Apple Reference & Presen…rary 8 (Internal Edition)/Apple R&P Lib Internal v8.0.iso/3-Presentations/Apple Computer Inc./Industry Competition/ROMs/Software/Win vs. OS⁄2 11⁄89

Text File | 1990-06-24 | 10KB | 217 lines

Apple Confidential


WINDOWS VS. OS/2:  THE WINNER IS OS/2


From:  Michael Mace, Michael Bobrowicz; Competitive Analysis/Mkt. Intelligence
Contact:  Michael Mace, MACE1

_______
SUMMARY

At the start of Comdex, Microsoft and IBM released a statement clarifying the
relationship between OS/2 and Windows, and giving more details on the future of
OS/2.  The statement strengthens the position of OS/2, assigning Windows to
price-sensitive users and those with limited hardware.  Implicitly, OS/2 is
also now a 386-only operating system.  This is what we expected the market to
do on its own, so the positioning is not revolutionary.

The most important element of the announcement is that Microsoft and IBM have
now formally split the PC operating environments into two incompatible
segments.  Some PC customers, especially business purchasers of 286 systems,
may feel betrayed by the change in positioning.  Other customers, in the
low-end markets assigned to Windows, may feel left behind.  Apple has a big
opportunity to promote Macintosh as the only graphically-based machine with a
single OS ranging from low end to high end.


Most industry analysts are at Comdex, so this report is compiled from a mix of
press releases and newspaper reports.  Direct quotes are taken from the
IBM/Microsoft press release.  We will include more information in our upcoming
report on Comdex.


______________________________
SITUATION:  THE FUTURE OF OS/2

The announcements made by IBM and Microsoft included the following:


•OS/2 Configuration

--The "Platform of the 90s" is a PC with an Intel 386 or 486, 4 MB RAM, and a
60 MB hard disk.  (This is now implicitly the entry level for OS/2 in the long
term.)

--IBM and Microsoft will try to make OS/2 run on a 2 MB system (the current
official limit is 3 MB, but in actual use it is 4-5 MB).

--Systems with 4MB of memory will be able to take "full advantage of advanced
system features."  (In other words, the low-memory version of OS/2 will have
features removed.  Apparent clients for removal will be the High Performance
File System, LAN features, and advanced applications.)


•386 vs. 286

--A 386 version of OS/2 will be released in 1990.  Developer tools for that
version will be available by year-end 1989.  (These were both expected.)

--New high-performance programs and server software should be written directly
to the 386 version of OS/2.  (This is a change; it essentially means that
developers should dump the 286 version of OS/2.  After all, who makes
low-performance business software?)

--Future enhancements to OS/2 will include special server support, Department
of Defense security, and "full object-oriented features and symmetrical
multiprocessing."  These will work only on the 386-specific version of OS/2.
(Another nail in the coffin for 286-based OS/2.)


•The niche for Windows

--Windows is for use on systems with less than a 30 MB hard disk and less than
3 MB RAM.  Microsoft said future releases of Windows will not include advanced
OS features such as threads, 32-bit flat memory, distributed processing, or
long file names.

--IBM and Microsoft will make graphically-based applications available on OS/2
before Windows, after mid-1990.  (This implies that Microsoft will release some
new Windows applications in the first half of 1990, something we had expected.)

--Software developers who are not currently working on Windows applications
should go directly to OS/2.

--There were also reports that IBM officials said they will not bundle Windows
with any IBM machines.  (If true, this was a switch from earlier reports.  Of
course, Windows might well be bundled with DOS next year, making that a moot
point.  This item was from a single source and we have not yet confirmed it.)


•RISC

--IBM and Microsoft intend "to develop OS/2 32-bit technology that is portable,
along with its applications, to other hardware instruction sets, e.g., RISC."


•Extended Edition

--Finally, IBM and Microsoft will work to make Extended Edition functions
"available to all users."  (This implies future server software which would
provide Extended Edition services to client PCs.)  IBM LAN Server and Microsoft
LAN Manager will converge and become identical over time.


__________________________________________
SCENARIO:  FUN TODAY, COMPETITION TOMORROW


•Short Term:  Fun Times for Apple

Although the announcements did not break a lot of ground, they clarified a
number of important gray areas.  IBM and Microsoft had left some of these gray
areas alone because clarifying them would anger some customers and developers.
Now that Big Blue bit the bullet, Apple has an opportunity to capitalize on
hurt feelings in the PC-standard world.  The injured groups include:

--People who bought 286-based PCs.  When IBM and Microsoft announced OS/2 two
and a half years ago, they said it would be optimized for the 286 processor.
Now it is abundantly clear that the long-term direction of OS/2 is to the 386
chip.  Some customers who bought 286-based machines like the IBM Model 50z will
feel betrayed--and justifiably so.

--Windows developers.  Microsoft had a choice between upsetting small
third-party developers of Windows software, and upsetting IBM and the big
software developers who did not work in Windows.  Microsoft chose to jettison
the small developers.  Although we still think Windows will linger for some
time, Microsoft has essentially said that it does not have a very interesting
future.  This will discourage new developers and customers, reducing the
returns to Windows software vendors.  The theme of Microsoft abusing
third-party developers is not new, but this will reinforce it.

--Low-end customers.  People in markets like low-end business, education, and
the home will apparently be offered Windows.  It's not clear how they will feel
about buying a lame duck operating environment.  Apple could probably make this
an issue.

We'll be interested to see if Microsoft attempts to reposition Windows and
promote it in the future, or if it will just let the environment dwindle.  Our
guess is that Microsoft will try to do something to put a good light on the
situation.  But given the clear pro-OS/2 message that was sent to developers,
that will be difficult.


• Longer-Term:  OS/2 Gets its Act Together

As painful as the announcements were for IBM and Microsoft they were necessary
in order to get OS/2 on the right track for the 1990s.  The recommended
hardware platform for OS/2 will be affordable to many businesses by this time
next year, about the same time that applications will start to appear.  The
decision to embrace the 386 enthusiastically will enable Microsoft to add a
much more robust architecture to OS/2, without dealing with all the problems of
the 286.

OS/2 may become a realistic purchase for some companies in 1990, but will not
reach critical mass until later.  In the long run, however, IBM and Microsoft
have laid a fairly good-looking foundation for growth.

EE Evolution.  The changes in Extended Edition may generate new customer
questions for Apple.  Now that IBM and Microsoft have agreed to produce a
single OS for networked PCs, more customers might start to look for support of
Apple's protocols within Extended Edition.  Getting support for those
protocols, rather than matching EE feature for feature, will probably be the
most important issue for Apple.  IBM is unlikely to deliver Apple protocol
support, but Microsoft might be willing to do so.

RISC futures.  By confronting the RISC issue directly, IBM and Microsoft have
broadened OS/2's potential appeal, and have raised the possibility of a PC
migration from CISC to RISC technology.  Apple has not yet publicly tackled
this issue.  Although most customers do not care about RISC today, the
announcement might eventually create pressure for other companies to articulate
their transition plans.  IBM's handling of the transition from DOS to OS/2
gives a very good model of what not to do.


_________________________________
IMPLICATIONS:  KEY APPLE MESSAGES

The announcement has two important implications for Apple:

--Capitalize on our consistent architecture.  Macintosh does not force
customers through the sort of disruptive transitions now being faced by PC
buyers.  In particular, the evolution of Macintosh does not abandon entire
classes of customers the way the OS/2 will abandon the 286.  System 7, which
will ship at about the same time as the 386 version of OS/2, is a very
interesting counterpoint to it.  Apple's offering runs on a very large range of
machines, and is compatible with most existing software.

To businesses, the smoother transitions message is likely to be very effective.
But in other markets, the announcement could have an even bigger impact.
Customers in the apparent target market for Windows -- price-sensitive areas
like home, education, and small business -- may be reluctant to buy an
environment with a questionable long-term future.  Microsoft and IBM have
intentionally undercut Windows in these markets in order to position OS/2 in
business.  This creates big openings for Apple.


--Appeal to abused developers.  Developer discontent with Microsoft is
currently very high.  This creates evangelism opportunities for Apple.


In the long term, Microsoft and IBM are finally laying a realistic foundation
for the growth of OS/2.  However, the real transition is only beginning, and it
will be very painful for customers and developers.  Now is the best time to
emphasize the rough transitions issue; it's a "window" of vulnerability in the
PC world that will remain open for the next 18 months or so.


______________________
We welcome your comments.  Please link us with your questions and suggestions.