Saturday, February 4, 2012

Are you selling technology or services? pt.2

Back in 2011 when Amazon launched the Kindle Fire I wrote a piece called "Are you selling technology or services?" which put forward the idea that Amazon had finally realised what makes Apple so successful. Apple doesn't sell just technology (iPods, Macs, iPads) but increasingly it provides services to consumers via iTunes, the App Store and iBook Store. People buy an iPad to use apps, iTunes, and read iBooks.
    Jeff Bezos of Amazon realised this some time ago and virtually gives Kindles away so people can buy Kindle books from Amazon. The Kindle Fire ramps this up by providing access to video and movies as well. Sure, the Fire is a crappy piece of hardware compared to an iPad, but consumers don't care! The Fire is cheap and they can read Kindle books and get other media as well on their Fire.
   To prove the point that consumers aren't really interested in the hardware anymore Sony have just announced they expect to loose $2.85 billion for the current year. Sure there are mitigating factors; a strong Yen, floods in Thailand disrupting supply, competition from Apple, but think about it. Sony makes gorgeous gear; their laptops are cutting edge both in terms of spec and design, their TV's are cool, they make great cameras, and they invented portable music devices, the Playstation is a good gaming console. But what don't they have? Great services.
   Without services all tech companies will struggle in the future and the problem with services is that consumers are very picky about locking in. iTunes doesn't force you to use iPods and Macs, it's just easier. Amazon doesn't force you to use a Kindle to read Kindle books, you can read them via the Kindle app on an iPad, but the Kindle is easier. Therefore tech companies can't just say, we'll start a music store and rent movies and people will buy our stuff. Nokia's Music Store for example has never had the take up that iTunes has because people are rightly worried what will happen to their music when they change handsets.
    It will be interesting to see how LG, Samsung and the other big players react over the next few years. Delivering seamless easy to use services is much harder than making gadgets.