Changing of the guard

Today I read in the Wall Street Journal that IBM is reporting a drop in revenue as well as selling off some more of its business. Microsoft has reported zero growth for its Windows business. Oracle has reported a small dip in revenues as well. Even Apple has seen a precipitous decline of its stock value by at least 1/3rd since last September.

In contrast, Google is reporting 31% income growth. Other online companies are reporting growth as well. Why?

This blog was written in Blogger, an online service. The operating system I use on this computer is Ubuntu, a free software alternative to Windows. Sure, the computer came with a Windows license, but I wanted a choice. I'm writing this blog article in Chrome, a free browser that runs on all consumer operating systems. All of it is free, much of it is free as in freedom. The online companies are running their businesses on free software, too. Linux, Apache, Javascript, Python. They are also using free protocols, TCP/IP, HTTP, and many other open standards.

That is what the old guard is missing. The old guard, loaded up to the eyeballs with name recognition, experience and know-how, are not moving fast enough to keep up with the disrupters. The disrupters are companies like Google, eBay, Facebook, and Twitter. They don't make their money selling software in a box with a license that hardly anyone ever reads.

The disrupters make their money by selling something people now want. Software that consumers never have to update. Software that is free. Service that is second to none.

I note also, that there is one other thing that the old guard has to fend off the disrupters: patents. Tens of thousands of patents. God only knows how many patents they actually own as the USPTO has been operating at or near a 90% patent application approval rate for a few years now. The old guard has been applying for patents on any idea that happens to pass the lips of someone in a product planning meeting.

The patent fight hasn't met much success. Oracle sued Google over Android for patent infringement and came away empty handed. Apple has two lawsuits against Samsung in progress and is still waiting for "their" money after years of litigation.

The anomaly among the old guard is Microsoft. Microsoft doesn't like litigation. They've worked hard to settle most lawsuits, usually under a non-disclosure agreement to protect the identity of their patents. Who knows what would happen if all 265 of the patents claimed by Microsoft to be infringed by Linux were known? Why, Linux and free software developers might write around them!

Microsoft has found a way to create a revenue stream from Android that is estimated to be around $100 million a year. Why did they do this? Microsoft almost completely missed the smartphone market with their own operating system. The efforts from Redmond have netted agreements from nearly every Android device maker except, Motorola Mobility, now owned by Google. Microsoft has shown zero willingness to sue Google directly. I wonder why.

The old guard may think they can win the game with patents, but the technology industry is catching on to the game. The USPTO is taking a beating in the press for its willingness to issue so many patents for ideas rather than inventions. They are starting to work with technology industries to address their concerns and that could help to clean up the mess they created.

The first mover advantage goes to the people who execute their ideas and do it well. Shareholders have noticed and stock values agree. Anyone hoping for their patents to rescue them and their old guard business model is resting on a false hope.