Gates vs. Jobs: The Rematch—circa 2000
Until Steve Jobs's return to Apple in 1997, innovation in the PC industry was stagnant. In 2000, Tony Perkins predicted the rise of Apple on the eve of the OS X and 7 years before the iPhone.
Gates vs. Jobs: The Rematch
Apple Computer’s iCEO, Steve Jobs (the ‘i’ now stands for Internet rather than interim), tells a story about a recent dinner with Bill Gates in which they talked about how they used to be the youngest guys in the business, and now they are the graybeards. That both men are just 44 is ironic enough. More profoundly, Mr. Jobs and Mr. Gates find themselves once again, after a 15-year reprieve, locked in head-to-head competition over the leadership of the personal computer industry.
This last statement may surprise you. How can Apple Computer, with barely over 3% worldwide PC market share, be a competitor to the mighty Microsoft? Sure, Mr. Jobs has guided the company he co-founded out of a garage in 1976 back to consistent profitability and revenue growth. Best of all, he has also increased Apple’s stock price tenfold since retaking command for shareholders. But will Apple become anything more than a computer maker for a high-end niche, the Porsche of PCs? “What’s wrong with owning 100% of the Macintosh market?” industry pundit Stewart Alsop used to say. And Mr. Jobs is certainly making a business out of Apple’s monopoly of the Mac market again.
‘New Platform’
To dig deeper into what I believe is a bigger competition, however, consider what Mr. Gates said at the World Economic Forum in Davos, Switzerland, in January about his new job as “chief software architect.” First, he reiterated that he would spend 100% of his time on product design. Specifically, he said he would “evaluate all the new technologies coming out of our research group, and out of the software industry as a whole, and develop a three-year plan to create a new platform so users can easily access, manage and share information, whether stored on a personal device or out on the Web.”
Mr. Gates’s ambitions go far beyond Windows 2000, which began shipping last month. He aims at “building a whole new user and Internet interface, and a whole new set of applications that go behind it.” During the development process, much of the old Windows code will be thrown away, and what will emerge will be a more modern, “Linux-like” operating system platform.
For Web surfers, single-browser access to our computers and the rest of the world is a welcome dream. For Mr. Gates, it’s more than a dream — it’s bet-the-company time. This is the same kind of gamble Microsoft made during the transition from DOS to Windows or developed Windows NT. “But the stakes of this bet are even higher,” Mr. Gates said, “because the stakes in our business are greater than they have ever been, and that’s why I have to give 100% of my attention to the big picture.”
Meanwhile, Apple has re-emerged as an industry player primarily because Mr. Jobs has focused on the company’s product development and marketing campaigns like a laser. He reduced the product line to four easily understood and well-differentiated classes of sleek machines, some packaged in vibrantly colored, translucent computer cases. He promoted these new creations with equally slick and fun advertising campaigns that made the 20 million existing Mac users feel young again and seduced a whole new generation into becoming Mac converts. Roughly 30% of iMac buyers are first-time PC users. Apple’s new buzz is summed up in the banner that adorns the company’s headquarters in Cupertino, Calif.: “The re-birth of cool!”
Sounding exactly like Mr. Gates, Mr. Jobs aspires to marry the iMac to the Internet with an easy-to-use new operating system and a set of complementary Web services. “The user experience is what we care about most, and we are expanding that experience beyond the box by making better use of the Internet,” Mr. Jobs told the throng attending January’s annual MacWorld trade show in San Francisco.
Here lies the crux of the competition between Microsoft and Apple, and the reason I believe Steve & Co. deserve attention. Apple has already leapfrogged ahead of Microsoft in the Internet innovation game. At MacWorld, Mr. Jobs showed off his newest baby, a completely new implementation of the Macintosh operating system called OS X (that’s a Roman numeral 10), including a new user interface called Aqua. Designed by a team headed by Avie Tevanian, Mr. Jobs’s chief software guru, OS X represents more than a glimpse of the dream Bill Gates is chasing.
For the all-important constituency of software application developers, OS X makes it easy to recompile their older applications to run “native” in the new operating system with higher performance and stability. And OS X comes equipped with a set of tools and interfaces called Cocoa that allows developers to create new applications in about a tenth of the time it would take to write for Windows. The goal here is to lure back developers, who had drifted away from Apple because of its dwindling market share.
For the iMac user, OS X is far less likely to crash, and it offers far superior Internet access. Its new graphics system called Quartz makes it easy to view any text document or graphic file received over the Internet. Mr. Jobs came to MacWorld armed with a whole new set of free Internet services, called iTools, such as online data-storage services, tools for building personal home pages, and e-mail and greeting-card services.
To be sure, many of these Web services are currently available from companies such as Yahoo! and AOL, but Apple’s key innovation here is integrating them into the operating system, a technical achievement that is, as Mr. Gates acknowledged in Davos, “the new Holy Grail” of the computer business. Said Mr. Jobs: “I actually think that our new Internet services are going to be equal to the OS X in making the Macintosh stand out.”
An interesting side note is that Apple has a head start on Microsoft because most of its innovations are based upon technologies first developed at NeXT, including NextStep, a Unix-like operating system that the European physicist Tim Berners-Lee and his team used to develop the original foundation of the Web. In many ways, this connection vindicates the 12 years Mr. Jobs spent in the wilderness at NeXT and soothed the cynics who claimed that the $400 million Apple paid to acquire NeXT in 1997 was a funny money deal of grandiose proportions.
The bottom line is that while Apple and Microsoft may be pursuing different technologies, they are trying to execute essentially the same business model. The goal is to create a proprietary Internet operating system platform and unique Web services that can run only using that platform. The major difference is that Mr. Jobs is also in the business of selling hardware, and he is proposing to provide most of his Web services for free. On the other hand, Mr. Gates will strive to hold on to Microsoft’s existing model of selling both the operating system and the applications. No matter how the economics shake out, both Mr. Gates and Mr. Jobs must face a world that is moving increasingly toward open Internet standards and will be, by nature, hostile to colonization efforts pursued by either company.
Also in Davos was the software industry’s other Bill — Bill Joy, the crafty co-founder and chief scientist at Sun Microsystems. “There has been no innovation in the PC business for 15 years!” he moaned to all who would listen.
Making the PC Industry Interesting Again
Mr. Joy is right. And it’s no coincidence that the last time we saw real innovation in the PC market, Steve Jobs was still at Apple and unveiling the Mac, with its now-ubiquitous graphical user interface, a feat that would take Mr. Gates almost 10 years to imitate successfully. Well, Mr. Jobs is back, and he and the Internet are making the PC world interesting again.
While Mr. Jobs’s new operating system is due in stores this summer, Mr. Gates is still straddling the old world with Windows 2000. Just like the last time around, Mr. Jobs has gained the early technology edge, while Mr. Gates maintains the market edge. Most industry seers would bet on King Bill. I will stick out my neck and put my chips on Apple. At a minimum, I think Mr. Jobs will gain significant market share in this next round. No matter what, Bill is right to make it his full-time job keeping up with his buddy Steve.
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