I have been documenting the Google / Microsoft battle of late (full disclosure: we own both stocks for our clients and ourselves). When Google announced earlier in the week that they were going to create their own "operating system" to compete with Microsoft's dominate Windows franchise, some worried that Microsoft was a goner. Not so fast I said. Besides at the current price we believe that investors are much too pessimistic about Microsoft's competitive advantages eroding too quickly. They will, but not for a long time yet, we believe.
My argument was that the "build-out" phase of the technology revolution is all about making technology more accessible to everyone, easy to use and ubiquitous. To paraphrase Brian Arthur of the Santa Fe institute, the technology revolution is not about the purchases of computers and communication equipment or about speeding up traditional business processes, it is about the "re-architecting" of the economy - the barely noticeable re-engineering of business processes, consumer activities and the interactions between consumers and those new processes.
The problem is that large companies in massive industries like banking and insurance still have not been very good at using the mainframe and client server architecture to make huge improvements in productivity. As James Kwak talks about in the blog link below, the failure of the mortgage industry to get their modification programs to scale is just one of many examples where large scale businesses are evolving, not revolutionizing, their business processes.
It takes time. And means that the PC and Windows Opeating system have some legs. Google and the "cloud" will grow extremely fast and consumers will have access to unbelievable easy to use applications over the network - where the applications will be accessed from any web enabled computer. But it will take some time for the large businesses to match their processes to the new architecture.
This is good and very encouraging because there is still a lot of productivity gains to come as large scale processes evolve in the second wave.
The money quote from the blog article below: The Google chrome operating system “Applies only to personal computing by consumers with limited needs.”
The Future of Computing? « The Baseline Scenario
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