Each of these firms is or was a leader in their respective industries and IBM, in particular, has had some significant bounces over the last couple of decades. At this moment, if you were an investor, youd likely favor IBM and Apple over Microsoft and Google. Its interesting to note that, as a tech buyer, youd also likely trust IBM and Apple over Microsoft and Google as well. And I think that partially speaks to the core of what is going on in the market.
What I think is also interesting is that Google has positioned itself as the heir apparent for Microsoft. But I doubt Google realized that the crown they would likely get is the one tied to the firm believed to be the most evil.
Lets look at these companies this week against current events.
Currently the environment which seemed relatively simple, much healthier, and much more focused in the 90s is largely a mess.
Youve got proprietary and Open Source platforms competing with a variety of economic models ranging from Free to nose bleed. And the Gartner TCO model, which helped significantly to bring order during the last decade, has proven to be ineffective in this one.
This means that buyers are having a significant difficulty in getting funding to justify technology purchases, and this difficulty ranges from corporations to individuals. Even with individuals you used to be able to see benefits from buying new gear because the old gear was always slower then you wanted.
But now system performance seems to constantly exceed requirements, and bottlenecks and issues seem to have more to do with network capacity than the speed of any one component. Complexity has grown to a point where its largely unmanageable.
As a result, technology purchases are not competing very well against other choices. And the general economic conditions have all types of buyers building larger cash reserves against what appears to be a rainy day without end.
IBM and Apple: Simple Focused Premium Value
For both Apple and IBM, approaching different ends of the market, the common strategy is to eliminate complexity and focus on what buyers are looking for in products.
IBM was a vastly more complex company before entering this decade and Sam Palmisano drove a significant reduction in that complexity. One of the first things Steve Jobs did in taking over Apple was to massively simplify it.
The result is both companies generally compete in the market as companies when they need to, rather than the more typical divisional focus. This is largely why Apple has recently been so successful at growing cell phone and PC market share while maintaining dominance in the MP3 space. And IBM was able to focus their company better than anyone else on the opportunities that came from the Sun collapse and the stimulus spending bill.
Even if you look at the acquisitions announced by IBM recently, SPSS and Ounce Labs, both enhance IBMs ability to sell a wide variety of products they already have in their portfolio. This is in contrast to Microsofts Yahoo attempt which is more of a Hail Mary effort intended to close a gap that likely should have never been allowed to exist in the first place.
Apples rumored new product, the iPad, is designed to address a price point they dont have covered, a category of product (Netbooks) that represent a risk to their market share growth, and Googles Chrome OS initiative that could do them harm next year.
In both cases the firms are able to move rapidly to enhance both their defensive and offensive company postures. Their financial performance in these really bad economic conditions showcases the benefits of this focus.
While this hasnt always been the case with either firm, currently both companies CEOs can fight using their entire company while their competitors often can only counter with a portion of the available resources.
Microsoft and Google
When Microsoft first took on and beat IBM it was because Microsoft fought as a company, albeit a much smaller one, while IBM could only focus a small portion of the firm on Microsoft. In fact, one division, the PC Company, was actually on Microsofts side through much of the fight. The result in favor of Microsoft is history.
Now Microsoft mirrors what IBM was and often appears at war with itself, with internal battles between Open Source and proprietary groups, competing divisions, and a complexity that appears from the outside to be virtually unmanageable.
They cant focus on Apple, IBM, or Google as a company and each has made moves that have largely gone unchallenged in recent months. The Sun opportunity appears to have been missed by Microsoft, they have been unable to create a compelling alternative to either the iPhone or the iPod, and currently Apple is taking a massive amount of market share in the PC space.
In fact the company is defined by conflicts that likely shouldnt exist. For instance Media Room is in conflict with Media Center, Xbox with PC Gaming, Live Mesh with Windows, and Zune with Windows Mobile. To a large extent this mirrors the problems in the IBM of the 1980s that Microsoft beat. And it helps explain why they have, this decade, been much less able to compete with smaller firms.
But Google is starting to make Microsoft look like an example of simplicity. The company is ranging so far afield that their battles and the massive decline in their image is starting to define them.
They have taken on phone companies, utilities, libraries, and they even have a group working on automotive designs. Yet their revenue sources have changed very little in the last year (they actually require job applicants to recite how Google makes its money, likely because their executives need to be constantly reminded).
Microsofts Bing is able to take share from a largely defocused Google, which cant seem to stay on a subject area long enough to finish it.
Wrapping Up: Focus is King
While neither IBM nor Apple are perfect IBM still has way too much bureaucracy and Apple is both too dependent on Steve Jobs and too controlling both firms lead their respective industries in terms of focus and general financial health.
Apple stood out over IBMs, which did very nicely as well last quarter because the consumer market moves more quickly than the IT market and IBMs results have been more consistent for similar reasons.
In the end, and over time, focus tends to define the winners over the losers. Companies that lose focus as much as Google seems to be doing at the moment seldom survive with their executive teams intact.
While Microsoft seems to be repeating IBMs mistakes, Google appears to be excelling here and making avoidable mistakes ranging across all industries and geographies. Its almost as if a Google executive mistakenly believed a book on corporate disasters was a to-do list.
Regardless, there is a lesson here on all sides. Focus = profits and right now profits are golden.