Software giants trying to take on the hardware giants at their own game hasn’t historically proven to be hugely successful. That’s especially been the case when it comes to the lucrative smartphone market. Over the past several years there have been sporadic forays into hardware and smartphones by the likes of Microsoft and Google, the relatively undisputed rulers of the software space. They have resulted in a series of high profile failures.
Microsoft’s ill-fated teaming up with Nokia on the Windows phones didn’t work out well for either company. Either did Google’s first, somewhat half hearted, stab at smartphone hardware through the 2012 acquisition of Motorola Mobility, the US mobile phone manufacturer. The company was purchased for $12.5 billion and resold two years later for $2.9 billion. Google Glass, the much hyped ‘wearables’ project, was another high profile hardware flop. The 2014 acquisition of Nest Labs, the ‘smart’ home thermostat system, has also proven to be bit of a damp squib, at least so far, if not an outright failure.
The feeling is that, if not the whole story, a major contributing factor is that the software giant, whose considerable fortune has been built on developing the latest technology in the world of algorithms and data, was previously not ready to go ‘all in’ on hardware. At least, that’s the recent interpretation of Rick Osterloh, a Google executive brought back for a second mandate at the company after being acquired as part of the Motorola deal first time around. Osterloh is now tasked with helping to lead Google’s latest, and it seems more focused, assault on also becoming a dominant force in hardware.
Google has already made some significant strides in that direction in the form of its Pixel smartphones, which were introduced in late 2016 and last year’s acquisition of a majority stake in Taiwanese smartphone manufacturer HTC. While the handsets have been well received, the company’s supply line management still needs some work, which has so far limited sales. However, it can be presumed the HTC deal, and the readymade manufacturing and distribution knowhow it entails, will allow Google to take that particular hurdle at the next time of asking.
Osterloh believes that the fact that hardware is now fully inside Google is what will make the difference this time around. Motorola was managed at a distance with the tech giant wary of upsetting hardware competitors whose smartphones were using Google’s Android OS. Now the strategy is a full marriage of inhouse hardware and software maximising each other’s potential. The benchmark in that regard has to be Apple, whose iPhone series have dominated the lucrative high end of the smartphone market and run on the company’s proprietary and exclusive iOS software. The software is built for the hardware and the hardware built for the software.
With Google at the forefront of the latest technology in the world of AI and machine learning, now set to become integral to the hardware we use, the company is confident it will now have the edge. Its Google Home voice assistant software and hardware are second only to Amazon’s Echo in market share of the nascent smart home market. And technophiles are generally of the opinion that the AI voice assistant in the latest Pixel 2 smartphone is quite considerably superior to Siri, Apple’s equivalent. Osterloh comments that when it comes to the AI race, Apple are “missing a huge part”.
Google have a huge amount of catching up to do with Apple if they want to be a real competitor in the premium smartphone market. In 2017, Apple sold 216 million iPhones and estimates put Google’s Pixel sales at around 4 million. However, with their undisputed AI, machine learning and big data edge, and HTC’s manufacturing and distribution know how, the software giants might soon become genuine rivals to the biggest players in hardware.