Wednesday, September 21, 2005

Predicting the future: Google vs. Microsoft

One of my customers just asked me what my take is on the future competition between Google and Microsoft. I will start with where I think that each company will be in 5 years:

Microsoft: I think that Microsoft will have limited success in newer markets like music players, gaming consoles, etc. In 5 years, I think that Office and Windows will still be their cash cows. I think that Microsoft's stock price will take a modest hit in the next 5 years, but they will still have huge cash resources.

Google: I think that Google will still be doing well in 5 years, but their stock price will probably come down a bit. Google's advantage is their infrastructure: a scalable platform that lets them relatively easily experiment with new very large scale web applications. Google File System and their map reduce libraries are great technologies. Their architecture scales much better than, for example, Oracle on Unix super servers.

Future of economy: this is the potential spoiler for any predictions that I am making. While the U.S. economy has a lot going for it, it is also subject to some serious threats from the housing and consumer credit bubbles. The "sea change" in our political system (i.e., the total domination of Congress, courts, etc. in the last 10 years or so by our new Corporate Overlords) will probably be OK for the economy as a whole, but say goodbye to much of the middle class: if you want to be OK financially, make sure that whatever you do that you are very, very good at it. The question is not if the U.S. economy is going to tank. Rather the questions are when it will happen, how bad it will be, and will we fully recover in a few years, 20 years, or never. My bet is that the economy will sink slowly rather than an absolute crash (yes, call me an optimist). In any case, the middle class will largely go away, transitioning into an "upper lower class" that still has some qualiy of life, but will struggle under huge debt loads, etc.

Google vs. Microsoft: Microsoft was in the right place at the right time in technology and economic history. They got lucky. Google on the other hand gained market dominance against existing market leaders. This difference, along with their flexible and scalable architectue for large scale web applications, is why I expect Google to improve their position in time while Microsoft is probably looking at a long (very) slow slide downhill.

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