Blogging was where we began, and how we built our company so we have preserved this archive to show how our thinking developed over a decade of developing the use of social technology inside organisations

End of empire or new phase of domination for Microsoft?

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The Redmond giant is waking up to a new world of social computing on the internet, but it may not have the weapons or the will to win this time around. The battle for supremacy in the online services space between Microsoft, Google and Yahoo makes for a fascinating spectacle, and we can expect to see them continue sweeping up smaller companies and services in pursuit of long-term dominance, fuelling the tech boom as they spend their investors’ cash with scant regard for short-run returns
But for Microsoft, the stakes are higher than their competitors: they might have to destroy their own legacy and revenue base to win. The FT is already pondering the future for Microsoft, and wondering where the announced $2.4bn extra spend will be directed and to what end. Despite enjoying revenues over 6 times the size of Google and Yahoo, Microsoft’s advertising sales growth is well down, and the fear that the core desktop business is being eroded by a multitude of leaner competitors in various areas is behind a $32bn fall in the value of the company last week. The old platform strategy is looking positively out-dated, and the slow, reluctant shift to the Internet as platform or ecosystem may be too late
In October 2005, a decade on from his famous ‘watch out here comes the Internet’ memo, Bill Gates described the new wave of web services he hopes will define Microsoft’s focus in the next five years. Ross Mayfield had an interesting perspective on this, articulating the rather unsympathetic views of many non-Microsoft users and pointing out the scale of the problem facing the company

The difference this time is it requires breaking something, not venturing out into whitespace. Steve Gillmor may be right that they are discounting the defensibility of the Office empire. But if they shift the value to serviced software, they also directly undercut their VARs, the distribution muscle that profits from overcoming the complexity of bad software.

The blogosphere’s man on the inside, Robert Scoble, responded as helpfully as ever by listing the 12 main reasons people reject Microsoft, and claiming they would find a way to respond. But it is hard to avoid the conclusion of the wonderful mini-microsoft blog: the company is just way too big to compete in this new world
Stowe Boyd likens this period to the end of the Roman Empire, which is an interesting comparison. But the situation has something in common with other end of empire scenarios as well. It is tempting to see Ray Ozzie and his team as the Young Turks who are trying to lay the foundations for a much smaller, more modern organisation, just as the Turkish state emerged from the chaos and bloated disorganisation of the the late Ottoman empire. Like Ray, they wanted to build connectors (in their case roads, in Ray’s case open APIs) with the rest of the world, and they came to power during a war the empire could not win. The New York Times is already describing Microsoft’s plans for next year in terms of an arms race with Google, which means a battle fought with large amounts of cash and a MacDonalds-style server farm building programme. It’s also a good time to be a server farmer ;-
MSN and Windows Live are the escape pod and Ray Ozzie is in charge of building it, but it will take time to turn around the neglected online services division, as the FT makes clear

“They’ve let MSN stagnate,” says Matt Rosoff [an analyst with Directions on Microsoft]. “Some of the MSN services hadn’t been updated for years, and Hotmail hadn’t been updated since it was launched.”

“To win traffic, he adds, “they have to a large extent been relying on links in other Microsoft products”

This has to be one of the most challenging but interesting jobs in computing right now, and the backstory, as reported by Fortune magazine, is quite riveting
There is a hell of a lot to do. Internet Explorer, described by John Dvorak as a dead albatross that the company has lugged around since the 1990′s, will finally be revived; and, for as long as users remain ignorant of the alternatives to Microsoft’s OS and desktop, we can expect IE to remain the most used browser on the net. Presumably, the new form of lock-in Microsoft wants to create is between IE and its online services. But a product whose only selling point is ignorance of the alternatives surely cannot last forever, and the IE-only Live Shopping launch is hardly an auspicious start. The problem is not just technical, it is also cultural, as illustrated by their recent ad campaign about people-ready business. Meanwhile, it looks like the new Vista OS is probably a year or more away for consumers, despite having been progressively reduced in scope to a point where it is behind even the current release of Apple’s superior OS X system
To his credit, Bill Gates is not afraid to bet the company, as he has done before. This means going with Ray Ozzie and leaving Steve Ballmer and others to manage a shrinking legacy business. People are asking whether they can turn the ship around in time; but whether or not they succeed, the waves will ripple outwards for some time to come. These waves will probably sink a number of the tugs that have attached themselves to Microsoft over the years (VARs, training, certified consultants, etc), but also raise many smaller boats slightly further out, creating new opportunities to combine the value and benefits of social computing with the sheer scale of Microsoft’s existing user base. Companies often do their best work with their backs against the wall – Apple nearly died before it developed OS X – and fear of imminent obsolescence is a great driver of innovation
For those involved in pushing forward social computing, it might just be a good idea to retain a slightly open mind and think about what we can all do to help transform the truly appalling experience of being a Microsoft “user”, especially inside large organisations where the inertia is greatest, by opening up software and systems to the new world of interconnected services. The ship may still go down, but the passengers still deserve to be saved, regardless of why they bought their ticket.

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