Wednesday, August 06, 2008

[How] Will Microsoft Weather a Perfect Storm?

Last week's article What Is Microsoft So Afraid Of? is meant to be provocative ... but it is also real reporting.

Thinking about the situation Microsoft is in, I believe the firm has, at a high level, quite a lot to be worried about ... a sort of perfect storm of high-level business trends, many of which transcend any individual product or feature. Big trends are harder to debug and then patch on Tuesdays.

Here are the issues:

  1. Declining importance of the desktop OS. As people spend more and more time in their browsers, the OS underneath it matters less. The trend is definitely toward more browser-based apps, even if they employ Flash or Silverlight or other acceleration technologies. Offline support is moving slowly but together with cloud (Mesh?) storage, will make the local filesystem less important.
  2. Rise of OS X as a real competitor -- between publicity, 'time to sink in,' and the decreasing premium that Apple charges for a Mac over a similarly equipped Dell/Acer/Toshiba laptop, OS X is a real and growing threat to Windows.
  3. Bill's off to save the world. For a while now, Bill has been the good cop (hey, stop laughing, I'm serious) to Steve Ballmer's bad cop. Now that Gates has retired to work on philanthropy, and Ballmer's the CEO, we're seeing more dumb-ass bad-cop stuff like the Mojave experiment, and less brilliant product strategy. Microsoft needs a good cop to pair off with Steve.
  4. Vista failure. The .Net platform was one of the smartest, most successful things Microsoft has ever done, an enormous accomplishment that brought enterprise IT shops and other developers along. Following that up with Vista isn't just bad at the retail (license selling) level, it shakes enterprise confidence in MSFT, and ticks off developers. From a developer POV, most of the cool stuff in Vista was gutted, or moved somewhere else ... or never really worked very well (WPF), after years of build-up. Now MSFT desperately needs devs to buy into "the next thing," and they're hesitant.
  5. Silverlight stuck in transition: Silverlight 2 is an awesome technology... but it has two problems: First, small penetration, unknown/unpublished penetration numbers, and no specific numeric commitment by MSFT to create penetration on PCs. Second, folks are sceptical that Silverlight on Mac really has a future. If that's in doubt, it seriously impacts the choice to use Silverlight because of #2 above. I can say that I've already had more than one client interested in doing serious work on Silverlight 2, but they insist on installed base projections (not download numbers) to make the business decision, and I don't blame them.
  6. Rise of console gaming: PC gaming was always a key part of the "latest and greatest" PC/OS/component ecosystem, plus it helped press down Mac adoption. As consoles (including Microsoft's own Xbox 360) gain, this relative benefit of the Wintel client platform goes down... and yet MSFT still has to spend a ton on R&D if they intend to keep the PC gaming client (DirectX and hardware integration) decent. So less bang for the buck there.
  7. Rise of USB. Now that practically everything runs over USB, it's easier for device makers to offer Linux, MacOS, etc. drivers (the upper layers can often be just user-space apps). So on the peripheral front there is less Windows differentiation in terms of hardware choices, and less lock-in.
  8. Reluctance to innovate with server licensing model. Most startups dream of going big, and they assume they'll do so on an open-source stack -- not because Windows Server isn't a killer product ... but because the current licensing for Server makes it a non-starter for cloud services or for architectures designed around cheap, flexible horizontal scaling. An easy fix is to add auditing to the core WMI counters and create a Windows Server SKU that costs $0 per CPU and $0 per client ... but to stay in compliance you average your ASP.net transaction count, or SQL size/complexity + operation count and then cut a license renewal check. Make it free (as in beer, with online-only support) for the first few thousand page views per month for a typical app, and it'll rapidly start taking over a big piece of the startup and cloud/on-demand computing world.

All this said, big companies tend to have nine lives (even if Yahoo! seems intent on burning through all nine of them). So I'm not about to count Microsoft out, or suggest an "over-the-hill" tipping point is at hand. Just some big decisions, both strategic and tactical, that ought to be made well and soon.

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