Touch technology help non-tech industries improve business, efficiency, and their bottom lines.

The SMART Table brings touch to masses and classes. Photo: SmartTech

We all oohed and aahed when Apple's (AAPL) iPhone came out because of how cool it was, especially its multi-touch capability that let us flick through photos and "pinch" and expand photos and websites.

Now, with Microsoft (MSFT) Windows 7 specially formatted for touch capabilities, and everyone from manufacturers to hotels touting their tough capabilities, we know human contact with computer screens is more than a gimmick — it’s here to stay.

Touch is already a big business — estimates indicate that sales will be more than $3.66 billion for this year and will catapult 145% to almost $10 billion in the next five years.

Only half of that revenue is coming from consumer electronics (i.e. cell phones, digital frames, etc.) — the rest is from retail, hospitality and more. What many people forget is that this 30-year-old technology has been integrated in non-tech industries for years — mainly as a way to improve efficiency, but never as a centerpiece.

So, we decided to take a look at the best of the rest and highlight the most innovative, business-savvy ways other industries are implementing touch technology — and helping improve their bottom line. More

It has near-monopoly status and nimble, disruptive competitors. We’ve seen this movie before.

By Jay R. Galbraith, president and founder, Galbraith Management Consultants

Galbraith questions Microsoft's resolve to change. Image: Galbraith Management

The more I learn about the current situation in software, the more Microsoft’s position seems to mirror General Motors’ position in the auto industry a few decades ago. Like Microsoft (MSFT) today, GM was an icon in its industry, held a quasi-monopoly, produced eye-popping profits and was often distracted by antitrust lawsuits. When a company experiences this kind of environment over a couple of decades, it eventually loses its competitiveness. Of course, Microsoft would vigorously deny any such comparison. The top executives in Redmond, Wash., claim to be on top of the trends in the industry. They are confident they can develop all the software they will need to be competitive.

My concern is not with the leadership of Microsoft; I am sure Ray Ozzie, the chief technical officer, will stay on the cutting edge of the technology. But its 15,000 to 20,000 middle managers have never been through a downturn (assuming they’ve worked only at Microsoft). And to me, you are not a real company until you have been through a downturn. Growth and high margins are very good at covering up a company’s bad habits and unresolved issues. When a downturn hits, all of the flaws come to the surface and the company purges itself of its bad practices. A  3% decline in sales in 2008 – Microsoft’s first ever – during the worst recession in decades will not wake up Microsoft. The bad habits will persist. More

Microsoft moved a lot of install disks, but hardware makers got a bigger bump two years ago

Photo: Philip Elmer-DeWitt

When Microsoft (MSFT) launches a new operating system, as it did two weeks ago, PC manufacturers like Hewlett Packard (HPQ), Dell (DELL) and Acer are supposed to reap the benefits. And everything seemed to be in place on Thursday Oct. 22 for that to happen.

"Never before has the industry launched such a variety of new form factors, price points, technology upgrades, and design innovations at one time," wrote NPD's Stephen Baker just before Windows 7's release. "This past weekend I happened by a Best Buy store and there was not one single PC for sale with Vista on it. Lots of Windows 7 machines, however, all of which were marked 'not for sale until October 22.' Someone did a great job in the supply chain making this happen. This will give Win 7 a tremendous boost out of the gate." (link)

Two weeks later, Baker is singing a different tune. Microsoft got a big boost according to NPD's weekly tracking data, racking up sales of Windows 7 that were 234% higher than Vista's during its first few days of sales. (More on that below the fold.)

But PC makers didn't make out quite as well. Although they had a relatively strong week, with unit sales up 49% year over year and 95% from the week before, it was nothing like Vista's launch in Feb. 2007. Then, sales soared 68% year over year and 170% from the week before.

In a press release issued Thursday, Baker explained what happened:

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Just three days were enough to push computer sales for the week up 40%

Click to enlarge. Source: Morgan Stanley, NPD

The sharp spike in the chart at right is the Windows 7 effect PC makers have been waiting for.

In a note to clients issued Monday afternoon, Morgan Stanley's Kathryn Huberty reports that NPD data for the week ending Oct. 24 — which included three days of Windows 7 sales — show PC sales jumping 40% year over year.

This was particularly encouraging, she writes, because sales in the early part of the week likely reflected the same pre-Windows 7 declines as the previous two weeks. PC buying for the weeks of Oct. 17 and Oct. 10 was down 29% and 2%, respectively, as consumers waited for Microsoft's (MSFT) new operating system to launch.

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IT departments are finally starting to buy Apple's smartphone, says a Deutsche Bank report

Click to enlarge. Source: Deutsche Bank

"There is growing evidence that the iPhone is making inroads into the Enterprise," writes Deutsche Bank research analyst Chris Whitmore in a report to clients Monday.

According to his estimates, Apple (AAPL) by the end of the year will have shipped about 2 million iPhones into corporate accounts through various routes, including internal IT department purchases and formal reimbursement policies.

That would give Apple about a 7% share of the enterprise smartphone market this year, up from 2% in 2008.

IT departments were famously resistant to the iPhone when it was launched two years ago. That resistance has begun to melt, writes Whitmore, for several reasons:

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Cheeky Get-a-Mac ads are not the only way Steve Jobs is going after Microsoft

Image: Google

If you ran a Google search for "download windows 7" early Monday, you got about 137 million results — plus something you probably weren't looking for. There, at or near the very top, was a sponsored link suggesting "There's never been a better time to switch to a Mac."

A four-line ad was spotted over the weekend by the Next Web's Alex Wilhelm, who suspected that Apple (AAPL) was paying exorbitant prices for the space.

In fact, this form of guerrilla marketing is surprisingly inexpensive. The cost per click for either "windows 7 download" or "download windows 7," according to Google's (GOOG) Keyword Tool, is 5 cents.

[UPDATE: The Apple-sponsored link disappeared mid-morning Monday, but it was back early Tuesday.]

See also:

• Apple's 2009 ad budget: Half a billion

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Microsoft has not halted Apple's momentum, according to Net Applications' October report

Source: Net Applications

If Microsoft (MSFT) was hoping that the launch of Windows 7 would halt the erosion of its operating system market share — and curb further inroads by Apple (AAPL)  — there is no evidence that it's working yet.

In fact, preliminary data released overnight Sunday by Net Applications show Mac OS X's Internet share growing by 2.73% in October, from 5.12% to 5.26%.

Windows' Internet presence, meanwhile, fell from 92.77% to 92.54% — its ninth loss in 12 months. Windows 7's share, however, was more than 2% even before its Oct. 22 general release, thanks to widespread use of early release versions. By Oct. 30 the Windows 7 portion was 2.85%, largely at the expense of Windows XP, according to a separate Net Applications report.

Net Applications, it must be noted, is not measuring share of market in the sense of sales revenue or unit sales. Rather it tracks the presence of various operating systems on the Internet by sampling browser data from visits to its clients websites — some 160 million hits per month. It's a methodology that tends to favor devices that make it easy to navigate the Web, which explains the relatively high "market share" of the iPhone in the firm's monthly surveys.

You can see Net Applications' October report here. The results are summarized in the chart below.

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Those Get-a-Mac spots aren't cheap, but they deliver a lot of bang for the buck

Photo: Apple Inc..

Apple (AAPL) shells out a ton of money for advertising. In fiscal 2009 it spent $501 million, according to the 10-K form filed Tuesday. That's up from $486 million in 2008 and $467 million in 2007.

But half a billion doesn't seem like so much when it's compared with the $1.4 billion Microsoft (MSFT) spent in fiscal 2009, or the $811 million Dell (DELL) spent on ads I can't remember ever seeing.

In fact, as a percentage of revenue, Apple has actually been decreasing its ad spending every year for the past eight, from nearly 5% in 2001 to 1.37%  today (1.17% if you use non-GAAP revenue). That's less than half the 3.6% of revenue Research in Motion (RIMM) spends advertising BlackBerries. (See chart below.)

Most recent fiscal year. Source: Company reports

Yet even if you despise Apple and never use their products, you tend to remember their ads. How does Apple get so much bang from its marketing buck?

I can think of five reasons: More

Both companies beat expectations last week, but only one of them was growing

Click to enlarge. Source: Company reports, Oct. 2009.

A year ago we ran a bar graph similar to the one at right. It showed that Apple (AAPL), despite the Mac's tiny market share compared with Microsoft (MSFT) Windows, was gaining on the software giant. The main reason: revenue pouring in from the iPhone but hidden as deferred earnings in Apple's balance sheet. (That chart is posted below the fold.)

Last week Apple and Microsoft once again reported quarterly earnings — and enjoyed nice pops on the stock market. But their growth rates turn out to be very different.

This quarter, deferred iPhone revenue isn't as big a deal for Apple as it was last year (non-GAAP earnings actually grew more slowly than GAAP; see here for why). Ironically, it was Microsoft that had to use deferred revenue from Windows 7 to show any growth at all. Otherwise, Microsoft's revenue for the third quarter was down 14% year over year and its earnings down 17%.

Apple's revenue, meanwhile, grew 25% and its income 46.6%.

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Microsoft's big launch, it turns out, was not entirely trouble-free

Image: Digital River

College students who took advantage of a "deal too sweet to pass up" have run into a bit of trouble.

The $29 electronic version of Windows 7 Home Edition sold for Microsoft (MSFT) through Digital River (DRIV) doesn't seem to install properly on some 32-bit Vista machines.

Apparently the download files weren't properly packaged and when some users tried to "unload the box" they got an error that read:

"We are unable to create or save new files in the folder in which this application was downloaded"

A discussion thread with that title was begun on Microsoft Answers' Windows 7 install forum less than 3 hours after the new operating system launched. By Saturday morning it had generated more than 500 replies and been read nearly 44,000 times.

Microsoft acknowledged the problem Thursday evening and by Friday was reportedly offering refunds. Meanwhile, however, Microsoft technicians are pointing users to a five-step Download Squad workaround (pasted below the fold) that might be enough to send students screaming to the nearest Apple Store.

Any bets on how long it will be before the incident turns up in an Apple (AAPL) Get a Mac ad?

[Follow Philip Elmer-DeWitt on Twitter @philiped]

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