Wednesday, 26 February 2014

A future in a fewer hands.

I thought of writing something on this subject on many an occasion but I never really had the buck going to muster the elements to indite something. I finally have some structure to build up a post on. I've been witnessing a lot of consolidations, inorganic expansions and companies that are literally turning into the bastions for their entire industry. When the world stepped into the industrial revolution, we had natural monopolies which encompassed companies that raked in on the first mover advantage. Eventually, we saw new companies that leveraged on innovation or revolutionary thinking and the industrial realm distended to some extent. You finally had the utopian fair competition for a while but once again, things started coming full circle. Once again, you've got just a handful of companies controlling stakes in the entire industry with the others having a very diminutive, if any, stake in shaping the future. So, what would this supposedly concentrated future hold for us?

Looking at the advantages, the suzerainty of the big fishes is obvious. They will have the financial muscle and the economies of scale. They will have the kind of corporate structure that needs to sustain quality leadership and that too in a protracted manner. Also, as we've witnessed in the past, some companies will emerge as the harbingers of better value and better service. All in all, the kind of restraints and impediments that are posed by the obligations towards profound competition, can be disposed off using the natural advantages. Instead, these companies can garner all their mettle and focus on bringing a quality revolution. This kind of a scenario can prove to be a boon for industries whose future course remains wry and hazy. These companies are likely to divert their energies on delivering the goods and services as expected by the customers and at the same time prevent unnecessary expenditure on moves meant to fend off competition.

The downside, on the other hand, seems a little too deleterious. One really important reason why we witnessed so much of innovation and revelation in the past few decades is the emergence of new technologies. This can largely be ascribed to an increasing number of competitors that left no stone unturned to win customers. While commoditization became prevalent and prices were getting standardized, the early movers sought differentiation in terms of features and marvel. Customer delight stemmed out of more and more research being put into the prospects of coming with more powerful products. It eventually resulted in effective cycles of product improvements. Now with the emerging systems being bereft of that element, it remains to be seen how that phenomenon could be recreated. 

Imagine a scenario where a few companies own the prowess of rolling out our future but defer the revolution for the sole purpose of reaping in the extra benefits that come out of it. Such a setup would be marked by other smaller companies either acting as pariahs who couldn't really accomplish anything comprehensive or companies that rise initially only to see themselves being devoured by the larger fishes in the pond. The consolidation drives that will spur out of such a scenario, if left unchecked, will soon assume an insidious character. Although appropriate regulations may be in place, such moves will always be camouflaged under the veil of usual corporate M & A. The corporate behemoths who possess enough money in their bank accounts to pay the burgeoning players a good enough price, will almost always succeed in expanding their realm. Slowly and slowly, the top cos will assume a superabundant status like that of the ones that ruled the world in the 50's. The only difference though, is that these big ones would have already consumed all the competition that was yet to ensue in case of the former. 

What compelled me to write this obvious and imminent post is the slew of acquisitions we've witnessed of late. The first one was the agglomeration of Comcast and Time Warner cable , the two largest cable operators in US, in a deal that spanned a sum that is more than the worth of a lot of other competitors combined. The deal is purported to bring better quality services to the areas where Time Warner cable reigned, as Comcast's portfolios have always been attributed with top quality service. Although the Time Warner cable subscribers are likely to gain with more efficient and efficacious services, Comcast will not see any competition in hindsight at least. Whether Comcast goes complacent and tries its hand on the more ambitious projects it might have kept at abeyance or would operate in the usual way, only time will tell. 

Another notable example is Facebook's acquisition of WhatsApp. While the entire world is rummaging for logic in a whopping USD 19 Bn valuation for a free software service, Facebook has shelled out the money not for no reason. Facebook now owns all mobile platforms it needs to connect mobile users to each other via all media modes. Facebook owns Instagram that facilitates easy image editing, WhatsApp that connects people through the most convenient Im platform and of course, Facebook itself is the biggest online social platform. By seamlessly integrating all services and bringing them on a single platform with possibly a single Id, just imagine the kind of niche Facebook could create. It will literally provide the kind of communication platform we all craved for. However, at the same time, it will nearly eliminate the possibility of any other company coming even near to what Facebook would be providing. Hence as long as the Internet will stay the way it is today, Facebook will become the czar that will take all shots. The overall market on the other hand will be sans ferocious competition, something that had originally shaped the Internet over the years. 

Although I've already posted a critique on Google's supposed takeover of the AI world in this post, Google takes over Boston Dynamics, I'm still stupefied by how a sensible giant is taking over companies operating in a space whose potential no one really knows. Google although is ripe with the kind of cash flows that are larger than the caps of many companies combined, it still needs some rationale to justify the investments it made in these neophytes. While a prognosis of an AI future could be used as a pretext, Google does know a lot about what's actually going to shape the way we'll interact with technology. We'll interact with the Internet in a myriad of ways and already being Internet's single most influential partner, Google wanted to make sure the future belonged to it. 

Coming up with a conclusion for this post is tough as a lot actually remains to be seen. However, we've surely begun to see a pattern emerging out of all these corporate consolidations. The big companies are vying hard to solidify their positions in the wake of opportunities presented by the not so ambitious smaller companies that declare their sale. Slowly, the world will begin to have more companies but with a smaller number of influential ones. The control will shrivel and will be vested in the hands of those who were quick enough to capitalize on their financial might. Brace yourselves as we hand our future into fewer hands, something which we did back in 1940's during the Normandy landings and something which we are doing once again. Let's just hope the move does not turn us down this time as well.