The new tech buzzword for the fall of 2011 is ecosystem.
We're not talking about the Earth, but a self-sustaining system of hardware, software, services and transactions without which you're no longer a real tech player.
An ecosystem must include all these elements:
- Mobile devices in high demand.
- Ancillary products and services (from yourself and others).
- A cloud that sells all of it.
Microsoft has a cloud. They even have a product in some demand with the Xbox. But most of what they sell is sold through channels, not directly. Most of what they produce has someone else's brand name on it. And their reputation in the mobile space is very poor.
Shareholders do have hope. Lawsuits are slowing Google's Android, and Google's purchase of Motorola Mobility is throwing OEMs into Microsoft's phone corner. But Microsoft connections to the elements of a functional ecosystem are a work in progress, and it's finding that it's not a “big time brand” in this space that can control its environment.
Amazon's Kindle created a channel for books, and its upcoming Android-based Kindle will expand that channel to cover everything else it offers. Because Amazon is, at heart, an online department store, and because Amazon has more cloud customers than anyone, it's a serious contender.
Google has the phones, it has the cloud, it has very close connections to more users than anyone, but it's not yet running a store the way Amazon is. It has an ecosystem that needs to be beefed up in order to function competitively, but CEO Larry Page shows every sign he intends to do just that.
Apple is what they all want to be. Apple created this trend with the iPhone, iPad, and iTunes store, selling apps from all over and taking a hefty cut off the top. Apple's only shortage is in the cloud area. Having a big building that claims to be a data center in North Carolina is not the same thing as having a functional cloud. All it means is you plan to be a Web host.
As you can see, all these ecosystems have weaknesses. Commerce in Google's case. Devices in Amazon's case. Cloud in Apple's case. Now that Microsoft knows what the game is, maybe it can catch up.
But you already know the name of the game.
Disclosure: I am long GOOG.