Competition is IT’s best friend

There was good news for Intel, the chip-making giant, when it reported excellent earnings this month. Then Advanced Micro Devices reported results that were much better than Wall Street had expected.

The earnings news was, in a sense, even better for computer users than for high-tech investors. Along with a series of recent announcements from competitors in the semiconductor business, we are seeing signs of a competitive market in an arena where many people have feared Intel might gain an outright monopoly.

The first favourable indicator for customers might be called “the Google effect”. This has nothing to do with searching the Web, but rather with Google’s own infrastructure. Google doesn’t run the latest and greatest servers with the latest and greatest microprocessors; it uses cheap, vanilla boxes with older processors in a vast parallel Linux array that gives the company an enormous bang for the buck. The lessons for IT — and the competition — are obvious.

Then there’s AMD’s continuing ability to hang in there despite the odds. No company has done more to push Intel to improve its products and moderate its prices. Most recently, AMD’s 64-bit technology, backward-compatible with the 32-bit era, looks like a smarter decision next to Intel’s less-compatible Itanium. In general, AMD deserves the thanks — and some of the business — of IT buyers as a result.

Transmeta and Via Technologies remain competitors at the edges, too. Their competitive impact has been substantially less than Intel’s in terms of affecting chip prices. Rather, they push Intel’s engineering team. Intel’s more efficient processor for mobile use stems, at least in part, from Transmeta’s technology initiative of several years ago.

And don’t forget that Sun Microsystems keeps improving its Sparc technology and that IBM’s PowerPC architecture has made huge strides (including the G5 chip that powers Apple’s latest and definitely fastest computers).

Intel’s own sensitivity to antitrust rules may also have played a role. Unlike its partner in the Wintel alliance, Intel has always known where the line is drawn between competitive actions and lawbreaking, and it has tended to stay on the right side.

This isn’t to say that Intel faces serious trouble because it’s confronting real competitors. Its recent financial results vindicated the company’s decision to invest heavily in new chips and processes during the worst technology recession in anyone’s memory.

Nor is it to say that Intel has always behaved in perfectly ethical ways. A long history of extremely hard-nosed tactics has created many enemies and detractors. But real markets, even flawed ones, are better than monopolies.

That lesson, sadly, continues to vex IT and other customers on the desktop software side of the industry. But even with that actual monopoly, some cracks may be appearing at the edges.

Governments, in particular, have forced Microsoft to alter its pricing policies. In Thailand, it’s selling a Windows and Office package to a government-sponsored computer initiative for an amazing $US40. The company offered a dramatically lower price to the government of Munich, Germany, when a serious Linux alternative emerged; in the end, the city went with Linux.

This doesn’t offer as much hope as it might, given Microsoft’s history and its deep pockets. I hope IT departments will start using their leverage, however tenuous it may be. Meanwhile, we can thank hardware competition for lower prices and the choices we do have.

Dan Gillmor is technology columnist at the San Jose Mercury News

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