is what course Microsoft will take? Will they indeed be the "IBM of the 21st century" maintaining the legacy of the late 20th century for the better part of the beginning of the 21st century?
UPDATE Oct 6 2011: It is now almost 1 year since I wrote this article and Apple continues to have a larger market cap than Microsoft. Steve Jobs passing kind of underlines the eternal competition between these 2 tech giants. The chart looks very similar.
The chart above shows a historical return on investment (ROI) between Microsoft (MSFT) and Apple (AAPL) going back to the early 80s when both companies become public corporations. Recent returns over the past 5 years put AAPL slightly above MSFT in terms of market capitalization and way above Microsoft and Google in ROI (see chart below). But the returns over a much longer period are startingly different.
While Apple was struggling in the mid to late 90s and working to get its mojo back with the return of Jobs, Microsoft was absolutely crushing it, gaining market share every year in both the home and the workplace. After shipping Windows 95, lauded to be the most compatible and available operating system "for the rest of us," Microsoft went on a tear to solidify their lead by cementing a stable OS with Windows 2000 and essentially locking in 90% of desktops to Windows XP. Go around most enterprise offices and you'll see Windows XP still running on most desktops. Vista and Windows 7 are a long ways from being adopted anywhere other than by consumers who buy new laptops and desktops for their home use.
And with those millions of software licenses Microsoft was able to create huge shareholder value -- mostly from their enterprise domination. And then the cash was used to buy a variety of products that we know of today mostly as "bloatware." There's a ton of useful stuff that is used by many, but when is the last time you saw a Web 2.0, high end, high volume business running on .Net as an infrastructure? I compel you to find any large Website using .Net as a platform.
So what has been happening the last 5 years or so?
Or has the whole landscape changed in terms of how much people are willing to pay for software and hardware, whether it be enterprise or for the home? Is open source really eating Microsoft's lunch as some purport? Are Web 2.0, cloud based applications that are tested for free and bought on a monthly basis a real alternative to shrink-wrapped multi-thousand dollar pacakges? It's probably way too early to tell, but we do know one thing: Apple's ROI is blowing Microsoft and Google out of the water. If it's an Apple bubble it sure has lasted a relatively long time, and I don't see it bursting any time soon.
Apple's new products since 2007 account for 60% of additional revenue to Apple -- those products simply didn't exist before then, so you could guess that there is a huge opportunity on the horizon for Apple to dominate the mobile and tablet space. If you mix Google into the mix (GOOG), an Apple + Google partnership would really give Microsoft a run for its 21st century dollar. Imagine Apple doing the hardware and Google joining forces with Apple and adapting Android to run on Apple hardware. Wither Wintel in favour of the GoogApp revolution?
There is only one thing missing from this equation -- will enterprise buy into the new Apple universe? Or will it even matter? Apple recently cut their Xserver, which didn't sell into enterprise. Apple realized that they are wasting their time competing in the Enterprise. (Apple tried A/UX before and many enterprise attempts in the ill fated mid to late 90s. Remember DAL anyone?)
Maybe the enterprise doesn't nearly matter as much in the 21st century as it did in the late 20th century. Is the enterprise really buying anything anymore? Seems like the big guys are hoarding cash. Maybe the preponderance of tiny companies being created by laid off employees or newly minted Facebook millionaires changes the landscape. Is the ready stream of entrepreners composed of college graduates foregoing the corporate life paving the way for a brand new future of high quality, reliable, scalable consumer products priced at a potential premium?
There are many that are saying that with competition from Microsoft and Google, Apple will suffer in mobile very soon. And when tablets come out from RIM, Dell, HP and many other 3rd parties, the iPad will look like the Newton. Cool at first, but completely incompatible with ordinary peoples' usage patterns (USB port anyone? Camera?). If I had to wager, I'd bet on the competition, not Apple. But if Apple continues to thrive and innovate as they have over the past few years, they will continue to build a lead. And you may be witnessing another Microsoft brewing.
By the way, NewPath Network is hosting a fun Apple Fan Day on November 24 2010 at Camaraderie on 102 Adelade St East. Please register today if you'd like to participate in the fun. We'll screen movies related to Apple lore and talk about all things Apple.