June 18, 2009, 11:34 AM — It's been fascinating to watch the three-way chess match between Linux operating system vendors, Microsoft, and netbook hardware vendors. Business schools may study this product creation and development for both the great moves (low cost mini-laptops that provide just enough horsepower for a large group of mobile users) and the power of entrenched vendors to control emerging markets.
Let's agree that “netbooks” are small form factor laptops that cost $500 or less and have screens about 10 inches wide (diagonally) or less. We could mandate more technical details, such as CPU, battery, and storage levels, but most people are seduced by the small size and small price, not the Atom central processor. Some of these units with small screens are down into the $200 range, which is remarkable, but those are the ones with 8.9 inch screens.
The original unit, the ASUS Eee, arrived with a small, solid state hard drive of 8GBs and the 8.9 inch screen. These ran a customized version of Linux. Since Asus had been just a parts provider, not complete computer builder, they didn't have a contract with Microsoft. Plus, with the meager horsepower of the original system, using Linux provided better performance and kept users from loading up the tiny machines with huge, processor-intensive programs like PhotoShop.
At the time, XP was officially being put out to pasture by Microsoft, so the Linux option looked like it may actually sell new Linux systems to people who'd never heard of the OS but wanted the small size and price. Here's where the entrenched can clobber the emerging: Microsoft allowed their PC partners like HP, Acer, and Lenovo to use Windows XP rather than Vista. This meant the most popular Windows operating system became the OS of choice on the hottest new hardware form factor. The news today? Microsoft has extended XP support and availability until 2011, so netbook vendors can rest easy and not have to move to Windows 7.
ASUS first controlled the chess board with their innovative hardware using a customized Linux operating system. Traditional PC vendors jumped in with their huge manufacturing and distribution advantage. Many even offered a Linux version initially, but customers, unfamiliar with Linux, wanted their familiar Windows OS. Microsoft then jumped in with XP, an OS that cost less in dollars and in hardware resources than Vista.
Results? ASUS Eee PC now comes with XP options on almost every model, but the sales momentum is swinging to larger, more established PC vendors. So far, entrenched hardware and software makers are winning this chess match. It may be over, or the emerging players in our three-sided chess match may have some strong moves left. Let's hope so, because this has been fun to watch, and provided a new product segment that's been the only hardware bright spot for consumers and vendors alike the past year.