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Tech titans are taking over the world

Paran Balakrishnan | Updated on March 06, 2018

Towering Above the others   -  istock.com/chris-mueller

The Big Five are spreading their tentacles into every industry and even the smartest corporations aren’t safe

It’s a figure beyond the dreams of avarice — and then some. A race is under way to be the world’s first trillion-dollar company and half a dozen globally famous companies are honing in on the target. In the lead is Apple, briefly valued at $903 billion on February 28 and which still is in ascent mode even after rising 56 per cent in 2017. Just behind is Alphabet (the Google holding company) which clocks in at $757 billion. Then there’s Amazon whose rise has been nothing short of astounding. On Monday, Amazon was at $732 billion — up from $580 billion on January 3. Step back a year earlier to January 2017 and it was $352 billion — in other words its market cap has doubled since then. Sprinting close behind is the reborn Microsoft at $722 billion

Cut away to down the scale, there’s a tight race between Facebook and Tencent, which is determined to prove anything the Americans can do, the Chinese can do better. Tencent’s market cap Monday was $525 billion, ahead of Facebook at $522 billion.

Brutal truths

These awesome valuations, though, are more than just numbers — they are a reflection of a brutal truth hovering like a black cloud over the global corporate world. The tech giants are becoming giant octopi spreading their tentacles in all directions with a stranglehold on the corporate world. Quite simply: nothing can move without their technology. Farhad Manjoo, the New York Times tech analyst, dubs the American companies the “Frightful Five”.

In retail, the dreaded phrase is ‘being Amazoned’. The world’s not enough for the bookseller turned e-retailer which is also looking at a moon landing in the not too distant future. Profits are flowing in from its Amazon Web Services (AWS) which correctly foresaw the huge data storage facilities that are an essential part of cloud computing. And Alexa, its intelligent personal assistant, has elbowed its way into homes. Amazon also moved offline last year by snapping up US supermarket chain Whole Foods for $13.4 billion. Bringing the offline and the online together, Amazon is offering its Prime customers a discount on Whole Foods products and, in some cases, home delivery in under two hours.

Rewriting rules

Turn to the auto industry where road rules are being totally rewritten. One international magazine wrote that automobiles are being turned into “computers on wheels that will drive themselves”. That’s not about to happen overnight but the top tech companies are all out there trying either to create their own vehicles or at least ensure that tomorrow’s automobiles run using their technology. Apple’s been working on its own vehicle for several years but rumours suggest it might be satisfied if other companies’ cars traverse the roads as long they use its artificial intelligence systems.

Meanwhile, Alphabet has its Waymo that’s been focused on driverless cars since 2009 and it now has vehicles on the road in Arizona. Still, in the automobile world, the Frightful Five have, of course, been upstaged by another tech star Elon Musk’s Tesla, which is already out there showing how a conventional industry can be challenged by a new tech star.

The old giants versus new tech whizkids battle is being fought out in almost every industry with varying degrees of brutality and even the smartest corporations aren’t safe. In the media industry, Google and Facebook have mopped up gigantic amounts of advertising leaving newspapers way poorer. And look at streaming video services where two free-spending rivals Netflix and Amazon Prime are putting humongous amounts of money on the table to create high-quality programming and, in the process, leaving conventional television channels watching with envy. Even a canny and super-rich company like Disney has been forced to sit up and is likely to launch its own streaming service next year. Disney’s movies already show on Netflix and the entertainment giant insists its services will be entirely different.

Some analysts believe 2018 will be the year when the older companies get tech-savvy and begin the fight-back in earnest against the all-controlling tech stars. They argue the established corporations have greater cash flow and can throw plenty of resources into the fight. Take Walmart, which has bought an e-commerce player Jet and which in India made an offer to buy Flipkart. Similarly, GM is looking to run driverless taxi services and put them on the road sometime in 2019. Ford has been slower off the mark and says it will only have its own vehicles on the road by 2021.

In a stranglehold

Look at the tech scenario from a different angle and it's obvious that the Big Five already have a stranglehold on the tech scene and the power to squelch newer rivals. Consider Snap which went public a year ago. It’s a serial innovator but every idea has been copied successfully by Facebook. Also, don’t forget that Snap has a five-year deal under which it pays $400 million a year to use Google’s services. At another level, Facebook has consolidated its position in social media by snapping up Instagram and Whatsapp, both leaders in their field.

Interestingly, though they have a controlling hold on the tech economy, the world’s top corporate stars haven’t lost the paranoia that keeps them moving at warp speed. They’re still looking over their shoulder for the smart garage startup that might end their reign. Meanwhile, , they’re all more powerful than ever before. NYTs Manjoo notes on top of the many platforms they already possess, “one or more of the Five are on their way to owning artificial intelligence, voice assistants, virtual and augmented reality, robotics, home automation, and every other cool and crazy thing that will rule tomorrow”.

Management guru Vijay Govindarajan looked at the pros and cons and whether older companies would be able to hold out against the tech starts. He pointed out that companies like Rolls Royce have crucial knowledge about material sciences and what he called “the physics of the hardware”, much of which, he pointed out, is protected by patents.

But after lining up all the arguments, Govindarajan pointed out technological breakthroughs like the ones taking place in electric vehicles would “level the playing field for newcomers”. Govindarajan decided he would put his money on the new tech stars. Writing in Harvard Business Review, he said: “If I were a betting man, I would place my bets on tech giants over industry incumbents.” That’s a chilling judgment that should frighten established corporations around the world.

Published on March 06, 2018

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