Cloud Leaves Some Tech Giants Seeking a Silver Lining JUNE 2012 may well go down as the month that the tech world entered a new era. On June 11, Apple showed its next operating system for iPhones and iPads. It offered maps and speech recognition, plus music and movies on iTunes, all tied via the Internet to Apple's "cloud" of servers. A week later, Microsoft, known better for software, demonstrated the Surface tablet, its answer to the iPad. The Surface interacts with both the Web and Microsoft's cloud, called Windows Azure. And, last Wednesday, Google introduced its newest cloud-connected phone and tablet, as well as a media player called Nexus Q. The player works with the devices, the Internet and the Google cloud. Remarkably fast, a multibillion-dollar industry is moving away from personal computers made mostly with Microsoft Windows software and Intel semiconductor chips. The combined revenue from these largely so-called Wintel desktops and laptops last year was about $70 billion at Dell and Hewlett-Packard. But these companies played virtually no part in the June shows from Apple, Microsoft and Google. Asked what part it hoped to play in the cloud-dominated future, Dell declined to comment. An H.P. spokesman said in a statement that his company had computer servers and software in "eight of 10 of the world's most trafficked sites, four out of five of the world's largest search engines, the three most popular social media properties in the U.S." He said nothing about PCs. The tech future also poses challenges for Intel, which has been diversifying. Its chips are now in Apple computers and a host of other devices. Intel still has a significant place in the market, but often with lower-margin chips, and increased competition. Another chip company, Nvidia, got a shout from Google's stage. We are seeing a new business ecosystem with all sorts of mobile and cloud-connected devices. Each is a powerful computer, with connections to a nearly infinite amount of data storage and processing in the cloud. "We're entering this era where consumer electronics is the hardware, and the software and the cloud," said Matt Hershenson, Google's hardware director. His view increasingly holds for business computing, too. Coincidentally, Friday was the fifth anniversary of the iPhone's introduction. Next week, cloud-based software applications for the iPhone from outside developers will have their fourth anniversary. And, already, cloud devices that Google called experimental last year are now almost mainstream. People now use their iPhones and tablets in their jobs. More than five million businesses write documents and swap spreadsheets in Google's cloud-based applications. Microsoft, with arguably the most at risk in this transition, has 273 business and finance applications for sale in its cloud store, Azure Marketplace. In the new ecosystem, many rules are still being worked out. Amazon, with its Kindle tablet and a successful online computing cloud and software store, may yet be a significant player. So may Barnes & Noble, which has a decent tablet and apps in the Nook reader but lacks a big cloud data center. A few things are already clear. Power now centers on controlling millions of computers tied together in the cloud, with a complementary marketplace where people can find, sell and manage applications. Few physical stores sell software anymore, but sales channels still matter. Even the iPhone did not really take off until it had apps, sold through Apple's store. Those apps were written mostly by outside software developers. Developers have been important to the industry for decades. If you keep thousands of them happy with decent software-making tools and a big potential audience, as Microsoft learned, they will build products that make you essential. When the PC came along, these were games like Flight Simulator and productivity software like Lotus; now we have Angry Birds and modifications of Google Apps. In the Wintel world, new versions of Microsoft Windows came out every few years, with major software projects tied to desktops and laptops. By contrast, in less than five years Apple has announced six versions of its mobile operating system. Google's operating system for cloud-connected laptops, called Chrome, is updated every six weeks. The June meetings were intended to get developers working on consumer products that would be out by Christmas. "Urgency has a whole new meaning now; you can't slip," said Andy Peterson, a senior software engineer at L4 Mobile, which makes mobile applications for companies like Sony and MTV. He was one of 5,500 developers at Google's I/O conference last week. "I started at the company last September," he said, "and I'm on my fourth application." Still, he says, the pace and the ability to get a creation into so many hands is exciting. Dell and H.P. might not be joyful, but should they be glum? With so many devices, the consistent experience may be guided by centrally managed cloud software, but hardware is where the experience lives. That is why Steve Jobs was so long adamant that Apple control both hardware and software, and why even now Apple is picky about which independently produced apps are allowed in its store. Microsoft apparently showed off the Surface without much notice to longtime hardware partners but could now bring them in to build it. Google's strongest outside relationship with a hardware maker seems to be with Samsung. Google's new tablet was made by Asustek of Taiwan. Google says it is open to working with the incumbents - but these companies have to completely reimagine themselves, centering on using their esoteric knowledge of how business uses technology, rather than how to make a cheaper PC. "What H.P. and Dell can do is understand the needs of the enterprise," said Sundar Pichai, senior vice president for Chrome at Google. "They can say, "Here is our tablet, we have phones, here is how it will work across your company." We don't have a sales force that can do that. That may mean giving up on the consumer market, more or less. But it beats being a relic of the old world.