ailon's DevBlog: Development related stuff in my life

Should Google and Microsoft Pay OEMs to Use Their OSs?

9/18/2012 2:55:55 PM

These days no one seems to debate the cliché phrase that it’s no longer a war of operating systems or devices, but a war of ecosystems. And, since actual devices and operating systems are only enablers of these ecosystems, it’s quite obvious that one of the ways to move an ecosystem forward is to strip the profit margins of the devices completely. And Amazon is a perfect example of this.

Amazon_Bezos_use_devices
Photo credit Android Authority

Amazon is happy to sell you a Kindle with no margin, happy to exchange a broken one without grilling you too much about validity of your warranty claim. That’s not where they make money. But it’s where consumers buy into the ecosystem – “Look this tablet is awesome and it’s only $299!”

Apple has a seemingly opposite business model, but they can easily switch to the Amazon’s way of doing business if they choose or are forced to.

Google and Microsoft, on the other hand, are very dependent on the OEMs making the hardware and those OEMs in turn are dependent on having a reasonable margin on top of the costs of the hardware and OS. Google can make their “own” Nexus devices, and Microsoft can make their own Surfaces, but they are not free to compete on the hardware prices as long as they care about OEMs even a little. And I guess they have to care at least for now.

So, unless Google and Microsoft either somehow compensate OEMs for the lost profits on the hardware or let them in on the revenues from the ecosystem as a whole, it looks like it will be difficult to compete with Amazon and (possibly) Apple in the ecosystem play.

Luckily for Google, Amazon doesn’t make phones yet. Luckily for Microsoft they don’t make proper computers yet. Luckily for both, Amazon is still very US-centric in the content department. All of this can change any day, though.

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