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The benefits of competition

11 Nov 2011

What follows is my editorial from the September 2011 issue of HardCopy magazine:

IBM launched the IBM PC in 1981, bringing the microcomputer into the office and simultaneously opening up a whole new market for IBM ‘clones’ from companies such as Compaq, Ericsson and Tandy. The IBM PC used Intel’s 8088 processor and introduced an architecture that allowed a full megabyte of memory to be addressed; so when Intel launched the 80286 processor a year later, which could directly address 16MB of data, the industry waited to see what IBM would do. Two years later, IBM responded with the IBM PC AT, which again was widely cloned.

Then in 1985, Intel introduced its first general-purpose 32-bit processor in the 80386, and IBM hesitated. The company was frankly fed up with the clone manufacturers, whose ranks now included Dell, Gateway, Olivetti and Zenith, and was looking for strategies that would enable it to reclaim the market. Furthermore, the power of Intel’s new processor meant that a PC based around it might well compete with IBM’s own lucrative minicomputer range, which did not seem like a good idea at the time.

Unfettered by such considerations, Compaq seized the initiative with its Deskpro 386. IBM faught back with the PS/2, in a desparate attempt to regain its position. This was a nice design, introducing the MCA (Micro Channel Architecture) expansion bus which IBM took the precaution of patenting, but it was too late. A group of PC manufacturers called the ‘Gang of Nine’ championed its own expansion bus which it called EISA. This was an Extended version of the expansion slots used by the PC and the AT, which by implication (and to IBM’s annoyance) became labelled ISA, or Industry Standard Architecture. IBM became just another PC manufacturer and eventually sold its PC business to the Chinese company Lenovo.

My reason for mentioning all this is that I can see parallels between the situation then, with IBM on one side and the ‘Gang of Nine’ on the other, and the situation now, with Microsoft taking the IBM role and exponents of Cloud Computing the other. Microsoft has long dominated the office with its highly lucrative Office suite and associated servers, which accounted for some $22 billion in sales and $14 billion in profit over the 12 months to 30 June 2011. Microsoft has a monopoly here, which is why it can get away with a torturous licensing system that is designed to extract as much revenue as possible from its customers.

However the game is changing with the advent of The Cloud in which Microsoft faces serious competition from the likes of Google and Apple.  Microsoft’s response is Office 365, and licensing Office 365 is a much more straightforward proposition with just one plan for smaller companies with up to 50 employees; four clearly delineated plans for larger organisations; and a handy ‘kiosk worker’ plan for users that don’t have their own desk. Long may the competition continue!

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