To consumers go the spoils of competition

A lack of competition makes dominant companies lazy and arrogant.  Nowhere is that more blatant than in the fast-moving world of technology and computing.

In late 2006, Microsoft released Vista, their operating system upgrade from their flagship XP.  They bungled the release.  The initial versions were buggy, and a failure to collaborate closely enough with the vendors who design software and hardware to run on the operating system resulted in frustration for consumers.

At the same time, the dramatic rise in popularity of netbook computing – low-cost, low-power mobile devices – meant that the resource-hungry Vista was unwelcome.

Microsoft isn’t an Eskom- or Telkom-style monopoly.  Innovators are not prevented, by law, from investing in new products and competing against the incumbent.  First out of the starting blocks was Apple.

Apple’s now ubiquitous iPod music-player had, for the first time in a generation, raised their brand awareness.  Their personal computer sales leapt as Microsoft grappled with market rage.  Seizing the initiative, Steve Jobs, Apple’s CEO, launched the iPhone.  Mystified people watched as massive queues camped out overnight in order to be first to buy a widely available consumer device.

Microsoft was losing ground in phones and was facing rebellion from pc-makers who weren’t happy being guinea-pigs for buggy software.  Which was the perfect time for Google, an internet search engine and media company, to enter the battle.

In short succession, Google released a free online suite of desktop publishing software to compete with Microsoft’s Office cash-cow.  In 2008, they followed up with an operating system aimed at mobile phones, as well as their own web browser, Google Chrome to take on Microsoft’s Internet Explorer.  They have also announced that they’ll be releasing their own pc operating system in 2010.

In the first quarter of 2009, for the first time in 23 years as a listed company, Microsoft experienced a drop in sales. Things were looking bleak for the software-making giant located at Number 1, Microsoft Way in Redmond.

However, Microsoft is not run by members of the ANC Youth League.  The company has 90,000 employees, the vast bulk of whom are top university graduates from around the world.  After desultory attempts to fix Vista and rebuild people’s perceptions of the product, they prepared themselves to start from scratch.

The last few months have been busy for them.  Bing, their rebuilt and rebranded search engine, was released to general approval in May.  New marketing campaigns featuring Bill Gates sought to humanise the company.  A completely revamped operating system, Windows 7, is to be released in November.  And, putting $4 billion of revenue at risk, Microsoft has announced an online and free version of Office will be launched.

The incredible effort at turning around such a large ship appears to be bearing fruit.  Amazon, one of the world’s largest online retailers, announced that – in its first eight hours – the prelaunch sales for Windows 7 outstripped the entire 17-week prelaunch sales for Vista.

Analysts are predicting that 177 million copies of the new software will be sold by the end of next year.

Microsoft could have whined like a youth activist and dragged their competitors through the courts in order to protect their dominance.  Instead they have stood up, like the grizzled athlete that they are, and joined in direct competition with their peers.

And so we have the dynamism that competition unlocks.  All this competition has dramatically improved services and lowered prices for us, the consumers of these products.  It is a wonderful thing.

Microsoft could still lose this battle.  The future of operating systems is in the integration with “cloud” computing where all our applications run on the Internet, a place Google dominates.

But no-one is suggesting that the world economy would be better-off by protecting the 90,000 jobs at one software manufacturer.

Something to be thought about as governments bail out auto-makers and consider nationalising industries.