BackThe tech giants’ race to a trillion dollars
Their primary battlegrounds are likely to be cloud computing and artificial intelligence
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On his trip to India last week, Google’s chief executive officer Sundar Pichai said, “The Internet and digital technology will be an engine of growth for the Indian economy." That is a boilerplate sentiment these days. But what about the obverse? As hardware upgrade cycles lengthen and computing paradigms undergo rapid transformation, how are the reigning tech giants pushing to keep their growth momentum going?
In April 2015, Apple hit its highest ever market capitalization of $774 billion. It would have taken a brave man to bet against the firm Steve Jobs revived being the first to the fabled trillion-dollar market cap mark. But the tech industry is a fickle beast. Apple’s market cap now is $619 billion. That still makes it the leader of the pack by a distance, but it no longer appears as invincible as it once did.
Ann Winblad, one of Silicon Valley’s reigning power brokers—a venture capitalist who has spent over three decades observing the industry from up close—has dismissed its chances of hitting a trillion dollars. She’d rather hang her hat on Google’s parent company, Alphabet, with a current market cap of $551 billion. Other analysts point to Microsoft, bouncing back from its long twilight, or Amazon, currently at $484 billion and $368 billion, respectively.
The reason for Apple’s slowing down a touch isn’t particularly surprising in hindsight. Its meteoric climb was predicated on its being a personal computing company—one that built its brand around creating new product categories, delivering best-in-class products and a polished user experience. Here’s the thing: personal computing devices, from computers to smartphones, are good enough now to obviate the need for frequent upgrades. And just as Apple lapped Microsoft by creating the smartphone and tablet categories that contributed to the traditional personal computer industry dwindling, future growth in the tech industry will likely come from two areas where it lacks a qualitative edge.
The first of these is cloud computing. The ability to rent on-demand processing power, storage and software online is, essentially, the equivalent of division of labour and labour specialization in conventional industries. It sidesteps the need for a great deal of capital expenditure. And it enables greater efficiency in resource allocation, allowing companies to upgrade capacity as and when needed, then scale down again. The potential is obvious. Amazon has an early mover advantage here notwithstanding its image as primarily an e-commerce company. It started Amazon Web Services a decade and more ago, originally intended for its own use but eventually made available to others.
It has captured about a third of the market now, leaving Google and Microsoft far behind. The latter are moving to correct this; there is a reason Satya Nadella, formerly head of Microsoft’s cloud business, was made the Redmond giant’s chief executive. Microsoft, after all, reigned supreme in the enterprise space. This is a natural evolution—renting out computing power and software to companies instead of selling software to them.
The second area is the linked spheres of artificial intelligence (AI) and the Internet of Things (IoT). The battle to control homes as entire ecosystems—smart homes—is the most high-profile aspect of this. As daily devices from microwaves to refrigerators to cars become networked, there are two prerequisites for unlocking their full potential: intuitive ways to control them via natural language recognition and algorithms to analyse the constant stream of data from them and enable predictive behaviour and increased efficiency. Apple may have started the AI wars with Siri on its smartphones and tablets, but Amazon, again, stole a march with the Alexa AI hosted on its Echo speaker and hub. Google has followed suit with Google Home, and Microsoft has recently announced Project Evo, an initiative to build similar hubs. And it’s worth keeping in mind that the scope for enterprise applications of AI and IoT is considerably larger than that for the consumer market; the learnings from the latter will be applied to the former.
There are no certainties in the tech industry, of course. There was a time when companies like IBM and Oracle led the rest. And while the control the reigning tech giants have established protects them from competitors, it also opens them up to unexpected challenges, such as from European regulators wary of monopolistic behaviour. But for now, it seems the primary battles will play out between them—and the contours of those battles will impact both the functioning of enterprises and how individuals interact with technology that not too long ago used to be static and desk-bound.
Which tech company is most likely to hit the trillion-dollar mark first? Tell us at views@livemint.com
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