Google’s Attempt at OS Disruption: Doing It Wrong?

Yesterday, Google finally showed off some of the details of its new Chrome operating system. The new OS should be available by Q4 2010. Google most likely didn’t show everything that will be in the final product, but it’s safe to assume that the basic concepts will stay the same.
Some things turned out as previously expected: Google’s OS fully revolves around its Chrome browser, is extremely web-centric and will be based on Linux and other open source packages. But there were also some surprises: Chrome OS will only be available on special hardware that is compliant with Google’s specifications. It will not support traditional hard disks and not run any locally installed applications outside of the browser. Chrome OS devices will not do everything that a PC does, but they will be cheap and easy to use.

This sounds like a fairly typical disruptive strategy (see Clayton Christensen’s books). A new entrant (Google) tries to disrupt the incumbents’ (Microsoft, Apple) business by offering a significantly cheaper and simpler product that will only appeal to the very low end of the market. Over time, as the new product category gets better, the incumbents’ products retreat more and more into the very high-end of the market, increasingly losing relevance.

The big question is of course if Google’s approach has a serious chance to disrupt the OS market. There’s more than enough reason for skepticism.

First of all, the OS is not a major cost point anymore at the low end of the PC spectrum. According to some sources, A Windows license only adds $15 to $20 to the price of a netbook. It’s unlikely that people will go with a very limited OS just to save a few bucks on a $300-$400 purchase. Disruptive price points have to make a 5x-10x difference to really move a market. Witness the fate of Linux-based netbooks. After a few months, the whole netbook market moved to Windows XP, because most buyers were willing to pay the difference for a more familiar OS.

Secondly, Google’s vision of a purely cloud-based computer (everything in Chrome OS is stored in the cloud, the local storage just serves as a cache) could turn out to be too cutting-edge for the low end of the market. In order for this to work, you need a pretty fast broadband connection and you have to understand and trust the concept of storing your digital stuff on somebody else’s servers. I’m not sure that most consumers are really comfortable with that just yet.

Finally, there’s little reason to believe that the incumbents couldn’t offer a stripped-down version of their OSes for low-end machines in order to defend their market. Microsoft has already been toying with the idea of a limited Windows 7 version for netbooks, but did not release it after complaints from its OEM partners. Apple is rumored to work on a tablet device that probably would run a stripped-down version of Mac OS X and could compete with web-centric netbooks.

It seems fair to say that Chrome OS will likely not succeed as a traditional, straightforward disruptive product in the PC OS space. But Google probably hopes for a much bigger, much more fundamental shift. Most people today have a primary computer that they spend most of their computing time on. The massive shift from desktops to laptops in the consumer market over the last few years shows that people want to take their primary machine everywhere, and that makes a lot of sense in the traditional model of personal computing. However, the increasing availability of cheap web-capable devices (like netbooks, smartphones, tablets, even game consoles) could potentially break this 1:1 relationship between user and PC. The more people get used to accessing the Internet from a variety of devices, the more they will want to seamlessly access their data from any of these channels. The consequence is that people will move more of their data into the cloud, and local storage and applications will lose much of their importance.

Chrome OS is probably a bet that prices for web-enabled devices will drop far beyond today’s $300-$400 netbook price point and that people will have not one, but several of these devices that they can use interchangeably for most (though not all) of their computing needs. Google is not trying to win Microsoft’s game. There will be no new PC OS war. Google is trying to start an entirely new game, where it could easily turn out to be the dominant player from the outset. Or to put it another way: Google is probably not interested in a short-term disruption of Microsoft’s dominance, but in winning the next game — which it hopes to be a fundamental shift in how people use computers.

The only problem is that nobody knows yet if and when this game will take place. Dominant designs in technology, like today’s PC, can be pretty hard to displace. Remember the Segway? Looked like a great idea, a fundamentally new way to provide transportation, much more efficient than the tired old car. But it didn’t go anywhere because people tend to be happy with a “good enough” solution that they already know, even if it’s more expensive and complicated. And that’s why Chrome OS could turn out to be the Segway of computing in the end. Maybe today’s PCs are just not flawed enough to open an opportunity for an entirely new approach. Time will tell, but Google is certainly not fighting an easy battle here.