Who will become the Operating System of Things?

by Ian Rosenwach on 2.12.2014

The sprawling web of interconnected products that has resulted now thoroughly dominates our experience of consumer technology: if you own a Google Chromebook, your life will be much easier if you use Android and Chromecast and Google Drive, and much more painful if you try to use Windows Phone, Apple TV, and Dropbox. (Matt Buchanan, New Yorker)

The “Internet of Things” (IOT) is shaping up to be the next battleground for technology supremacy.

With this post I’m going to try to explain what’s at stake, go into some history, and shed light on strategies the contenders will undertake to dominate the IOT.

And Then There Were Three

Three companies, each with different values, are  battling to become Operating System of Things.

The companies are Google, Apple, and Microsoft. The strategy is to do everything possible to become the company that seamlessly powers not only our phone and computer, but our home, TV, car, refrigerator, and more.

NestThe winner will lock customers into their software ecosystem since their underlying operating system will be integrated with the most important things in your life.

Just like Windows was everywhere on the PC, and iOS is everywhere on Tablets + Phones, the OS of Things will be everywhere.

The First Two Rounds

First we had the PC era of the 90’s which was won by Microsoft.  Then the post-PC era which was one by Apple.

Now we’re in the the IOT era and a clear winner has yet to emerge.

Microsoft was able to become the first dominant OS by bundled Windows with desktop computers. Microsoft never made the PC’s, but partnered with PC manufactures to be the operating system (i.e. the brains).

When consumers fired up their Windows computer, they entered Microsoft’s walled garden. They did just buy Nokia, but that might turn out to be to Microsoft what Motorola was to Google. A brief experiment in mass-producing hardware.

Apple designed the best post-PC era products – the iPhone and the iPad. The foundation was laid by the iPod. Their integrated approach to hardware and software delivered in a huge way; they created an ecosystem that just worked, and it improved customer’s everyday lives.

Is Google next in line? 

Google entered the software market through search, which you could say was the OS (entry point) of the web. Their business model was and still is targeted advertising.

Google has since diversified well beyond search to the point where they too have an operating system – Android. Android powers more smartphones than any other OS, but that doesn’t mean it’s the most widely used and is a misleading figure.

They clearly have aspirations to be the OS of things. Google (not Apple) bought Nest, and are not just experimenting but aggressively aiming to bring new connected devices to the masses – glasses, cars, watches, thermostats, contact lenses – and I’m sure there are many more they’re dreaming up in Google X.

GE Logo

The Battleground for Round 3

When the battle moves out of the Internet into the real world, what’s to stop the winner from closing the ecosystem all in the name of profits?

The physical world doesn’t have the same open, virtual nature as the web. The Internet was architected to be open source and not owned by any one person or company. This created protections around one company creating a walled garden within the web.

In the same way that Windows was a closed operating system living on PC’s, and iOS is a closed operating system on Apple computers, it’s possible that the next dominant OS will be a closed, cloud-based operating system. (There’s some good technical evidence that Google is gradually limiting the amount of the Android OS available to outside developers.)

Each company, to varying degrees, is trying to lock in their customers and be the preferred ecosystem. Here’s a look at each contender.

Microsoft

You could say that Microsoft’s days of domination are over. Even Nokia, a company they just acquired, will be making an Android phone. How could they be the OS for the IOT if their own subsidiaries use another OS?

The short answer is the sheer size of the company, their partners, customers, and talent will keep them in the ballgame.

To Consider –

  1. The days of the phone as the pivot device might be over. It’s fair to say that Windows missed the boat on that one, but that doesn’t mean they can’t learn and still aggressively compete in the OS market.
  2. Bill Gates is back. He’s a software guy. He drove the strategy that led to Microsoft’s victory in round 1. Can he adjust the strategy to modern and future times?

Apple

Apple has a relatively new CEO, is constantly adding new IOT-friendly hires to it’s ranks, and the iPhone + iPad combo today can’t be beat in terms of an OS ecosystem. But there are some warnings signs starting to emerge.

To Consider –

  1. The company just finished a massive share buyback. I don’t take this as a good sign, because I’d rather see this money invested in R&D. I’m wary of how Tim Cook “non-negotiated” with Carl Icahn.
  2. Steve Jobs’ vision led Apple to win the post-PC era
  3. Tim Cooks likes saying that Apple is not after market sure, but wants to make the best products. There’s the chance this could prevent growth, but we’ll see.
  4. There are signs of Tim Cook and Apple starting to get defensive. I see Apple reacting more now than I used to.

Tesla

Google

Google is in a good place. They seem to be able to make quick decisions and place big bets. The founder is at the helm. Google X is churning out IOT prototypes, they bought Nest, and Android is a mature and widely adopted OS.

To Consider –

  1. Google has never had the product marketing savvy that an Apple or Microsoft has. They make great products, but beyond search they’re usually not mainstream hits. How well do they know what customers want?
  2. Google now owns the Nest DNA, which is some of the best talent to have on your side when it comes to the IOT
  3. Google has amassed the  most market share by giving away Android. But as they increasingly make Android a closed system, will the market react negatively?

The Big Question – What do Customers Want?

In order to be successful, the winner will need to be the first to identify and bring to market a product that will be the most important connected device, or the “pivot device”.

Apple knew far in advance that the phone would be the next pivot device and was first-to-market with an unbeatable phone. The iPhone makes peoples lives so much better that they have to have it. From that consumer decision, many other buying decisions are made based on ease of integration, from Macs to Apple TV’s to tablets.

I actually think this is probably the hardest part. There are numerous contenders, technology and business limitations to each, and it takes a real ability to tap into the consumer psyche and drive that across the organization. Who was better than Steve Jobs at that?

Pivot Device Candidates

What device will be the pivot device? The fact that we use the term internet of things tells you how up for grabs this space is; “things” is too broad to really have any meaning (but it’s the best we have). Product categories to watch are –

  1. Television
  2. Automobile
  3. Refrigerator
  4. Watch
  5. Speakers
  6. Glasses
  7. Contacts
  8. Thermostat
  9. Smoke detector
  10. Coffee maker

The list could go on, and time will tell which one above of the above categories makes the most sense as the next pivot device.

Pivot Device Factors

Three of the key factors that will determine which of the above categories emerges as the leader are:What value can integrated technology bring to the category?

  1. What value can integrated technology bring to the category?
  2. How seamlessly can technology be integrated into the product category, as not to require consumers to adjust their current behavior?
  3. The product has to be an integral part of a lot of people’s daily routine. (This is where the list gets dramatically shorter.)

Companies that are innovating in the markets above that will produce the next pivot device are worth watching. It could be Nest, but I have a feeling not.

But perhaps that team, and Google, will be the one’s to create the next blockbuster device that will lead them to become the Operating System of Things.

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