Why Apple needs Microsoft to survive the coming OS battle (tgdaily.com)

Analyst Opinion - With Google coming to market, the OS environment is very similar to what it was in the late 80s with Microsoft in IBM's position, Apple in Apple's, and Google in Microsoft's. Windows 7 is the best operating system that Microsoft has created since Windows 95, but it breaks the same model that Windows 95 did - and Windows 95 began the cycle that effectively eliminated much of Microsoft's market control. In the end, the next three years will be one for the history books. Those who lose will go down in infamy for their failures.

This battle is for all the marbles and it is particularly interesting that Apple may actually depend on Microsoft's success, because Google plans on taking both out.

Building dominance

Bill Gates is credited with making that one critical decision that turned Microsoft into the power it became and made him the richest man in the world. He gave away the OS at cost to IBM while retaining the rights. (Clicking on the link will showcase what happened to the guy who actually wrote the OS).

Until then, operating systems were largely provided by hardware manufactures and could never reach the level of dominance needed to control a market and the resulting eco system. By ultimately giving the software to IBM initially (while retaining critical rights) and later selling it very cheaply, Gates took control of a market and made money off of the products like Microsoft Office that were built on top of it.

In effect, hardware vendors outsourced the operating system to Microsoft who had given them a product that allowed them to compete with each other on hardware prowess (which is what they did best anyway). An empire was born on one simple OS lesson: Keep it cheap, keep it simple, control the OEMs and own and profit from the applications.

Breaking the model

Once dominant, and this appears to be a repetitive and common mistake, there was an increasing need to grow the revenue from the OS. Windows 95 was created, doubling the price at a time when hardware cost had dropped by around a third and it started to feel more like a bundle of applications than just an OS, containing the UI, which had previously been a spate addition, media playing capability, several games, basic editors, disk utilities and a browser. Still, there was only one version, it was still relatively cheap (under $100 on top of $2000+ hardware) and, while weakened, it seemed bulletproof.

Except Microsoft was so dominant the bundle created anti-competitive problems, first with the U.S. and then with Europe. This got the government involved and, coupled with some other mistakes Microsoft made, caused them to lose their U.S. antitrust trial and put them solidly in the EU's gun sights.

Then the OS forked. Windows NT, which had initially been intended for workstations and servers, dropped into the business market creating two versions somewhat incompatible with each other. They stayed this way until Windows XP and then Microsoft seemed to forget that Windows was an OS and started treating it like an application and the versions started to multiply.

With Vista, they blew up the model with two versions for business and four for the consumer topped by Ultimate, which, with hardware cost reductions, actually cost more than some of the hardware in the market at the time it was released. Microsoft Office became decoupled so it no longer helped drive upgrades and, for the first time ever, sales of the previous version of the OS actually increased, Microsoft lost market share, and OEMs started aggressively looking for alternatives. First with Linux and most recently with Android.

Microsoft forgot their lesson and Google is moving in for the kill.

Android

How do you displace Windows? You look for a technology change wave, much like Microsoft did with the PC, and then you use Microsoft's model to do the same thing Microsoft did. The wave is the Cloud and, initially, it is having a bigger effect on smartphones than PCs.

Google picked where Microsoft was weakest to attack first (smartphones), built a pool of devel...