Eric Schmidt sure has become fun since he stopped running Google. I’m not sure what the guy does, exactly, but he looks like he’s really having a good time doing it. (Look, there he is dancing Gangnam Style!) Schmidt has always been an interesting interview—he’s more thoughtful than ruthless, which was one of his shortcomings as Google’s CEO—but as chairman, he’s been able to really put his rational, expansive side on display. Schmidt’s role gives him enough inside access to understand what’s really going on at Google, yet—unlike a boss—he’s far enough removed from day-to-day operations to be able to see things from beyond just Google’s point of view. Schmidt is also not one for bluster; he won’t try to convince you that you Google’s ahead in some area of the tech business when, clearly, it isn’t. (See Google+).
All of which is to say: When Eric Schmidt makes grand pronouncements about the industry, he’s probably not just blowing smoke. You should listen to him. And when he repeated his claim, during an interview this week with Walt Mossberg and Kara Swisher, that the tech world is ruled by just four giants—Amazon, Apple, Google and Facebook—Schmidt was right on.
These four make the dominant platforms that will rule tomorrow’s digital world: Apple has iOS, Amazon has ecommerce and AWS, Google has Android and the Web, and Facebook possesses your identity and social graph. Together, they exert enormous power over every sphere of the economy—though of course they don’t work together. What’s fascinating is that they’re all working at odds with one another: Whatever industry you’re in, your next few years will be shaped by how these four battle for dominance over the world’s economy. Whatever you do, wherever you go, Amazon, Apple, Google and Facebook will be in your life. (I should note I’m in the tank for Schmidt’s Gang-of-Four view of the world: I’m writing a book about their coming tech dominance.)
“You left out Microsoft,” Swisher pointed out during the interview. “Deliberate,” Schmidt said. Schmidt has said that while he believes Microsoft is a well-run company, it hasn’t yet shown that it’s going to create the future.
Schmidt is right. Early this year I pronounced 2012 to be “the year of Microsoft.” With Windows 8 and the fantastic Windows Phone, I argued that we could be witnessing the moment that Microsoft finally “shakes its malaise and takes its place alongside Apple, Google, and Amazon as a dominant innovator of the mobile age.” I still think that’s possible. Everything we’ve seen from Microsoft recently—the unveiling of the Surface tablet; the purchase of Skype; a big social-friendly redesign of Bing and the launch of Outlook.com; a sensible pricing plan for Windows upgrades—suggests that Steve Ballmer understands what he needs to do to join the four leaders.
But he’s not there yet. And he’s not guaranteed to get there, for one simple reason: We don’t have any clue, yet, what most customers—i.e., regular non-tech people—think of Microsoft’s mobile efforts. When Windows 8 hits the streets later this month, will people consider it a fresh, exciting take on an aging interface? Or will they recoil at the jarring difference between the new and the old, at how radically they’ve got to change how they work to accommodate the new software? And will the new Windows Phone finally push people to take a look at Microsoft’s left-behind mobile OS? Or will they be too thrilled by the iPhone to even care? At the moment, these huge, company-defining questions loom over Microsoft’s future.
But soon we’ll have answers. Indeed, it’s not an exaggeration to call the next month the most important time in Microsoft’s history since the launch of Windows 95. There’s a lot to love about the new Windows, and if people give themselves time to get used to it, they may well come to regard the software as a sign of Microsoft’s rebirth.
Microsoft is betting that users will want a single interface that does everything—an OS that feels the same across your phone, your tablet and your desktop. It’s a huge gamble, but if Microsoft gets it right, the strategy could play off: The firm would be able to leverage its PC monopoly to push developers into building apps for tablets and phones—potentially bringing Microsoft’s app store to parity with Apple’s. Meanwhile, by building the Surface, it is forcing other PC manufacturers to create world-class hardware for Windows 8—if Dell and HP and Lenovo don’t step up, they’ll be outshined by Microsoft itself. In that way, the Surface steals a page from Google’s playbook: In the same way that the search giant built Chrome as a way to spur competitors to improve their browsers (because, in the end, better browsers are better for Google), Microsoft is hoping that Surface-sparked competition will create a new class of not-awful non-iPad tablets.
So if all that happens—and if, as a bonus, all the joy for Windows 8 bleeds over into renewed enthusiasm for Windows Phone—then Microsoft will be back. The gang will expand to five.
But there’s another story that could unfold in the next few weeks. A dire one. If Windows 8 doesn’t fly, if people react to it with fury rather than joy, the fall of 2012 could mark the beginning of the end of Microsoft. This is not implausible. The new Windows is just different enough from the old to cause massive anxiety for hundreds of millions of people around the world.
If that anxiety becomes the Windows 8 launch narrative—if initial reviews dwell on the big adjustments that dyed-in-the-wool Windows users will have to make to accommodate the upgrade, and if office workers start complaining that they can’t figure out how to do anything they used to do in this blasted new thing—that would quickly seal the fate of Windows 8.
And if Windows 8 fails, it would be calamitous for Microsoft. Remember that Microsoft doesn’t have a Plan B. This isn’t like New Coke, where, if people hate the new thing, Microsoft could easily fix the software by replacing it with Windows Classic. That’s because people won’t tolerate Windows Classic much longer either; the Windows Classic business is dying—that was the entire point for coming up with something new. For Microsoft, Windows 8 is the only game in town. It will all come down to this.
And, honestly, I have no idea what will happen. I think desktop Windows users will be initially spooked by 8, but I can’t say how long their stress will last. If it doesn’t last long, Microsoft has a chance. Otherwise, the decades’-old Intel-Windows empire will begin to crumble. The stakes couldn’t be bigger. By the end of the year, we’ll know whether we’ve just witnessed a new tech beginning—or the beginning of the end.