Lessons in Longevity From I.B.M. 2

Microsoft’s other sizable business beyond PC software — also more than a decade in the making — is its Xbox video-game console, software and online gaming franchise.
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June 21, 2011 - PRLog -- Microsoft’s other sizable business beyond PC software — also more than a decade in the making — is its Xbox video-game console, software and online gaming franchise. That division of Microsoft is a solidly profitable, $8 billion-a-year business.

But the long-term problem for Microsoft is that more than 80 percent of its operating profit still comes from its PC software franchise. “Microsoft has delivered some singles and doubles, but is there going to be another home run?” asks David B. Yoffie, a professor at Harvard Business School.

Because of such concerns, Microsoft’s stock price has stagnated for years. The anxiety has been magnified by the company’s trailing position in fast-growing new markets in search and online advertising, as well as smartphone and tablet software. Some big investors are uneasy — and one, David Einhorn, the hedge fund manager, last month publicly called for Microsoft’s chief executive, Steven A. Ballmer, to be replaced.

Whether Microsoft can find a new foundation for prosperity is uncertain. But like I.B.M., it has deep reservoirs of technical and research expertise. Kinect, its add-on device to the Xbox gaming console, suggests one promising path. The device, which went on sale last November, recognizes people’s faces, their gestures and simple voice commands.

Microsoft acquired some of the sensor technology used in Kinect, but designed the hit $150 product itself, helped by seven different groups in its research labs. To date, Kinect is a gaming device. Yet personal computers that can see you, hear you and respond would be a breakthrough, bringing artificial intelligence into the mainstream.

GOOGLE, meanwhile, has the purest engineering culture among the major technology companies. Its founders, Larry Page and Sergey Brin, former Stanford graduate students in computer science, set the tone. And the assets most prized at the company are brains and data.

“Google is all about information — searching, discovering and sharing information more intelligently,” says Peter Sondergaard, senior vice president for research at Gartner.

In essence, Google sees itself as an artificial-intelligence factory. Its programmers use machine learning and natural language techniques to mine vast troves of Web data to deliver smarter search results and more finely directed ads. Its offerings beyond search all scoop up more data and afford potential opportunities for serving up more ads. They include online e-mail, calendars, maps, shopping, word processing and spreadsheets, as well as videos on its YouTube service and photographs on Picasa. It’s all grist for Google’s data mavens.

Google’s natural habitat is the wide-open Web. But it is also moving into the more closed realm of software for devices, mainly for smartphones and tablets, with its Android operating system. The move is partly defensive. More and more searches are being started from these mobile devices, and it is easier to steer users to Google search and other services from its own operating system. Yet the move could also put it in a powerful position to shape the future of mobile devices, which are eclipsing PCs as the center of gravity in computing. In smartphones, at least, Google is doing well. Android, which Google distributes free, has rapidly become the leader, with 36 percent of the market for smartphone operating systems.

IN recent years Apple has been unmatched in applying its core assets to new markets. Its hallmark skills are the intuitive usability of its software and the inspired design of its hardware — talents long appreciated by loyal Mac users. Yet in the PC industry, Apple machines are still dwarfed by those running Microsoft’s Windows. Apple’s stunning success has come in taking its skills beyond PCs with pioneering new designs in markets that it has redefined or created: digital media players (the iPod), smartphones (the iPhone) and tablet computers (the iPad).

Apple looks to be riding a money train for some time. Its current model is focused on selling its stylish devices; the company’s online software and marketplace (for digital media and mobile apps) are mainly servants of the hardware, pleasing consumers so they are more apt to buy iPods, iPhones and iPads.

Yet Apple’s product designs, however impressive, will eventually be mimicked and come under price pressure, just as the mainframe did, predicts Michael A. Cusumano, professor at the Sloan School of Management at the Massachusetts Institute of Technology. In time, he says, Apple may want to borrow a page from I.B.M. and rely increasingly on software and services for its livelihood.

Apple, he suggests, can build a large business around offerings like its new iCloud online storage and syncing service for music, photos and software, announced two weeks ago, applying Apple’s usability magic to woo users.

Once millions of people use a service, Mr. Cusumano says, there will be ample money-making opportunities with advertising, marketing or charges for premium services. Those can produce steady revenues, quarter after quarter, year after year. “Becoming a platform for delivering digital services is the way Apple can make big money in future decades,” Mr. Cusumano says. --http://discount-battery.us/dell-vostro-1520-battery.html

FOR the powerhouse companies of today, the I.B.M. story holds a cautionary lesson as well: the danger of delay. Mr. Yoffie of Harvard Business School recalls that in 1990 he had finished a case study on I.B.M. His research included extensive interviews with the company’s top executives, who spoke of the need to wean I.B.M. from its dependence on mainframes and to shift toward software and services.--http://discount-battery.us/dell-vostro-1310-battery.html

But I.B.M., he notes, didn’t pursue that strategy until after the company was in peril, and an outsider, Louis V. Gerstner Jr., was installed as its leader in 1993. As Mr. Yoffie says, “It’s really hard to move a company when it’s doing well and not facing a crisis.”

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