Will Google Operating System Change the way we use computer?

 

On the 7th July 2009 Google announced its own operating system Chrome OS based on Linux and other open source technologies. Chrome OS will in its look & feel resemble Google Chrome web browser and web browser actually will be single application installed on the Chrome OS powered devices. The new OS will be released in July 2010 with first devices coming from major computer manufacturers. Chrome OS is supposed to run on:

• Tablets
• Netbooks
• Notebooks &desktops.

Each of the Chrome OS version will have modified input and display methods to fit the specifics of the device. After success of Google’s mobile devices operating system Android. Chrome OS announcement has been considered as an openly communicated aspiration to replace Microsoft’s “application’s eco system” including its core product Windows.

From Google, it is definitely a bold step. However, is operating system on a computer still important? Do we really care about OS underlying infrastructure and communication standards or we care more about applications and GUI (Graphical User Interface)?

I believe that role of the role of OS today is less important unless it fails to cope with basic requirements for stability and security. On the other hand, given the current stagnant homogenised retail OS environment led by Windows, followed by MacOS and Linux, where major innovations are originating from 1970s, there is a room for improvement.

• What could be changed at current OS:
1. Speed of booting up
2. Access to documents from anywhere / any device
3. Minimum interference with what user does
4. Increase Security
5. GUI easier to use

 

• What Chrome OS offers:
1. Speed booting and immediate Internet access (in 2sec)
2. Data accessibility across platforms and devices (on line documents storage)
3. Worry less about drivers (Cloud printing)
4. Enhanced security (physical developer / admin button)
5. GUI resembles web surfing

"The promise of Chrome and Chrome OS is that the devices that you give to your employees will have a 2-second boot time, will be completely disposable and the price will be incredibly low." (Eric Schmidt at Atmosphere, 12.04.2010)

Does it mean that Chrome OS is the new big thing? I would like it to be so. Unfortunately, there is a major issue in its deployment strategy to the market.

Even though developers can view its source code and compile it, Chrome OS won't be available for download because it requires a special hardware configuration and it's not designed for multi-boot. Chrome OS is just the platform for Chrome OS netbooks.

If you have to get Chrome OS with new computer without possibility to download it and install side by side with your current operating system, its penetration will considerably slow down.

If Chrome OS would run on the same machines as Windows and MacOS does, users would boot into Chrome OS in just 2 secs in comparison to 43 secs with Windows in case that they would like “just” to check their email, chat on Facebook or watch videos on YouTube. Later, they would find out that they do not need their “main” OS that much, because Google Docs can do basic word processing and spreadsheet job and store their documents on-line. That would ultimately hit Windows market share. Why Google didn’t choose this compelling strategy is mystery to me.

As Google went into shipment with new computer devices model, it also chose its competition consisted of:

• Microsoft Windows / MacOS esp. on notebooks with standby / hibernate feature
• Apple iPhone OS on iPad / iPad in general
• Linux on netbooks

I think that Chrome OS makes greatest sense on tablet devices, therefore the toughest battle will be with the iPad. We can see similar situation between Android mobile devices and iPhone.

In conclusion, I think that Chrome OS can make a difference at the outdated OS marketplace. However, its shipment strategy is flawed and will hinder its market inception. At the same time, Chrome OS might had a bright future in tablet devices, provided tablet manufacturers will adopt it quickly and will create similarly “sexy” devices as iPad.

Quo vadis, Microsoft?

Although, there is a lot of resentment among PC users about Microsoft, I am not going to comment on emotions, but rather will stick to facts and general trends. You can argue about Microsoft’s internal innovation capabilities and its sometimes controversial contributions to the shape of the IT industry. However, nowadays, Microsoft is without doubt the biggest player in the IT industry at least based on the market capitalization (see figure 1). At the same time, its arch rivals Apple and Google are getting closer with their business models more relying on Internet (in case of Google totally relying on Internet).

Figure 1

Microsoft’s obligatory SEC filling 10K reveals information about current revenue streams. The cash cow product is Office together with Enterprise Resource Planning system Dynamics (former Navision). Expectantly, second place with 25% share in revenues assumes Windows, followed by server software like Windows Server and Microsoft SQL Server. Then come so called “hungry dogs” represented by two groups. First, entertainment services with Xbox, Zune, and Windows Mobile and second “hungry underdog” On-Line Services with 5% revenue share (mainly coming from Microsoft’s Advertisement product). See figure 2 for graphical expression.

Figure 2

To expand on the On-Line services subject, where Google was able to generate $23.65 bil. of revenue with gross profit $14.86 bil., Microsoft generated only $3.09 bil. with operating loss $2.25 bil.! I would call this a strategic gap.

Apart from competition, Microsoft creates troubles for itself on its own. The most significant example is its operating system Windows Vista, which did not persuade corporate customers to switch from reliable and proven Windows XP. As a remedy for that, Microsoft had to launch new re-vamped operating system Windows 7 ahead of product roadmap followed by massive advertisement campaign. To add to the problems, Microsoft’s mobile devices platform shrink its market share to 7% in 2009 (see Figure 3).

Figure 3

What is going to be Microsoft’s reaction? Well, Microsoft always pursued strategy identifying the best technology or product at the market and than either purchase or replicate it. We have been noticing executing this strategy recently as Microsoft started replicating Google products like:

· Google Search vs. Bing

· Google Maps vs. Bing Maps

· Google Docs vs. Microsoft Office 2010 On Line

· Gmail vs. re-vamped Hotmail

· Google Sites vs. Microsoft Live Groups

Most importantly, Microsoft announced Google’s main technological pillar cloud computing as its cornerstone strategy for the near future.

On top of that, Microsoft is aware of rising importance of mobile internet. Recently, unusual news has been released that Microsoft, company which in the past refrained from engineering its own computer or mobile hardware, launched its own branded mobile phones KIN ONE and KIN TWO with totally re-vamped Windows Mobile 7. Moreover, Microsoft’s management felt a need for such a radical change that due to almost complete re-design of the operating system, majority of applications designed for previous version of Windows, will not work on Windows Mobile 7.

Steve Ballmer’s vision of Microsoft product mix from the CEO Summit 2010 is on Figure 4.

Figure 4

In conclusion, I believe that Microsoft could stay at the top of the industry at least for next two or three years, provided that it will shift its core products like Windows and Office even more into on-line services without the hassle of deploying additional technologies (e.g. Sharepoint Server for collaboration). This can be achieved by further moving to the cloud, which could overtake part of the IT infrastructure used today in corporate sector. Firms will definitely welcome low frill collaboration services and decrease maintenance costs. In the retail segment, imitating Google approach seems to be a good strategy. Also, Windows 7 was a genial way out of the “Vista” problem with additional cash from unhappy Vista customers. Now the stakes are on the Windows Phone, whether it can compete with Apple, Android, RIM and Symbian. Generally speaking, this year we will keep hearing about Microsoft.

FourSquare and money lying on the ground (Updated)

Recently, I registered to a one year old internet service called FourSquare (foursquare.com). FourSquare caused new internet hype with adding 100 000 additional users just in ten days in March 2010. Estimates for current number of users are amounting 1 mil. Allegedly, Yahoo offered $125 mil. for the company, although it's valuation based on its capital is $6 mil. FourSquare is most frequently compared to Twitter, recently valued at $1.44 bil., which is 240 times as much as FourSquare's current value. According to web analytics firm Compete, Twitter had 22 mil. visitors in December 2009, which is 22 times more than FourSquare. In conclusion, investors value future cash stream of one Twitter customer as $65.5 and FourSquare customer $6. Building upon investors valuations, is FourSquare under or overvalued? Lets look deeper in FourSquare's history, what it does and it's business model.

FourSquare has been founded by Dennis Crowley and Naveen Selvadurai after trying similar project with Google called Dodgeball in 2005. It was probably too early for such a project as Google shut down the service in 2009. Dennis and Naveen should thank Google for the time and money it invested to shape the product as FourSquare is sometimes called DogeBall 2.0. So, what is ForSquare about? Actually, it's a mix of location based social network and a game. After registering to the service (you can link your Facebook and Twitter account), you mark the places you visit in a good old fashioned physical world and get various virtual badges . After collecting the right badges, you can actually get discounts and gifts at various bars, restaurants, food chains etc. I believe that the badges concept was taken from Microsoft's XBox Live service where you gather achievements for completing special task in games or on-line. Similarly as achievements, badges earn you honor when ranking with other folks at the FourSquare and more importantly guide users to specific behavior like going to places you want them to go. And here we are getting to the FourSquare business model. For instance, if you are a restaurant owner and want to attract more customers, you go to the FourSquare's paid Dashboard application, where you can offer specials for people, who step by in your place. Moreover, all the users, who checked in to your place, let their friends know over FourSquare site so that you get a multiplication effect by 21st century "word of mouth" advertising. Another source of revenue will be marketing statistics about consumer behavior, which could serve big companies like Coca Cola and Starbucks to track, who is coming to their stores.

Nice idea? Local internet advertisement business is estimated to be worth of $10 billion and so far nobody could tackle it in a proper way. I believe that FourSquare is on the right track to make a big cut from this market for several reasons:

1. It's a community service so that updates about hot vs. not so hot places will happen really quickly
   
2. FourSquare put its stakes to mobile internet, which is growing by building application for all major mobile platforms
   
3. It is gaining critical mass of users thanks to ability to import friends from Facebook and Twitter
   
4. Last but not least, FourSquare is very easy to use…
   

My opinion is that Foursquare has a more sustainable business model than today's Twitter and therefore it's valuation could be even higher than $125 mil. On the other hand, the threats on the way could be the "second movers" like Twitter, which announced its service @anywhere and Facebook. Moreover, in January 2010, users were coming to FourSquare from three main sources:

1. From Google 24%
2. From Twitter 21%
3. From Facebook 19%

It means that if Twitter and Facebook create their own location based services, FourSquare could theoretically loose 40% of its incremental user's base. Given the FourSquare's three digits growth in users base, the speed of competitors move is crucial. This competitive risk is most probably the reason of mediocre FourSquare's valuation. I place my bets on FourSquare!