As the lines between segments of the technology value chain blur, competition between what normally would be partners grows. When this occurs, companies tend to retreat from supporting solutions from other vendors, and some times, even industry standards.
We are seeing many examples of companies crossing the lines of the traditional value chain. By purchasing Sun Microsystems, Oracle is now in direct competition with the likes of HP, Dell, and IBM, which have all been valuable partners in the past.
As Microsoft enters the PC/tablet market with Surface, it will compete against the company’s PC and tablet OEM partners. Google will compete against its smartphone OEM partners with the acquisition of Motorola. And, Intel has often entered markets, like the motherboard and systems, where it competes with its own customers.
But as the industry and business models change, this value chain boundary hoping is not limited to just hardware and software vendors. In the retail, Walmart and Target have abandoned selling the Amazon Kindle tablets due to competition between the retailers and e-tailers, and Apple competes against its retail and wireless carrier partners by selling directly to consumers.
The result of these boundary crossing threats results in many companies considering doing the same. With the release of the iPhone 5 and iOS 6, Apple has attempted to replace key Google applications, and in smartphones and tablets, many content providers, retailers, and carriers are considering offering their own branded devices, applications, and content services.
These cross-value chain threats indicate more change in the industry. During this period, the availability of desired solutions may be limited, but ultimately, businesses and consumers will benefit from increased availability and lower pricing of more robust solutions that combine hardware, software, content, and services. So, protectionism within the industry is not necessarily bad. But, what happens when social and political factors play a role?
Suppose China, the fastest growing market for the technology industry, suddenly became closed off to foreign technology providers? Not only would growth suffer, but the impact on the current sales could be devastating. It’s easy to argue that this would not happen because we are now in a global economy that has many inter-dependencies. But, the truth is that it could happen as China and other developing countries become more technologically advanced.
Just a follow-up note. The US House intelligence subcommittee just declared war on Chinese companies Hauwei and ZTE. As if the threat of losing access to the Chinese market were not enough, the US government throws gas on the fire.
As we have seen with Apple, most companies try to establish a virtual monopoly for their product lines. They hope that they can kill off or significantly delay the competition. It is natural for the original developers to want to keep their lead as long as possible.
However, they are only playing for time. Competitors will emerge if the product idea is lucritive enough and people do not mind buying copies.
Protectionism is an old game, been happening for millenia. I do not expect that to change. The best protectionism is to give the consumer a good product at a good price and back it up with excellent customer service. People will remain loyal and pay up for that option. Otherwise, its just a cost shoot out and you will eventually lose.
Just my opinion.
David Patterson, known for his pioneering research that led to RAID, clusters and more, is part of a team at UC Berkeley that recently made its RISC-V processor architecture an open source hardware offering. We talk with Patterson and one of his colleagues behind the effort about the opportunities they see, what new kinds of designs they hope to enable and what it means for today’s commercial processor giants such as Intel, ARM and Imagination Technologies.