All the buzz about Windows 8 has put an exclamation point on something many in the technology industry already knew: Mobile devices are changing business models. Early reviews of Windows 8 say that the OS is clearly meant for mobile devices, and that PC users are going to have a hard time moving away from the desktop.
The New York Times published an article today on how many industry behemoths seem to be playing catchup in the mobile business. Intel was late to the party and is now building mobile chips. PC sales are lagging, so Microsoft is betting on Windows 8 to ease its transition away from pure computing. Google, no longer content being a search engine provider, has developed the Android OS and is looking at new uses for hardware. These and other companies are entering businesses that are nontraditional for them, and the implications for the supply chain are significant.
Companies seem to be moving away from the idea of core competency. A decade ago, businesses were narrowing their areas of expertise to focus on what they do best. Companies that built stuff focused on manufacturing. Those that invented stuff focused on R&D and IP. Those that made chips focused on embedding more functions on to a chip and left the manufacturing to fabs. Software companies developed software, and hardware companies developed hardware. Outsourcing was a key part of this strategy, and manufacturing was left to the experts.
Now we have Amazon, Google, and Microsoft entering the hardware business and finding new markets for that hardware. If you read the business case each company lays out, these strategies appear to make sense. Regardless of whether they succeed or fail, the electronics supply chain will play a big role in their fate.
In addition to manufacturing chips, Amazon will have to forecast demand for them, move them around the world, and possibly sell them to its competitors. Amazon, Microsoft, and Google will be under continuing pressure to release products that are better, faster, and less expensive. They will have to select and qualify suppliers. They will have to vet manufacturing partners to avoid accusations of labor and environmental abuse. They will have to increase efficiencies in the physical movement of their goods, and they will have to explore options we haven't even considered yet.
If the last few years have taught us anything, it's that nothing is too far-fetched. Companies that were once synonymous with their products (Nokia with mobile phones, RIM with BlackBerry, HP with computers) are stumbling badly. A search engine provider developed a wildly successful mobile operating platform. Apple got a black eye for, of all things, worker abuse. And vertical integration is trendy again.
Companies such as Amazon, Google, and Microsoft are new to the hardware game. If anything, the supply chain will become more important to them as their business models evolve. For these OEMs, it's no longer business as usual. And that's a huge opportunity for the supply chain.
Of all these organizations, big blue IBM is missing. It will be very interesting if IBM jumps in to this market. They are great and they can redefine or reinvent novel market. This may be true for GE and others.
Yes it would be interesting to see how these companies especially Google will perorm in hardware market. They seem to have taken some real bold moves. Hardware is a completely different business and its not that easy like search engines or pure software. The supply chain is an important factor in developement or failure of the hardware businesses.
IBM is doing great in different departments, including cloud computing, and contributing to make cities smarter targetting different angles. Why missing?
I am a bit worry about it because the big players became more and more bigger but if the result will be "They will have to vet manufacturing partners to avoid accusations of labor and environmental abuse." then let it be ;)
IBM wasn't included in this overview, as many companies weren't, because it doesn't fit the model. IBM was vertically integraed and then outsourced. It was in computers, and still is in computer-related business. As much as it has developed and provided services, it still manufactures hardware. I would argue it is still solidly within its core competency, minus the chip making and PC manufacturing.
Rich--fantastic video post--thanks for the comment and the well-thought-out reply. I agree, business as usual left the building around the same time Elvis did. I did not mean to imply that these companies are entirely breaking new ground in the industry but they are breaking new ground as far as their particular business models go. (Software to hardware vs. build the hardware and then figure out what to do with it.)
I also agree that there is a feel of desperation to this -- I believe of all of these companies Facebook has the least chance of suceeding in the long run. I'll leave that discussion to another day.
I do have to say, however, that entering the chip business, if that's what Amazon intends to do, is a BIG stretch for a company that has never manufactured anything and in fact relies on OPI (other peoples' inventory) to exist. Sure, it's building warehouses now (remember clicks not bricks???) but I think it is woefully unprepared to manage a chip business. In this particular case, I think the supply chain should be all over this move. TI, BTW, has always been a leader, not a follower in regard to its channel strategy. In that way, Amazon may not have to retool everything. I am very curious, however, how they intend to accomplish this.
Along with the talk that the software companies are trying to enter the hardware business and vice versa, there is also the talk about vertical integration where every company now wants to have the manufacturing capability of its own for everything required to make a product - from chips to hardware and the software.
In This scenario I doubt whether the supply chain business will grow or shrink.
I think Barbara didn't mean to say the opposite, as she explained in a comment below. I also think IBM always comes up with great things, and is one of the companies that has remained out of trouble.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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