Chrome OS: Why Google won't beat Microsoft Windows

Posted by Rob Enderle

Notice the key word in the title is won’t - not can’t. Sure, any vendor can be beaten but you have to first be willing to do what it takes to win.

However, I doubt Google has ever done an accurate assessment of the cost required to win this fight. 

Now, I’ve been following operating system battles since the early 90’s when I worked for IBM.  

Back then, and thanks to a multi-million dollar research budget, we were able to determine what it took to take out a dominant platform like Windows. 

Chrome OS: Why Google won't beat Microsoft Windows Still, IBM was unwilling to make the effort. After spending over a billion dollars (some estimates were over several billion dollars), the attempt failed - and after nearly a decade left the field of battle the loser.  

It is my belief that had IBM management been able to determine the cost of wining the OS/2 fight up front they would have avoided it. 

This cost included spinning out IBM software as a separate company and it was more than IBM was willing to pay. 

Over the years I’ve watched companies form to fight similar fights and none have come close to the investment IBM made and all, so far, have failed without, I expect, ever realizing they never really had a chance. 

Let’s explore this in the context of Chrome OS and talk about what it takes to win against an entrenched dominant vendor - whether it is Apple with the iPod, or Microsoft with Windows.  

I include Apple because the number of companies that have tried to beat the iPod is equally impressive and include Samsung and Microsoft; but they too didn’t fully assess the full cost of the effort either and failed as well. 

Similarly, ChromeOS appears slated to be Google’s Zune.

Anyway, here are the requirements:

Requirement One: Lots of Cash

Bing is trying to move against another entrenched offering, Google Search, and the amount of money Microsoft has put into this fight now appears to exceed several billion dollars and Microsoft is approaching around 30% market share.

But even after spending billions MS wouldn’t be where it is now if the company hadn’t agreed to pay Yahoo an additional impressive sum, and take over a good chunk of search related costs while giving up much of the revenue. 

Windows Phone 7
Now, Windows Phone 7 has an estimated $600M on launch and ramp related marketing alone. Even after that, the volume of phones sold certainly isn’t setting any records. 

Of course, this is in a market largely dominated by Apple and Google today and both Search and Smartphones don’t entail the high personal switching cost that moving from one PC operating system to another would.

Switching is the cost the user incurs when moving from one product to another, and the more stuff that surrounds the product - the higher this cost is.  

With PCs, think drivers for video cards, printers, accessories (including mice and keyboards) on top of software packages and utilities. 

While the web can mitigate some of this, it is clearly a daunting task for any new operating system.

Uplifting from the money IBM spent and Microsoft is spending in the search and Smartphone segments the initial estimate for marketing, seeding, and initial drivers to reach significant share (over 10% of the market) is likely in excess of $10B for a reasonable chance of success.

Requirement Two: Ecosystem

Unlike Search and even more pronounced than the iPhone is the ecosystem that surrounds Windows. This includes security and management products, services, marketing co-funding and deep OEM relationships.   

Microsoft Windows 7Yes, all of this can be matched but it would take time to build up the resource and funding such an effort at an initial level wouldn’t be cheap either. 

Last month I spent some time talking with firms and other analysts more familiar with Google’s Android efforts and the feedback wasn’t promising.   

Google had fielded inexperienced people, without providing adequate support for this more limited platform. 

Meanwhile, the vast majority of vendors are holding off on Android Tablets to fight the iPad until the 2.4 version of Android (2.3 just released).  

In addition, Android application devs for Android were complaining they weren’t making money (unlike those that were building for the iPhone) and, from the outside, the effort seemed massively underfunded and staffed.

Android Market
Yes, Android has been successful, but only because Apple is locked into AT&T and the carriers - including AT&T - don’t like Apple’s insistence on controlling the customer and making the lion’s share of the money. 

A huge part of this problem is business and Microsoft’s business, particularly enterprise; has its resources focused in line with IBM’s, Oracle’s and HP’s.  

This puts them currently well out of Google’s class, as Mountain View weighs in with a revenue model that is basically tied to selling information about their customers.   

As such, overcoming that inherent negative to a business buyer may turn out to be just short of impossible.

So, to roll against Windows successfully, Google will have to come close to matching the eco-system that supports Windows.

Otherwise, the result will likely mirror the Linux desktop - which can hardly be termed an overwhelming success.

Requirement Three: A willingness to do whatever it takes

It is one thing to compete against a company in an emerging market and quite another to go after their crown jewels. 

Windows is Microsoft’s most important product and Microsoft will likely spend whatever it takes to defend it.

Google ChromeThis suggests the bar will move - and not in Google’s direction. 

Much like Microsoft had to do with Bing when they went after Google’s crown jewels, Google will need to be willing to significantly increase their investment as Microsoft responds to the threat. 

Sure, the market continues to look for an alternative to Windows, but just throwing out something that is free won’t accomplish anything.

Clearly, Microsoft will field whatever it takes here, and Google has to be willing to do the same - or the outcome will surely favor Microsoft.  

Wrapping Up: Google won't make the necessary effort

Personally, I doubt Google is willing to spend even a fraction of what it takes to make significant sustained inroads into Microsoft’s install base.

An easier path, as Apple may be discovering with the iPad and iPhone, would have likely been for Google to significantly improve its existing Android platform and then use the revised OS as a stepping stone to the Windows market. 

But with the ChromeOS, they effectively start all over, and roll against a market that is very difficult to penetrate.   

This has the potential to go down in history as Google’s biggest failure - and the company has had a few - largely because it doesn't seem to have estimated the full cost of a successful effort. 

It isn't that Google can't win, it is that they won't.

Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently, he provides his services to most of the major technology and media companies. The opinions expressed in this commentary are solely those of the writer.