In an update to my earlier posting on how Oracle is an example of the fusion of manufacturing and services, the Wall Street Journal is running a story on Larry Ellison's view of the software/hardware marriage (Oracle is in the Hardware Business to Stay):
But Ellison said in the interview that companies that combine their hardware with software, such as Apple and Cisco, can charge a premium because the pieces are made to work together. "If a company designs both hardware and software, it can build much better systems than if they only design the software," he said. "That's why Apple's iPhone is so much better than Microsoft phones.
I have long argued that the key to Apple's success is the business model - not just the technology or design. Beginning with the iPod, Apple has successful combined services and manufacturing. iTunes was as an important feature of the iPod success as anything else.
But, the interview with Larry Ellison (part of the SEC filings on the Oracle/Sun deal) makes one thing very clear. In his mind, a product company is different from a manufacturing company. A company can fuse products and services into a holistic offering with out actually manufacturing. As he states:
Just because we're buying Sun does not mean Oracle is becoming a manufacturer. Sun outsources almost all of its manufacturing to companies like Flextronics and Fujitsu. With one tiny exception, Sun does no manufacturing; neither will we.
That may be the case in electronics -- it certainly has been for decades as cross-national production strategies have broken up the process into discrete subcomponents. But I still think that manufacturing expertise is critical in product development and design -- and in understanding the issues of after-sales servicing.
So we need to understand both the fusion of product and service in a business model -- and the relationship between manufacturing and other parts of the value network. Those are two different concepts. And I will try from now on to keep them separate.
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