Is Manufacturer Dominance Normal in Technology?

In the technology world, it is interesting to see how dominant a particular vendor or technology implementation can become, compared to other industries in the world. There are times, like for utilities, where a single company will dominate for a time. An example from the past was AT&T in telephones, and on a smaller scale, local water and power companies. In those cases, I believe that comes from the significant infrastructure costs, and the challenges of trying to provide duplicate service (do you really want to have lay 2 or 3 different water pipe services to the homes?).

However, in technology, it seems to be a familiar tale of dominance in many market segments. Examples include Microsoft Windows, Intel’s CPUs and Apple iPods. In these cases, it isn’t that they merely have a bit of majority. They absolutely tower over the alternatives, holding 80+% of their markets. A past example was the mainframe, which held on to its lead role in computing for over 30 years, provided almost exclusively by IBM, and only minimal competition from Amdahl. Minicomputers held some sway, but compared to the installation base of the mainframe, it was pretty small.

Now it seems that people expect a technology vendor to completely dominate a segment. Comments on new product announcements and reviews echo this over and over: new product X will unseat product Y, and completely take over the market; system A will eliminate system B, and own the market completely.

However, if you look outside of computing and portable music, the landscape is generally more balanced. No one TV manufacturer holds 80+% of their market. In cell phones, there is a broad selection of products that you can choose from. Even in smart phones, while the Blackberry holds a significant segment, they by no means represent nearly all of the market. The iPhone, Windows Mobile, and Symbian hold respectable pieces of the market. It is expected that Android will likely hold a place near the top of the heap, and the Palm Pre may give everyone a bit of a run. At this time, it doesn’t appear that a single vendor or single system will come to dominate the market to the point where there is no effective competition.

Look even further afield. No one manufacturer dominates in appliances like stove and microwave ovens. There isn’t overarching dominance by one car manufacturer. No single airline completely owns the entire market. No hotel, restaurant or even retail store completely obliterates the competition to the point where there is no way to compete. Even Walmart, for all of their success, still faces competition from Target, K-mart, Sears and others. Walmart is big, and they carry a lot of clout in how things are done with distribution, and have significant influence on what products are sold and what aren’t, but they don’t completely control it.

Why we ended up this way with computers today makes some sense. Take Windows as an example. Windows, in some ways, became the psychological equivalent of 110v power and NTSC TV signals in the minds of businesses and consumers: it is what everyone else is using. Much like the mainframe during its heyday, picking Windows was (and is) easy, because nearly everything that businesses wanted and needed to do their job was available for it. And since Windows basically only ran on Intel (sorry MIPS fans), Intel rode the wave to dominance along with it. Windows has a large catalog of 3rd party applications, and runs on a variety of hardware configurations from various manufacturers. Most people in business already know how to use it, so hiring someone doesn’t require training them on your computer system: its the same one they used elsewhere, that they likely used in school and probably use at home. You may still have to train them on the 3rd party applications your business uses, but you don’t have to teach them how to navigate the system, find files, etc.

But is this type of dominance normal? Why is it, outside of technology and what we view as basic infrastructure today, you do not see a single vendor dominate a market so completely? I think the key is in the last sentence: view as basic infrastructure. In the minds of a consumer, some elements of technology are “basic infrastructure”. In personal computing, people view Windows and the Intel CPU as something to take for granted like the power from a power outlet. For the consumer, the differentiation and competition is with the hardware that you choose to run Windows on, and the software you can use with it. People want to choose between netbooks, notebooks, and desktops. They want to be able to select between HP, Dell or Sony. But the underlying assumption is that the operating system will be Windows, and the rest of the software they need to run will just work with it.

The iPod is another example of a case where, I believe, the consumer views the iPod and its iTunes environment as “basic infrastructure” and the competition, such as it is, is around what music, movies, TV shows or (in the case of the iPod Touch or iPhone) what applications are available. But the iPod is something that’s assumed, like assuming the steering wheel on a car will be there, and work a certain way.

That these technologies are viewed as basic infrastructure, and not a point of competition, makes it hard to unseat them. However, very few technologies come to dominate for extended durations. There are exceptions: that we continue to use 110v 60Hz AC power in North America is assumed, and will continue to be assumed for some time. But mainframes, which dominated the computing landscape for several decades, gave way to other computing technology. Cars dominate personal transportation in North America today, but that wasn’t always the case. The horses and good ‘ol feet were the way to get around at one point, and very few people had their own horse. Long distance travel was once dominated by the train over land, and passenger liners between continents. They were largely supplanted by air travel, even sometimes when a train or a boat might make more sense. If you were to ask someone in 1950 how would get they get from New York to Los Angeles, they would have said “take the train”. Ask someone today that same question, and the answer is “fly”. in 1950, the assumed “infrastructure” was the train. Today that “infrastructure” is air travel. Who knows, years from now it could be the train again.

In computing, some day Windows and its successors will be less dominant, replaced by other technology that changes the way people view computing. The iPod will, some day, have less dominance in the market as some other portable entertainment technology takes hold, one compelling enough for consumers to abandon some or all of their library of media and applications. VHS was replaced by the DVD. Vinyl and the cassette were replaced by the CD. It isn’t a question of “if”, it is simply a question of “when”.

So, my belief is that the technological dominance we often see today is normal. It only happens, though, when the technology in question becomes “infrastructure” in the minds of the consumer. When it is simply an element of competitive advantage, dominance is unlikely. But when people just assume a technology’s presence, that’s when it tends to dominate.