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Breaking Android: How Google's lack of control affects their value chain

A few years ago I read a book called “Breaking Windows” which was the story of the DOJ investigation into Microsoft’s abuse of monopoly. The book was written by a journalist who tried to summarize some of the findings from the published internal emails.

One of the takeaways was the logic of Microsoft’s entry into the Office market. The main internal justification was not that it would be a hugely lucrative new business, but that it was a necessity to the maintenance of the Windows business.

The story was that Lotus, having a huge installed base, could (and did) arbitrarily refuse to upgrade their software to the latest Windows version and in so doing, could kill the franchise. Lotus owned the “killer app” and could hold Windows hostage. Users would rather keep their applications than upgrade a largely invisible OS.

Another way to read this was that Microsoft needed to “vertically integrate” Windows so that it encompassed not only the OS but also the key applications that ran on the platform. A purely horizontal OS platform was obviously not viable as a business even back in the early 90s.

What reminded me of this story was the news that Dell is launching a new smartphone in the US.  Called Aero, it will run Android 1.5, an ancient version released in April of 2009, 18 months ago.

Now think about the idea of Adobe coming to market next week with a new version of Photoshop that ran only on Windows XP. Or even more poignantly, if Office were not part of Microsoft, seeing a *new* version of Word that only worked with Vista.

Through an aggressive acquisition plan twenty years ago, Microsoft avoided this scenario. Google today is faced with the prospect that not only the devices (which sit on its OS) but also services and apps on top would choose to remain on old versions of Android. There is nothing to stop them from doing just that. Unlike Microsoft, Google does not enforce licensing terms for Android. It is at the mercy of the value chain.

Couldn’t Google crack down and deprecate Cupcake? It’s not as easy as that. Not only do they not have license terms that permit that but in the phone business, development lead times are so long and global distribution can be so elastic that a low volume vendor like Dell has no choice but to sell multiple OS versions of their own products. Microsoft has almost the same problem with Windows Mobile, with a variety of given-up-for-dead Windows Mobile 6.5 powered devices still in the pipeline while Windows Phone 7 is imminent.