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The new business model: Competing with partners!

Suddenly, the only way to succeed in the mobile space is to violate the old code of the ecosystem

November 24, 2012 06:13 AM ET

Computerworld - Blame Google.

It started this. In January 2010, Google shipped a mobile phone handset called the Nexus One. Manufactured by HTC, the device was a pretty good phone for its time, but nothing to text home about.

What was shocking about the phone was that, for some reason, Google decided to compete directly against its OEM hardware partners. And that was something you just didn't do.

The long-tested model for anyone with an operating system that depends on a third-party ecosystem of hardware makers -- call it the "Microsoft model" -- was that you do the software and they do the hardware. You don't compete against them, they don't compete against or abandon you, and everybody is happy.

Google bailed on the Nexus One, but has recently shipped Nexus 4, 7 and 10 versions (a phone and a couple of tablets). More than that, Google also acquired Motorola, and now competes directly and aggressively against every company that uses its Android operating system.

And now Google might compete with wireless carrier partners, too.

Reports suggest that Google could work with satellite TV provider Dish Network to build a wireless broadband network that would compete with AT&T, Verizon and T-Mobile.

So much for the 'Microsoft model'

Blame Microsoft.

You know the "Microsoft model" is in trouble when even Microsoft abandons it.

The introduction of the Microsoft Surface with Windows RT ushered in a new era where Microsoft is competing directly against OEM partners the company expects to support Windows 8.

Such a move would have been unimaginable just one year ago. And Microsoft is just getting started. The next Surface, called Microsoft Surface with Windows 8 Pro, will compete against the most sacred group of partners Microsoft has ever had: Its PC-making OEMs -- the likes of Dell, HP, Lenovo, Acer and others.

Microsoft CEO Steve Ballmer says there's more to come.

So why is this happening now?

Blame Apple.

While users and pundits focus on market share, companies tend to focus on profits. And when it comes to profits in the mobile space, Apple is taking nearly all of them.

In the second quarter of this year, Apple reportedly earned 77% of all the profits in the entire phone industry, and did so with only a 6% market share. And tablets are also massively profitable for Apple.

Despite Android's very high market-share numbers, only Samsung is making any money with Android devices.

Both Google and Microsoft have been frustrated not only by Apple's success, but by the fact that they're being held back by lackluster products from their partners. Both companies have separately come to the conclusion that they've got nothing to lose by competing with partners. After all, not competing with them is getting them nothing but dashed hopes and massive problems.



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