From the beginning of computing, hardware costs have dominated and shaped the nature of the business. The following $100 WalMart price check for a 1 Terabyte drive says that is no more. And of course Moore and Kurzweil have been telling us this for at least a decade. So maybe Microsoft is right – software is the driver of computing and so perhaps a good operating system is worth 20-50% of the price of a computer [see here how “good” the new Windows 7 really is]. So who has the right business model:
Apple : great styling, design, and constant innovation to gain monopoly/dominant share in key consumer technology markets;
Google: build a better Web computing mousetrap; but make money on the smart and monopoly advertising services;
Microsoft: build and maintain a monopoly in key software categories that everybody wants set to a defacto standard.
Note the essential ingredient in all these models – a monopoly. Joseph Schumpeter would argue that each of these models is sowing the seeds of its own destruction. Is this the inherent nature of Disruptive Economics? And does labor in the middle get constantly squeezed?