Middle-aged myopia
Microsoft is still a significant force in IT. Its products are used by hundreds of millions of people every day. But it’s not the company it once was. It is in a war of attrition with free and open-source software and is on the verge of losing the battle for a new class of Web-based software to Google.
Ubuntu, a free Linux operating system and the brainchild of South African Mark Shuttleworth, is now the equal of Windows in many ways. It offers the eye candy that adorns Microsoft’s new operating system, Vista, and it is stable and easy to use.
On the Web, Google is developing software services that threaten to undermine Microsoft’s Office franchise and make the operating system a much less important aspect of the computing experience. Microsoft is fighting back with Web software of its own but so far it’s made little headway.
Some Microsoft watchers say it’s time for Microsoft CEO Steve Ballmer, cofounder Bill Gates’s handpicked successor, to move on, to make way for fresh blood.
This may seem like an odd time to be criticising Microsoft. After all, the company last week reported a huge jump in earnings and sales on the back of the launch in January of Windows Vista and Office 2007.
But there is a growing body of opinion, reflected in a recent report by London-based Rethink Research Associates, that Microsoft is nearing an inflexion point in its success, that “both success and share price have peaked, after which the company… may be doomed to mediocrity, and a downward spiral, reminiscent of IBM [in] the 1980s”.
Strong words! Microsoft, Rethink Research says, is competing on too many fronts and is no longer the visionary company it once was. “The visionaries have been supplanted by marketing men.”
Hang on a minute, though. By most measures, Microsoft is still doing very well. Windows still dominates the desktop; Office is the standard productivity suite in business; sales of the Xbox 360 gaming console are strong; it has launched a rival to Apple’s iPod; it is making inroads in the business software market; and it has one of the world’s most-visited Web portals in MSN. Yet all these businesses are under real threat.
The only areas where it dominates are Windows and Office (as ever) and they are under sustained assault from Linux and OpenOffice.org, a free office suite. Office is still best-in-class but most people’s basic office productivity needs could soon shift to the Web anyway, making both Office and OpenOffice.org less relevant.
In other areas, Microsoft’s efforts are not meeting with a lot of success, with the possible exception of the Xbox. But with the Xbox, Microsoft has backed HD-DVD over Sony’s Blu-ray as the next-generation, high-definition video playback format. Blu-ray looks set to win the standards war and Microsoft may have to concede defeat within the year by selling a Blu-ray player for the Xbox.
Then there’s Microsoft’s cellphone software business, which is performing poorly. The largest cellphone handset manufacturers don’t trust it and are largely shunning it in favour of Symbian and Linux, worried that Microsoft wants to turn them into little more than low-margin hardware manufacturers.
Microsoft is unable to use its Windows monopoly to force itself into new business areas as it did when it won the browser wars. Says Rethink Research: “The one thing [Microsoft] cannot continue to do is let itself be run by marketing and continue to repeat the bundling tricks of previous technology generations.”
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