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Apple Google Salesforce: Attack Incumbent Market Leaders

The flight from central Europe to the autumnal hills of Kentucky was a delight. The flights were filled with happy, loud children. Considerate coach travelers talked loudly and without stop for 8.5 hours. The Delta flight crew served wonderful meals, and the food. Ah, the food–to die for. With so much right with major corporations using their business acumen to acquire Northwest Airlines, I was shocked to read that Apple was resisting IBM’s legal attempt to prevent an executive from quitting Big Blue and falling into the Steve Jobs’s reality distortion field. On one side, Apple a purveyor of expensive gadgets challenging the $100 billion mega-enterprise. Goodness. Then Google with its black eye from its run in with US Federal regulators suggesting that Microsoft and Oracle were off base about cloud computing. You can read about the Apple IBM dust up here. You can learn more about the Google and Salesforce.com criticism of Microsoft and Oracle here. If these links, go 404ing into oblivion, you will be able to find numerous posts about these two unrelated incidents.

I have a different take on these actions, and my view is influenced by my analysis of Delta and its buy out of Northwest Airlines. You probably wonder, “What’s the relationship? Airlines haven’t treated passengers well in a decade or more. Northwest Airlines is a turkey made of aluminum and fiberglass composite. This addled goose has suffered a meltdown.”

Apple, Google, and Salesforce.com assert that IBM, Microsoft and Oracle are little more than early 20th century thinkers when it comes to cloud computing. The Apple, Google, and Salesforce.com approach is more modern, zippier, and more “right” for the times.

I beg to differ.

The old order is represented by the Delta-Northwest business decision. Two losers don’t often make a financial winner. The investment bankers and consultants make a killing, but the Delta-Northwest tie up underscores the folly of dinosaur businesses trying to cope with a financial climate that almost guarantees that dinosaurs will die. At best, offspring will end up as birds, tiny birds struggling for survival. In Kentucky, a crow and a shotgun are not evenly matched. The shotgun wins unless my neighbor is juiced on white lightning.

IBM, Microsoft, and Oracle are dinosaurs. All three are on the evolutionary path that leads to becoming a bird, maybe bigger than a crow but smaller than a dinosaur. Your reaction to my suggesting that these three companies are in decline is probably, “You are definitely an addled goose.”

Times Have Changed?

Maybe? Maybe not?

First, Apple and Google are putting on their game face and backing up their aggressiveness with actions. Apple is going to hire Mr. Papermaster and let the courts determine if an adult can quit a business-to-business vendor and work for a consumer products company. I don’t have a view on the propriety of this in-your-face action by Apple, but I see a forcefulness behind Apple’s action. I interpret the behavior as dismissing IBM’s objections as irrelevant to Apple. Google and Salesforce.com have simply turned the dial on their assertions about Microsoft and Oracle. The impact on me is that Microsoft and Oracle believe they have cloud computing in their gun sights. Google and Microsoft are informing Microsoft and Oracle that each company is out of touch with reality.

Second, the IBM, Microsoft, and Oracle organizations find themselves facing challenges from upstarts who seem more in tune with the market today and where users may want to go tomorrow. eWeek quoted Salesforce.com’s Marc Benioff as saying:

In answer to [moderator] O’Reilly’s question about margins for cloud computing being lower than traditional software businesses, another claim made by Ellison, Benioff said it’s unfair to compare the cloud model to “mature, dying models like Oracle or SAP, which may be already dead. … It’s a little bit apples and oranges.”

Google and Salesforce.com are making it clear, in my opinion, that the Microsoft and Oracle position on cloud computing is wrong. My hunch is that the saber rattling will be followed by a skirmish or two to probe the opposition.

Third, the recipients of the push back from Apple, Google, and Salesforce.com are probably going to respond like Delta. Instead of figuring out how to make the new business climate work for the company, Delta bought more trouble of the same type Delta already has. In short, the notion of hooking together two weak entities like Delta and Northwest or the hypothesized GM-Chrysler deal underscores that the power shift has taken place.

The Information Access Hook

When it comes to information access, I have to side with these upstarts. Apple, Google, and Salesforce.com are not perfect, but each is a an example of what will weaken the strength of IBM, Microsoft, and Oracle. Each of these companies will find themselves turning into consulting firms. Apple, Google, and Salesforce.com are generating revenues from new products, services delivered from the cloud, and business model innovations.

Why am I focusing on information access and not the broader business issues? I think that Apple owes much of its success to the information access features it builds into its  iPods, iPhones, and computers. A user can find music and other information objects without having to resort to third party tools. Google is a company anchored in search, but my research suggests that the company is morphing into a challenger in data management. Salesforce.com makes it easy for a user to organize contacts. Sure, Salesforce.com delivers other functions, but a sales person can find a person, a document, and a scheduled appointment pretty easily.

IBM, Microsoft, and Oracle on the other hand offer bloated, fuzzy, complex, and hugely expensive solutions. There is a clash of technical cultures taking place. The Apple, Google, and Salesforce.com feistiness offers a low level hint of the battles that will ensue.

Stephen Arnold, November 9, 2008

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