Companies Adapting 
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Companies that Adapt- and those that Don't, 1996

Rapid technological change has been a "godsend" for many companies. The best example of this is in recent years is Microsoft. On the other hand, companies such as Tandy, CompuServe, Prodigy and Apple have seen dramatically shrinking market share and are either becoming short term takeover targets or are being forced to reengineer their companies and change their product mix and corporate missions. One may therefore pose the question, "Why the difference?" The answer I believe depends on a number of factors, including:

Rapid technological change has been a "godsend" for many companies. The best example of this is in recent years is Microsoft. On the other hand, companies such as Tandy, CompuServe, Prodigy and Apple have seen dramatically shrinking market share and are either becoming short term takeover targets or are being forced to reengineer their companies and change their product mix and corporate missions. One may therefore pose the question, "Why the difference?" The answer I believe depends on a number of factors, including:

Corporate bureaucracy

Corporate philosophy and concern or lack of concern for the individual worker and consumer

Corporate greed and shortsightedness

Lack of knowledge, vision and understanding of high technology at the senior management level

CompuServe, for example, at one time was considered the nation's preeminent on-line service. It offered the most extensive databases, the best on-line games and the liveliest discussion groups. And best of all for CompuServe, they essentially had a proprietary technology. If you wanted access to CompuServe's vaunted resources you had to pay CompuServe for access to their network- and it wasn't cheap. Unfortunately for CompuServe, people abhor costly restrictions on their ability to communicate and share information. Three to four years ago, inexpensive web browser technology and small ISPs with thin operating margins and flat corporate structures started to gain a foothold. Continually decreasing hardware costs and rapidly improving MIPS/dollar ratios also positively impacted on the ability of ISPs to provide cost effective service. The ample bandwidth of the Internet was suddenly being put to good use by a new breed of early technology adapters and users. E-Mail, USENET, FTP, Archie, Veronica, WWW, etc. were all terms that began to enter popular parlance. Of course, some of these technologies existed for years and were extensively utilized by academia. At first slowly and then at an exponential pace, individuals unaffiliated with academia such as everyday business people began to tap in to the resources of the Internet. Not only did they tap in- they became active content contributors, thus further enhancing the value and contextual richness of the medium

And in the face of this obvious, clear emerging trend, what did CompuServe do?. The answer it seems is NOTHING. Perhaps they thought that the average "Joe" would never be able to understand such terms or concepts as FTP or TCP/IP?? People they thought people needed to be led by the hand as they explored new technology. The Internet was after all a relatively scary, insecure and unreliable place. And as CompuServe appeared immobile, the industry moved forward at a blitzkrieg pace. Not only were they "out flanked" by the emergence of the World Wide Web, they were outclassed by competitors such as America On-line that offered better bang for the buck and more innovative user interfaces and Internet connectivity. Finally today, you have CompuServe, redefining itself as an ISP and Internet content provider- as if the world can hardly wait!! For example, according to The Odyssey "Homefront Survey" 48 percent of households using the Internet do so through Internet service providers. That's a big change even just six months ago when 54 percent of at-home net surfers were using on-line services for Internet access (CNN Sci-Tech news brief, 9/29/96).

Ultimately what providers like CompuServe, Prodigy, MSN and America On-line (The Big Four) want to do is to provide basic Internet access and use their "custom" services as wrap-around, "value-enhancers". In this way they hope to distinguish themselves from "commodity" providers that offer no more "content value-add" then the phone company does when it provides telephone service. To the extent the Big Three are large and powerful companies, they may succeed in maintaining dominant market share. Or, their big corporate mentality may be perceived as a threat to free expression. They may, in fact, become severely weakened by a combination of negative public perception and free speech attacks by special interest groups- in effect between a rock and a hard place. CompuServe apparently has already thrown in the towel as far as the consumer market is concerned. The acquisition of Sprynet appears to be their primary thrust in this area. They are also seeking a merger partner, AOL is rumored.

Apple is a classic case of corporate greed and over bureaucracy. One senses if it was up to Apple's management in the 1980's and early 90's, personal computers with proprietary operating systems and closed hardware architectures would be today's norm. This is not even to mention how they squandered a 10 year lead in GUI PC operating systems and practically forced Steve Jobs, their innovative co-founder to leave Apple and start NEXT. Today, Apple is a prime takeover target by Silicon Graphics, Oracle (Ellison recently joined their Board of Directors) or perhaps even Big Blue (if any of the three will have them). To this very day, Apple's plan for its next generation operating system does not include compatibility with Intel chips. This may change however with Apple's acquisition of NEXT and the influence of Steve Jobs. In the meantime, Apple's corporate motto can be summarized in two words, "Buy Me." Even Microsoft recently bought a stake in Apple- ostensibly to keep alive demand for the Mac version of Office. Literally Apple is following the adage- if you can't beat them...join them!! Final Note: I wouldn't want to be an Apple clone manufacturer today- no company, especially a dying one, can afford to have its declining market share even further cannibalized by its "allies."

IBM realized by 1985 that they needed to restructure and refocus their company. It wasn't till a year or two ago that they succeeded enough to change their bottom line from red to black. The company's sheer size seems too assure itself a place in corporate America. However, in the personal computer desktop hardware and software arena, IBM is merely a player. They have the resources to dominate, but seem to lack the vision, as former President George Bush would say, its that "vision thing". They still have strong R&D capabilities and are a worthy competitor to Motorola, Hewlett Packard and Intel in CPU/microcircuit design/fabrication. However, where exactly is the Power PC these days? It may provide scaleable power for their RISC 6000/AS/400 midrange systems and Apple may be using it in the MAC, but overall it hasn't made much of a dent in personal PC computing. Finally, how will they compete with Intel's/HP's 1,400 MHZ P7 chip-Merced? Another IBM "classic mistiming" is their embracing of Lotus Notes at a time when Internets/Intranets are obsolescing the need for Notes' core and Exchange/Outlook is getting increasingly powerful and integrated with the desktop and enterprise. Recently there has been a resurgence in the System 39/mainframe arena and the AS/400 is being repositioned (again) as a web server /e-commerce box. With lowering cost of ownership becoming a "new" trend, the very wide spread, low cost of ownership and now scalable AS/400e has become a more appealing option for department-wide and small company computing. The introduction of SAP's core applications for the AS/400 has of course only helped.

And then there is Microsoft. The most widely admired and hated company in the computer industry. Perhaps its dawned on a few minds in corporate America that Microsoft's greatest success has come as a result of initial luck followed up by brilliant marketing and product development strategies. Not brilliant marketing in the "typical" "older" use of that term, that is getting people to buy things they don't need. Rather, a combination of marketing and product development strategies that really does help "bring information to one's fingertips". Microsoft has always been committed to empowering the individual user. They have been rewarded by substantial corporate profits because they have done the most good for the greatest number- they have helped to in essence democratize computing. Will this continue? Will or has their ever increasing market domination result in a company more concerned with profit than innovation? I don't know. Will their size stifle (or some would say continue to stifle) innovation and allow out dated technologies and standards to persist too long in the market place? Will the anti-trust division of the Justice Department awaken after a long slumber? Maybe. Will they realize how intertwined Microsoft's product development strategies are with their efforts to avoid anti-trust suits, while still maintaining market domination? But in the meantime, they have left companies like CompuServe, Apple and Tandy in the dust, figuratively and in some cases literally. Tandy and Egghead Software can not even maintain profitable computer retail outlets (their supposed forte) let alone be innovators in product development or mass/targeted marketing. Microsoft is even getting into the toy market with intelligent, upgradable toys that connect with VCRs and provide CD-ROM playback when hooked to a PC.

It is unclear what the outcome will be of the Netscape /Microsoft war. Still, If I was an IS decision maker, the combination of commitment to open standards, distributed object technology, ActiveX, Windows NT/Internet Information Server, Normandy and Microsoft's host of web/non-web visual development and database tools would be compelling (in favor of Microsoft). This is further compounded by Microsoft's superb Internet Explorer 4.0 (IE 4.0) that makes browser technology (Microsoft's browser technology) integral to the Windows 95/98/NT 4/5 operating systems. It seems apparent that Microsoft is poised to do to Netscape what they did to Novell. Yet is it really Microsoft, or have both Novell and Netscape hurt themselves by thinking more about profits and product sales and less about their role in shaping the future direction of computing and technology. On the other hand, Netscape is still a showing a strong growth in earnings- it's future may still be in its own hands. However, they better be careful. If the best their President and CEO Jim Barksdale can do is proclaim, "I am open, your open" (referring to open software standards), they are in trouble. Quoting Barksdale from the Netscape web site, in an article entitled, "MULTIPLE CHOICES LEAD TO A GOOD NIGHT'S SLEEP" (4/22/96), "So instead of lying in bed at night wondering what your support of the Aardvark Company is costing you, hopefully you'll be sleeping and dreaming about all the great open systems you can build. " Netscape's competitor is not the Aardvark Company. Better is Barksdale's statement, "While the first waves of the Internet focused on users being able to easily find information, the mark of this third wave is that information finds the user,'' he said. "Our new products will have the intelligence to help you focus on the information you care about.'' Integrating push technologies with Marimba and PointCast products also makes sense for Netscape. However, positioning Netscape as a groupware /communications company in direct competition with Lotus/IBM and Microsoft seems foolhardy-since the Lotus and Microsoft groupware/distributed computing technologies are not so much entrenched as they are inclusive and standards oriented. Just how many competing open standards do we need and what is or should be the criterion for success? Certainly market fragmentation and confusion are not desirable outcomes.

Perhaps Netscape's "vision" is high bandwidth Internet /intranets that use Netscape client/server products with "open" extensions. An environment where proprietary operating system conventions and objects become unimportant as the "browser" simultaneously displays streaming audio/video running from an Oracle server while running a Java/C++ based, operating system independent application(s). An environment where Intel based clients no longer dominate and Microsoft operating systems become an increasingly and relatively unimportant option. This is what Microsoft fears. Notwithstanding the above, Microsoft's IE 4.0 is superior architecturally and functionally to Netscape's Communicator 4. Netscape, even as they release their best suite to date, finds itself playing catch-up (and losing market share). Will Communicator and its progeny combined with Crossware development tools/ applications fulfill the Netscape vision? Again, this remains to be seen.

Is Novell the next victim of the Microsoft juggernaut? Or has Novell, not known as a particularly humble company in their heyday, victimized itself? For Novell it is in a phrase, "the technology silly". That is, if Novell begins to reassert a technical lead, a lead it certainly had in the 1980's, then it will continue to thrive. However, as we have seen, a large market share and perceived incremental, however worthy, improvements in older technology aren't enough. Novell seems to be a company that is constantly shifting technological directions these days- a ship without a rudder. Where for example is the Super NOS? AppWare? How successful has their Novell for UNIX been (didn't they sell that technology a year or two ago?). Who owns WordPerfect now- Corel?. Corel got WordPerfect so cheaply, even I could have mustered enough investors to make the deal if I had some connections!. Corel is an innovator though it remains to be seen if they are a lightweight or heavyweight in the Internet arena. They and Lotus have embraced Java as the development tool for their office productivity suites. However, do they really know how to strategically employ Java tools and technology in the corporate marketplace, and if so, is Java, not really designed for major application design, the right development technology? Microsoft still appears to "lead" the "Suite Wars", with Corel offering a lower per dollar seat cost. Perhaps the monolithic Microsoft Office suites will become dinosaurs and mini-application /Java based productivity components /objects become the norm. With NC computers become popular and the "cost of ownership idea" more in vogue, the likelihood of this is increased.

And then of course there is the $400 Internet "computer" that will offer every one "inexpensive" access to the Internet. My view is that if you can get it on a TV screen that cheap- people will buy it. If I were Bill Gates I would face reality- its going to happen (I guess he did face it- note the recent acquisition of WebTV). And if you get the Internet on a TV screen you may be accelerating the ruination of the Internet as a media for renewal and free exchange of ideas. The people who browse the Net with the $400 box, won't be saving e-mail messages and discussion threads. They won't be composing Web Pages. They won't be downloading, uploading and creating freeware and shareware programs. In short, they won't be using their machines as an instrument for creativity and personal growth. What will they be doing then? Why of course- they will be buying stuff and playing on-line games and lotteries. The Internet may become a vehicle for corporate domination. Soon, it may be "information to the highest bidder" and not "information at your fingertips". Or worse, predigested, useless information for the masses who can't pay to get the good "stuff". Of course, the interactive video games will be great!!. Who knows, perhaps one day we can elect a President and enact important legislation over the Internet using software developed by Sierra On-line. Its all a game anyway, isn't it.....?

Paraphrasing de Tocqueville,"... if one believes in the exercise of free will for individuals, then perhaps it also applies to groups of men, entire countries and the world itself..." If we as individuals band together and effectively organize and make our voice heard- perhaps we can keep the Internet "alive" and free flowing. Its worth the fight.

bulletDemocracy in America-Not
bulletFree Speech on the Internet
bulletAmericans for Computer Privacy

Postscript: 1999

It appears that the profitability of content, advertising and bandwidth providers is tied to their collusion and the lessening of freedom on the Internet. Greater commercial intrusiveness and consolidation increases the likelihood of political control and monitoring. Who watches the watchmen? What is commercially  "free" may bring about freedom's fall.

Imagine an Internet of wired fences, where the only freedom are temporary enclaves, made "suspicious" to Big Government by encryption technology. It is not that far away.

 

 

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