We’re All PC Users Now

by on April 6, 2006 · 14 comments

Apple’s Wednesday announcement of Boot Camp, a utility that allows users to run Windows on their Intel-based Macs, may be the final chapter in the decades-long commodification of the PC industry. “Wintel” PCs were commodified by the rise of “IBM clones” in the early 1980s, and the release of Pentium clones and LInux in the 1990s. By the mid-1990s, virtually every component in a Wintel PC was a commodity with vigorous intra-platform competition.

Apple began joining the commodity hardware party in earnest with the release of the iMac, which abandoned several Apple-only hardware components in favor of PC equivalents. Over the subsequent 8 years, they gradually phased out virtually all of their Mac-specific hardware, culminating in the adoption of Intel processors early this year. And this week they put to rest any notion that a Mac is anything but a glorified PC by giving users an easy way to install Windows on their Macs if they want to.

This is surprising because Steve Jobs is a control freak. When he rejoined Apple in 1997, he killed off the Macintosh clone program, which was beginning to allow third parties to build Mac-compatible computers. Five years ago, it would have been crazy-talk to predict that Jobs would soon transform Macs into glorified PCs with pretty cases.

What has happened, though, is that economies of scale have became such a powerful force that no one, even a closed-platform zealot like Jobs, could resist them. In the last few years, Intel and AMD together have sold more than ten times as many chips as did the PowerPC manufacturers who supplied Apple. As a result, they could afford to spend ten times as much on R&D. No amount of ingenuity or superior processor architecture can make up for such a lopsided funding advantage.

In addition, I suspect the iPod experience has changed Jobs’s perspective. It’s hard to fathom today, but the iPod was originally conceived as a loss-leader to sell more Macs. Only after it became obvious they had a huge hit on their hands did they release a version that would work with Windows. And it took them even longer to release a Windows version of iTunes. Today, the iPod and iTunes are arguably more important to Apple’s future than the Mac is. Tying the iPod to the Mac held back its potential for success. By making it as widely compatible as possible, Apple allowed it to achieve much greater success.

Jobs may have realized that Mac hardware and the Mac OS may be holding each other back as well. There may very well be a lot of customers who love Apple’s superb industrial design but need to run Windows to get work done. There might also be people who would like to try out the Mac OS but don’t want to drop several hundred dollars on a new computer. By de-coupling the two–allowing Windows to run on a Mac and (I hope soon) allowing Mac OS X to run on PCs–Apple allows each to survive on its merits. Perhaps Mac OS X will grab significant market share away from Microsoft. Or maybe Macs will steal market share from HP and Dell.

Either way, the bottom line is that network effects are an irresistible force in the computer industry. No matter how innovative your product might be, it’s not likely to succeed if it’s only used by a small cadre of technological elitists. Bill Gates figured this out in the 1980s, and it made him the richest man in the world. Perhaps Steve Jobs is beginning to figure it out as well. Better late than never.

  • Tom Dunstan

    Apple is still very much a hardware company, and OSX is a way to sell Apple hardware (as were the iPods originally, as you pointed out). Getting Windows to run on Mac hardware increases the value of that hardware for people who need certain Windows programs, and so is a win for Apple, but it’s hard to see how opening up OSX to run on generic PC hardware helps them. Yes, they’ll sell more OSX licenses, but their hardware market will disappear as people flock to cheaper Dells or whatever. It would make it easy for their loyal fanbase to desert them without offering enough of a compelling move to switch to all the Windows users out there.

    Also note that one of the benefits to a closed platform for the vendor is that they don’t have to deal with weird and wonderful hardware, just their own. Many of the stability problems in earlier versions of Windows were due to buggy hardware and/or drivers. While I hate Microsoft’s business practices, the ability of Windows to run on every PC device is a major achievement (one probably shared by Linux as well, to be fair), and it might take years for Apple to get OSX to such a point, assuming that they were even interested.

  • http://www.blindmindseye.com MikeT

    There really is no reason to use a Mac if all you want is Windows. It’s typically cheaper to just by a low end or mid range Dell. The ability to run Windows is a boon, but only because it will be able to be hosted like MacOS Classic. What Apple really should be focusing on instead is creating a slick Win32 API clone that they can use as a compatibility layer to prevent people from having a reason to leave the OSX environment in the first place.

  • Tom Dunstan

    Apple is still very much a hardware company, and OSX is a way to sell Apple hardware (as were the iPods originally, as you pointed out). Getting Windows to run on Mac hardware increases the value of that hardware for people who need certain Windows programs, and so is a win for Apple, but it’s hard to see how opening up OSX to run on generic PC hardware helps them. Yes, they’ll sell more OSX licenses, but their hardware market will disappear as people flock to cheaper Dells or whatever. It would make it easy for their loyal fanbase to desert them without offering enough of a compelling move to switch to all the Windows users out there.

    Also note that one of the benefits to a closed platform for the vendor is that they don’t have to deal with weird and wonderful hardware, just their own. Many of the stability problems in earlier versions of Windows were due to buggy hardware and/or drivers. While I hate Microsoft’s business practices, the ability of Windows to run on every PC device is a major achievement (one probably shared by Linux as well, to be fair), and it might take years for Apple to get OSX to such a point, assuming that they were even interested.

  • http://www.techliberation.com/ Tim

    Tom: I don’t buy it. Margins on software are far better than margins on hardware, which means that they could generate the same profit with a lot less revenue.

    And yes, supporting every conceivable PC in the universe is a headache. But there is a variety of ways Apple could deal with it. Probably the easiest would be to be choosy about which PCs they’ll support. They might work with folks like Dell and HP to develop one or two PCs each that have well-supported hardware.

    The market for Macs is never going to go away completely, because Apple has far and away the best industrial design in the industry. PCs are ugly and clumsy. I’ll gladly continue paying an extra $100 or $200 for a sturdy, elegant, and beautiful laptop.

    But even if they ended up cannibalizing their Mac sales, that would hardly be the end of the world. Last year–their best year ever–they sold 1.2 million Macs and earned $1.3 billion. Even if all of those profits are on Mac sales, that’s only about $100 per Mac. Given the high margins on software, they wouldn’t have to sell very many additional $129 copies of Mac OS X to make up those profits.

  • http://weblog.roth-cline.net Matt Cline

    MikeT:
    Actually, BootCamp is not “hosting” Windows at all. BootCamp sets up Intel Macs to dual-boot. You can hold down a key on the keyboard to choose between Windows and Mac OS.

    By “hosting”, you seem to be thinking about something like Virtual PC. That’s another valid approach to running Windows on a Mac, but it’s not what BootCamp does.

    Developing an API compatibility layer is a *huge* job. (Among many other reasons, the Windows APIs are moving targets.) And it’s not at all clear to me that it’s in Apple’s interests anyway.

  • http://www.blindmindseye.com MikeT

    There really is no reason to use a Mac if all you want is Windows. It’s typically cheaper to just by a low end or mid range Dell. The ability to run Windows is a boon, but only because it will be able to be hosted like MacOS Classic. What Apple really should be focusing on instead is creating a slick Win32 API clone that they can use as a compatibility layer to prevent people from having a reason to leave the OSX environment in the first place.

  • http://www.techliberation.com/ Tim

    Tom: I don’t buy it. Margins on software are far better than margins on hardware, which means that they could generate the same profit with a lot less revenue.

    And yes, supporting every conceivable PC in the universe is a headache. But there is a variety of ways Apple could deal with it. Probably the easiest would be to be choosy about which PCs they’ll support. They might work with folks like Dell and HP to develop one or two PCs each that have well-supported hardware.

    The market for Macs is never going to go away completely, because Apple has far and away the best industrial design in the industry. PCs are ugly and clumsy. I’ll gladly continue paying an extra $100 or $200 for a sturdy, elegant, and beautiful laptop.

    But even if they ended up cannibalizing their Mac sales, that would hardly be the end of the world. Last year–their best year ever–they sold 1.2 million Macs and earned $1.3 billion. Even if all of those profits are on Mac sales, that’s only about $100 per Mac. Given the high margins on software, they wouldn’t have to sell very many additional $129 copies of Mac OS X to make up those profits.

  • http://weblog.roth-cline.net Matt Cline

    MikeT:
    Actually, BootCamp is not “hosting” Windows at all. BootCamp sets up Intel Macs to dual-boot. You can hold down a key on the keyboard to choose between Windows and Mac OS.

    By “hosting”, you seem to be thinking about something like Virtual PC. That’s another valid approach to running Windows on a Mac, but it’s not what BootCamp does.

    Developing an API compatibility layer is a *huge* job. (Among many other reasons, the Windows APIs are moving targets.) And it’s not at all clear to me that it’s in Apple’s interests anyway.

  • http://www.blindmindseye.com MikeT

    Matt: I know that it’s a bootloader. What I was saying is that Apple seems to be moving toward the virtualization route that everyone else is and being able to hot Windows natively inside of OSX would be a benefit for them. I’m not sure why they didn’t just focus on the virtualization aspect, like how VMWare lets you boot an OS you have installed on a partition inside of VMWare on your currently running OS. What I was getting at is it’s not really in their interests to make it easy to turn a Mac into a pure Windows PC so that people can just forget about OSX.

  • http://www.blindmindseye.com MikeT

    Matt: I know that it’s a bootloader. What I was saying is that Apple seems to be moving toward the virtualization route that everyone else is and being able to hot Windows natively inside of OSX would be a benefit for them. I’m not sure why they didn’t just focus on the virtualization aspect, like how VMWare lets you boot an OS you have installed on a partition inside of VMWare on your currently running OS. What I was getting at is it’s not really in their interests to make it easy to turn a Mac into a pure Windows PC so that people can just forget about OSX.

  • Tom Dunstan

    Tim: With less revenue, yes, but a lot more actual unit sales. And to get those extra unit sales they’ve got to convert an awful lot of people from Windows, and there are structural factors (the availability of software for each platform) which make that difficult.

    I’m a little confused as to how $1.3b profit and 1.2m sales got $100 profit per unit, perhaps I misunderstood?

    Yes they could go with some blessed hardware configuration from certain manufacturers, but what do they get for it? They still aren’t as widespread as Windows and they aren’t making money on hardware anymore either.

    Don’t get me wrong, I’d love to see them do it so that I could run OSX on my Dell laptop here, but I just don’t think it would be in their interest.

  • http://www.techliberation.com/ Tim

    I’m a little confused as to how $1.3b profit and 1.2m sales got $100 profit per unit, perhaps I misunderstood?

    Ha! That would be me being unable to do math. It’s more like $1000/computer. Which obviously isn’t right, because a lot of the profit comes from Apple’s other products, notably its iPods, but I don’t what the right number would be. So never mind.

    Anyway, opening up their OS to PCs would be something of a gamble. There’s a chance that they’d simply lose a lot of customers to cheaper hardware. But it’s a gamble with an enormous potential upside. If Mac OS X is superior to Windows (which I think it is) then it can only benefit them to make switching between the two easier. Once users can make side-to-side comparisons with minimal switching costs, a lot of them might decide they’re tired of Microsoft’s ugly, spyware-ridden bloatware. It would only take a small slice of Microsoft’s Windows revenue to make up for lost hardware profits.

  • Tom Dunstan

    Tim: With less revenue, yes, but a lot more actual unit sales. And to get those extra unit sales they’ve got to convert an awful lot of people from Windows, and there are structural factors (the availability of software for each platform) which make that difficult.

    I’m a little confused as to how $1.3b profit and 1.2m sales got $100 profit per unit, perhaps I misunderstood?

    Yes they could go with some blessed hardware configuration from certain manufacturers, but what do they get for it? They still aren’t as widespread as Windows and they aren’t making money on hardware anymore either.

    Don’t get me wrong, I’d love to see them do it so that I could run OSX on my Dell laptop here, but I just don’t think it would be in their interest.

  • http://www.techliberation.com/ Tim

    I’m a little confused as to how $1.3b profit and 1.2m sales got $100 profit per unit, perhaps I misunderstood?

    Ha! That would be me being unable to do math. It’s more like $1000/computer. Which obviously isn’t right, because a lot of the profit comes from Apple’s other products, notably its iPods, but I don’t what the right number would be. So never mind.

    Anyway, opening up their OS to PCs would be something of a gamble. There’s a chance that they’d simply lose a lot of customers to cheaper hardware. But it’s a gamble with an enormous potential upside. If Mac OS X is superior to Windows (which I think it is) then it can only benefit them to make switching between the two easier. Once users can make side-to-side comparisons with minimal switching costs, a lot of them might decide they’re tired of Microsoft’s ugly, spyware-ridden bloatware. It would only take a small slice of Microsoft’s Windows revenue to make up for lost hardware profits.

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