Microsoft and the transformation of the computer industry - 1980-2002 Uploaded for IS 714 Mastering IT Strategy at Boston University School of Management

1. Transformation in the Computer Industry:
Insights and Implications
Professor N. Venkat Venkatraman
Boston University School of Management
IS714: Fall 2014
@NVenkatraman

2. Computer Industry (1980s)
Consulting
Applications
Tools
OS
Networking
Peripherals
Computers
Processors
Bill Gates Testimony

3. Consulting
Applications
Tools
OS
Networking
Peripherals
Computers
Processors
......(2002)
Bill Gates Testimony

4. Strategies of Key Players
} Resellers of computer }
hardware
based on Windows-Intel (“Wintel”)
architecture

5. Consulting
Applications
Tools
OS
Networking
Peripherals
Computers
Processors
......(2002)
Bill Gates Testimony
“How do we define
these layers?”

6. Defining the Value Layers
1.Distinct sources of value in the interconnected system
2.Well defined marketplace with a set of alternatives and
multiple companies
3.Articulated links to the adjacent layers

7. Consulting
Applications
Tools
OS
Networking
Peripherals
Computers
Processors
......(2002)
Bill Gates Testimony

8. Degree of
Vertical Integration Virtual
Ownership Relationship
Control Coordination
Tight Loose
Hierarchy Network

9. Technology Linkage
Marketing Agreements
Financial Investments
Joint product/service
Ownership
We can look at
a variety of
linkages
between layers {

10. Consulting
Applications
Tools
OS
Networking
Peripherals
Computers
Processors
“Strategic
Investment”
“Windows
Intel”
“Wintel”
computers
“Drivers”
Microsoft’s Logic of Linkages

11. Consulting
Applications
Tools
OS
Networking
Peripherals
Computers
Processors
Microsoft’s
virtual
integration
of the
PC Ecosystem
......(2002)

12. Positions in one or more layers
Relative market positions in each layer
Nature of links across layers (exclusive versus non
exclusive)
Competes and cooperates with other companies
within- and across- different layers
Role of each
company {

13. Microsoft orchestrated the PC ecosystem by
• Co-creating the Windows Intel (‘Wintel’) PC architecture
• Controlling Windows OS and Office Applications
• Attracting a set of PC manufacturers to create the hardware (PCs)
• Coordinating the development of drivers for peripherals
• Extending the PC from Consumers to Enterprises
• Evolving the scope of influence to include Enterprise network

14. 1991 2000
The Golden Age of the ‘Wintel’ Ecosystem

15. In the Bill Gates representation, the layers
were static (unchanged)
1 When do new layers of value emerge?
2 When do existing layers of value reconfigure--split into
sub-layers or morph together?

16. POST-PC
SHIFTS
IN THE
COMPUTER INDUSTRY
Browser Search
Mobile Social
Cloud

17. 1 Role of ‘Browser’
Netscape innovated by introducing Netscape Navigator 1.0
(December 1994) as gateway to the Internet on top of the desktop
OS
Microsoft launched its Internet Explorer 1.0 in August 1995
(bundled free of charge with Windows)
What role did Microsoft’s dominance in other layers play in
the acceptance of Internet Explorer?

18. 1 Recent Trends in Browser Usage
70
52.5
35
17.5
0
IE Firefox Chrome Safari Opera Others
2008 2009 2010 2011 2012 2013*

19. 1 Role of ‘Browser’
Google’s competitive advantage with its Chrome browser’s
dominant market share?
OS

20. 2 Role of ‘Search’
1995 1996 1998 2000
2009

21. 2 Recent Trends in Search Engine Usage
100
75
50
25
0
Google Yahoo! bing Ask Jeeves Baidu Others
2009 2010 2011 2012

22. 3 Role of ‘Mobile OS’
1996 1999 2000 2002 2005 2007 2008 2010

23. 4 Role of ‘Social Web’
2002 2003 2004 2010 2011

24. 1985 Now
Mainframe to PC PC to Internet Post-PC