The Fear-Factor Revisited: Time for a Microsoft Death Watch?
March 30th, 2007I suppose a company’s life-cycle might resemble that of a living creature. Some die rapidly, often without achieving success. Others attain the pinnacle of success, grab the brass ring and discover the end of the rainbow. A precious few, such as Microsoft, come to dominate their industry. You can almost think of them as invulnerable, yet it seems that only oil companies maintain that status for terribly long.
Consider the 1980s, when IBM was king of the PC universe. Today the market leaders are Dell and HP, whereas IBM’s PC business was sold off to Lenovo, a company based in China. If you went back in time roughly two decades and told anyone how the PC business would look today — and don’t forget about Apple using Intel chips for the Mac — you’d get laughed at or put away in a little room with extremely soft walls.
It wasn’t so long ago that any suggestion that Microsoft was losing its mojo would garner loud laughter, and that’s quite understandable. And certainly with sales of 20 million copies of Vista, the mere suggestion that Microsoft might be in its death throes may strike you as absurd. Besides, the company is hugely profitable, stockholders are happy and 95% of the world’s personal computers still run some version of Windows.
But it’s the little things that count, and I’ve been covering a few of those things in recent months. Moreover, I’m not alone in this suggestion. More and more people are talking tough about Microsoft, and you do hear suggestions that its executives might just be a little out of touch with reality.
Take the statement from Bill Gates that Macs are suffering from as much malware as Windows. What planet is he living on, and where did he get that silly idea? Before you go look for the first Mac OS X virus to spread into the wild, let me tell you that it’s not worth the bother. You see, Microsoft’s spin-meisters would probably claim that Gates was just pointing to the various Apple updates that fix security leaks, and not speaking about genuine exploits. Maybe his comments were, well, misinterpreted.
Then you have the incessant rants of Steve Ballmer that everything the company does is spectacularly innovative and will change the computing world forever — for the better of course.
But it’s not the irrational remarks of its executives that should be cause for concern. They have the right to feel optimistic about their products and they are expected to evangelize Microsoft’s vision.
However, you begin to wonder whether or not there are a few signs of a long-term erosion in Microsoft’s dominance. Indeed, Mac market share, after years of stagnation, seems to be on the rise, particularly when it comes to note-books, which is the real growth category in the PC business. But that’s certainly not all.
Why are more Macs being sold? Well, one key reason is that more and more Windows users are disgusted with that platform’s instabilities and vulnerability to malware. Virus protection software often has to be updated on a daily basis to keep current. By the time you add software to protect your PC from spyware and various and sundry ills of the Internet, it takes its toll. Your PC may even run noticeably slower under the load of all that security software.
More and more tech writers who formerly touted Windows as the ultimate PC solution talk of their great experiences switching over to Macs. Some just do it as an experiment for a story, perhaps, or just to see why Mac users are so passionate about their computers. But more and more of these experiments are life-changing experiences. They embrace the Mac, and urge others to do so as well.
No, it’s not just a set of goofy ads that made this happen. But I suppose that the fact that millions of Windows users have adopted the iPod as their music players of choice might be a factor.
And just look at all the awesome gadgets that Apple has introduced of late, such as the Apple TV, and let’s not forget the iPhone. Even the Chairman of the FCC reportedly spent time admiring one. Imagine that!
In contrast, Microsoft begat the Zune music player, such as it was, and Windows Vista, which seems almost an afterthought after six years of hype.
Office 2007? Well, you don’t hear so much about that anymore.
Now there ought to be a little reality check: I happen to like Microsoft’s Mac products, including Word, Entourage, their wireless keyboard and mouse outfit and, more importantly, the people I know who work there. So let’s not take this long critique personally.
At the same time, of course, there is the worldwide attention that’s focused on every little thing Apple does. iTunes has a “Complete My Album” feature, which allows you to upgrade from singles to the full album within six months for the difference in price. The new feature made worldwide headlines, although you wonder if they are simply paying heed to music industry concerns that albums aren’t so popular anymore.
On the other hand, there’s that nagging feeling that, even if it takes a decade or two, Microsoft is on the long road downward, but to where, nobody really knows. Except for those time travelers of course.
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“But it’s not the irrational remarks of its executives that should be cause for concern. They have the right to feel optimistic about their products and they are expected to evangelize Microsoft’s vision.”
You’re being diplomatic there, of course. They’re rattled, and when questioned in public they show it. There was also the recent incident of Bill Gates’ having to be coaxed to say goodbye to an interviewer.
That’s not new: he played the same “I don’t like the way things are going, so I’m just going to pretend to ignore all this” game a long time ago:
http://www.devilducky.com/media/28888/
Not that Ballmer’s brashness and cockiness is a PR bonus for Microsoft either. The man’s a laughing stock. Most recently, asked about the iPhone, he’s said that Microsoft’s partners (which in Microsoft’s terms means whoever they haven’t screwed over *yet*) would have something that Quote “looked exactly the same as” Unquote the iPhone in six months. So much for “innovation”. And so much for his earlier implication that the iPhone was nothing much. (And, of course, this isn’t just about “looks” and, in truth, no-one’s likely to have anything even vaguely comparable in that time.) Look at what he said, and you knew where his fears lay.
What’s the choice? A sulker or a lout: take your pick. Both men are a liability to Microsoft’s public image. And that’s enough of a problem in itself now, anyway. Anyone who takes an interest in the tech scene and reads around a bit now knows about some of the things Redmond has done, and is aware of a few court cases, a lot of anti-competitive actions, and not a few damaged companies. They’re also aware of the games Microsoft has played with formats, and what that’s about. And even those who don’t take an interest in the tech scene, are aware of spending out more than they’d wish for software that never fulfils its promise. Enough of the BSODs and the viruses, eh? It’s never going to be 1995, when people were queuing round the block to get Windows. Windows has its fans, but there are a lot of people who are disappointed, angry, and really don’t trust or like Microsoft. A case in point was when the BBC celebrated the launch of Vista and opened its notice board for comments. The public were, shall we say, rather less enthusiastic than the BBC. I’ve rarely seen so many hostile comments about anything there. There’s a voting system there, as with digg.com, and some of the most contemptuous comments of all were garnering the highest approval.
But this *isn’t* an “image problem” or a “PR problem”. It’s down to people knowing more about the company, being more familiar with its products, and its ways, and not liking what they see. This is a heck of a turn-around in people’s attitudes just a decade or so. It’s also a huge problem for Microsoft.
Besides, the challenge of Apple on the desktop there’s a looming challenge from the Linux vendors. On Wednesday Dell confirmed that it will be shipping desktops and laptops pre-installed with Linux.
Large, publicly traded corporations rarely ‘implode’ without warning.
Microsoft has investors, and a board, that are entrusted with the responsibility to watch the company’s direction and try to keep it profitable. The board has a very real responsibility to the investors to do that, and most boards try.
I cannot imagine that things would go on much further before the board realizes that top management has lost its way. Gates is voluntarily on his way out, and as mentioned frequently, Balmer is a public joke. Soon, the board at Microsoft should step up and reorganize things at the top.
One of the first things new management tries to do is evaluate the company’s resources, strengths, and assets to determine whether it is overstretching itself or where it needs to redirect those things to take advantage of its strong points. Hopefully, it will take stock of its fading monopoly and realize that it needs to actually dump parts of itself, restructure around its core competencies and start acting like a company that is competing for its life.
If it doesn’t, it may not recover from where it’s going.
I think it’s fair to say that there’s blood in the water. The attacks on Microsoft are now coming from more than the Mac fanboys or the Linux zealots — there is a widespread malaise about Windows, and Microsoft in general. For this, Microsoft has only themselves to blame.
Microsoft is a lethargic giant, uncaring about their public perception, or worse, unable to control it. Now when your products underdeliver, your ads under-wow, and your PR simply stinks, that’s bad enough. But when you face an opponent that is the direct opposite of you, you are in trouble.
The wind is out of Microsoft’s sails. A death watch is appropriate.
Microsoft is looking more and more like a rudderless ship these days. With Bill Gates throwiing hissy fits or worse issuing off-the-cuff remarks like “best six billion I’ve ever spent” to describe the cost of developing Vista. (Stockholders should be mortified by such flippancy!) And the specter of Steve Ballmer taking complete control of the helm with a compass that seems to point in all directions. The guy has energy, no question, but a kid with ADHD has a lot of energy too, which is mostly spent bouncing off the walls.
And that’s what Microsoft has been doing the last few years. Bouncing off the walls. At a billion dollars a bounce. How many times have they had to change course with Longhorn/Vista? Let’s do Fairplay. No let’s do Zune. MCE will colonize the living room. Maybe not. Origami is the next big thing. Well, check that. MSN Search is a nice name. No Windows Live is sexier. [Everybody knows us as Datsun, but let’s change our brand name to Nissan anyway.]
Can they effing decide where they’re going and then figure out if what they have now can take them there? Because if they did, they’ll probably conclude that Windows is now too bloated, too complex, too vulnerable, and too jerry-built to move them forward.
What happened was they got so enamored with their monopoly that every decision they now make is based on one overriding consideration: Will it protect or weaken our Windows/Office monopoly? This led them to the decision to support legacy apps practically in perpetuity, which got the bloat going, and hobbled their ability to work in the cutting edge of software design, which then drove away the best, most innovative programmers who wanted to work in a company (can you say Google?) that gives them room to be creative.
So where are they now? They’re now serving the boring, technologically lagging end of their market with a corps of software engineers that had already been abandoned by the most creative, most ambitious programmers. In short they’ve become an American car manufacturer.
They need a boardroom and stockholder revolt. They need to break the OS and apps components apart so that they can separately focus on building great product rather than on protecting each other’s monopolies. But none of those will ever happen because the largest stockholder and his college buddy are the architects of this debacle.
Microsoft is in deep yogurt.
“Microsoft has investors, and a board, that are entrusted with the responsibility to watch the company’s direction and try to keep it profitable.”
OK– I’ve just elected you chairman of the board. What do you propose that they do? It’s not like they have any decent products to fall back on. Arguably their best product, the XBox, loses money.
But at least Windows is now secure–so long as you don’t use the mouse. 🙂
http://secunia.com/advisories/24659/
After all the boasting from Bill Gates about improved security …
The Slashdotters have been aghast at this one:
http://it.slashdot.org/it/07/03/30/1311247.shtml
Don’t claim to be a CEO, but I see them falling back on what I call their core competencies, mainly their Enterprise system and Microsoft Office. Just how actually competitive those are is not really something I want to debate. I am an Apple fan, and don’t really like their stuff. However, they hold such a large part of the market, and even in the Enterprise, where they are not so strong, their customers are so deeply invested in Microsoft products, it will take years for those customers to diversify their systems even if MS failed today.
Eventually, they will need to dump (sell, spin off, close, etc.) unprofitable parts of themselves, including the desktop Division, just to survive. They may have twenty five billion in the bank, but with such a large corporation, that will evaporate faster than you think when things start to tank.
Just my opinion.
“Microsoft has investors, and a board, that are entrusted with the responsibility to watch the company’s direction and try to keep it profitable.â€Â
MS has this nasty habit: they see somebody making money on something, they figure they could and should get into that market too, no matter how little they understand it. As often as not, they lay an egg. Sort a like the time Disney acquired the Anaheim Ducks — “We understand entertainment, lots of folks think pro hockey is entertaining, therefore we understand hockey.” Hoo boy, did Disney screw up on that one! I don’t know how many millions MS has frittered away over the years with these failed ventures. Sure, they have plenty of millions to fritter, but if I were an investor or a member of their board, I’d still like to see them have the corporate self-displine to stick to what they do actually know how to do.
Well, this sounds nice in principle, but Microsoft’s executives will say they “know” how to make music players. 🙂
Peace,
Gene
Windows and Office are where they make their money. I’d think there are problems associated with that, though. IIRC, Daniel Eran remarked recently that people don’t like paying for intangibles. You can hold a MacBook or an iPod; Windows and Office are “just” ones and zeros. I think he’s made the same point WRT digital content. I get the point that a lot of work goes into software–just as it does into, say, a performance by the Berliner Philharmoniker (whether it comes on plastic or not). And there’s distribution and marketing, and so on, on top in both cases. But people don’t feel the same about “files” as they do about hardware.
As FOSS options become more usuable on the desktop, aren’t people going to resent paying Microsoft for software more and more?
I don’t mind paying for an “intangible” myself. In fact, I find some of the people in the FOSS world rather tiresome: not a few basically just don’t want to pay for work someone’s done; *and* they want to get all self-righteous about it at the same time.
But how much are even the willing going to fork out and how often? Of course, Apple is not just a hardware company and OS X is not even just something that comes with your Mac. I think the gap since Tiger has been long enough, and the price Leopard will come in at will probably be low enough, that people are looking forward to it. But I doubt even Apple would be able to get people to fork out much more much more often. But that’s OK, because they make most of their money on their hardware.
As for MS, the fact is Vista boxes are not flying off the shelves; and while that’s not too bad a blow to Microsoft, since they make most of their money on deals with the OEMs, there are cracks appearing there, too:
http://www.desktoplinux.com/news/NS6557150707.html
Because the margins on hardware are higher, Apple can be very profitable indeed with only part of the hardware market. By contrast, since you can make less on software, you need to sell more of it. Doesn’t the logic of Microsoft’s business plan almost push them into a position where they have to try to grab virtually all the market, have to try to lock people in by gaming them on formats, and suchlike? Naturally, people resent that.
Microsoft has also always worked on a basis of “good enough”, too. OK, they work hard at some things. They put a lot of effort into backwards compatibility. They’ve also put an appreciable amount of effort into making things easy for users–far more than the open-source people have. But at the same time they have reckoned on selling what’s “good enough”–and what’s “secure enough”. Even with Vista, users still have the millstone of the registry … and one could go on at length, but the point’s obvious enough. Is “good enough” going to be enough when you can get a machine from Dell or HP with SuSe or whatever on it instead? If all you have to sell is software, then your product had better be a premium one. That’s not a description I’d apply to Windows.
Windows and Office may be where they make their money, but the Windows side is supported by the illegal OEM contracts locking OEMs into selling Windows exclusively. I think most people on this forum would disagree that Windows is a core competency , in the sense I used it. My post was to the point that if Microsoft wants to survive, they will need to divest themselves of those parts of the company that are losing money, and without the support of those aforementioned OEM contracts, the Windows division will NOT be making money past another three years or so. The first crack you see is the recent decision of Dell to begin selling Linux pre-installed. There will be more! The only place Microsoft can guarantee customers due to lock-in through high investment in past products is in the Enterprise, for both Office and server investments, which at that level of investment, cannot be changed very easily or swiftly.
Therefore, the Enterprise is the logical place for them to focus in a future consolidation effort. The desktop is a losing proposition for them, due to the encroachment of both Mac OS and Linux, which will both steal significant market share in the next 24 months.
“Therefore, the Enterprise is the logical place for them to focus in a future consolidation effort. The desktop is a losing proposition for them, due to the encroachment of both Mac OS and Linux, which will both steal significant market share in the next 24 months.”
I’d have thought that the home desktop, which is what you mean here, is a tougher nut for Linux vendors to crack than the business one. The lucrative high-end of the the home market is very much Apple’s turf. But the Linux vendors have a different product.
I can see business and government beginning to moving users, or some users, to Linux. There’s the odd initiative in the public sector already, although these never seem to get very far–except where money is very tight, as with Extremadura in Spain. But the point here is that you can hire knowledgeable IT staff to make it work, and you even have the advantage that you can customize to exactly what you want. Windows is so painfully general-purpose, and its parts so deliberately inextricably bound up with itself.
And look at how much Exchange licenses cost. Anyone’s got reason to find a way out of that tarpit:
http://www.roughlydrafted.com/RD/RDM.Tech.Q1.07/685B09D3-950B-4B23-8B1F-A56D448F7208.html
While I think a Linux desktop set up for a specific purpose by an IT department would be solid and low-maintenanace, I don’t see the average home user maintaining one, or even wishing to. I think they’d be right to be a little shy of that commitment, too. Everywhere you go on the web now you see how this or that person has “moved to Linux”, usually Ubuntu. But there tends to be an ideological edge to the enthusiasm and a certain deliberate refusal to see the deficiencies of the popular Linux desktops. One recent episode of desktop-Linux enthusiasm at Slashdot led one to a long article where a tech journalist had written fairly warmly of Ubuntu. However, here-and-there, throughout the article, she described a number of problems, some of which she had still not been able to resolve. Somehow, enthusiatic Slashdotters had read this article and not seen what was actually in it. Good grief, she’d even had to edit a config file by hand to get her monitor to work. Recently, Eric Raymond, after spending four hours trying to chase down dependencies, has written an open letter to Red Hat in which he scarifies them for their failings, including the fact that they have, apparently, allowed their repositories to get in a terrible state. When experts can come unstuck so badly, the average person would be well-advised to approach Linux distributions with some caution.
In fact, Eric Raymond is one of few soberer commentators in the Linux camp. He realizes quite well that if granny wants to do some C++ hacking, Linux would be good for her; but if she wants to download _Lost_ from the iTunes Store, which is more likely, she’s going to be out of luck.
http://www.catb.org/~esr/writings/world-domination/world-domination-201.html
I think Dell could resolve two fairly big problems with Linux on the dektop. They could ship it on hardware that it supports; they could supply multimedia codecs and enable DVD playback. But I’m not convinced those steps are enough to make the product viable as an alternative to Windows for most home users. And they have the further problem of making it pay. Home users will not expect to pay as much for a machine with Linux on–let alone more. However, there are still substantial costs involved for Dell. Moreover, on Windows those costs can be offset by doing deals with the likes of Symantec:
http://arstechnica.com/news.ars/post/20070111-8598.html
Trial offer software and so on–so-called crapware (aka craplets)–is a problem for Microsoft, and they’re starting to get uncomfortable and murmur about it, because it is an annoyance that spoils people’s enjoyment of their machines and lowers people’s perception of the quality of Microsoft’s product. And this is particularly true if the OEM is so insouciant as to ship something that actually causes software conflicts (some, apparently, do).
Apple, of course, since it’s not licensing its OS to third-parties, can keep end-users’ machines free of “crapware” and thereby improve their experience. But for Dell putting this stuff on is a means of keeping costs down. Unless all the crapware is ported to Linux, they’re going to be a bit stuck.
I can certainly see the likes of Dell and HP selling a few Linux desktops to home users. But I’d not like to guess at how great the take-up will be. I suspect myself that it will be the other way round for Linux: that the inroads on the desktop will happen first with business and government users.
I mentioned Linux, because there is a movement among the OEMs to begin offering various flavors of that OS as a pre-installed option. I am, as one might imagine, as I haunt this and other Mac sites, a Mac/Apple fan, and have been for years. I don’t think Linux will make much inroads by itself, either. But Apple AND Linux, once the Microsoft monopoly on the desktop is broken, will together measurably increase the market share of non-Microsoft OSes. Apple, I think will take most of that, and your reasons regarding the difficulty of Linux for the average user are right on the mark, in my opinion, too. But, as OEMs begin to support it, will put pressure on third party parts makers, such as Broadcom, for instance, to provide better Linux support, and who knows, maybe one or more OEMs will get the idea of putting out their own version of Linux, like Red Hat, and try to clean it up and make it more useable. Once the Microsoft hold on the OEMs is broken, anything’s possible.
I know that Microsoft’s Enterprise costs are horrific. I know how much my Agency spends on them annually – much too much! But that’s my point. Enterprise managers are always focused on how much they have invested in their infrastructure. They have to be. My Agency has an infrastructure that services 10,000 employees, nationwide, many of whom travel world-wide and need access to that support where ever they are, 24/7/365.
We run over 700 servers, an increasing number of which are virtual, running apps from Exchange 2003 to some legacy apps that are over 30 years old.
As many readers of this site know, the management of such an infrastructure isn’t done ad hoc, scribbled on the back of a napkin. Servicing it is expensive, and O & M costs alone are daunting. Replacing that equipment takes planning, multi-years in advance. Yes, moving to an Apple based system could save millions. But Apple doesn’t have the physical equipment that scales to that level, they don’t have service and support systems that meets the needs of such an organization, and they will NOT advise such customers of their future product plans so they can make future budgeting plans based upon that equipment.
Of course, once Microsoft begins to come apart, organizations such as mine will need to look to the future at what is coming, and who may be able to compete. But that will take time. In the meantime Microsoft will be able to count on some of these captive customers to still be there, because of the difficulties in changing infrastructure.
But you’ll notice I said Microsoft will have to COMPETE. That means those exorbitant licensing fees will have to be reduced, if not totally restructured, as well as many other elements of their business.
I read an article, I can come back and reference it day after tomorrow (I’ll be off tomorrow, and the url is on my work PC), in which an analyst pointed out that Microsoft has practically hemorrhaged cash in the last year, reducing their cash stock to just 29 million dollars.
I think the handwriting is on the wall!
If you would rather continue this via email, my email is rahrens(at)mac(dot)com.
Just a quick comment on the long quotes: I’d like to see a better way, but the tools for WordPress are a little unwieldy. Anyway, I’m hoping we’ll have a more efficient system one of these days.
Peace,
Gene
I’ve nothing more to say, really. I had thought that on the desktop Linux might be a better fit for business/government than for home users–at least right now. But then again, maybe not, as you say. It’s interesting that Dell is talking about having their Linux offering available in a matter of weeks. That’s far sooner than I’d have expected. It’ll be interesting to see how well the line sells.