Microsoft’s New War Against Apple, Part I

| Hidden Dimensions

While many observers are, with plenty of justification, slamming the recent Microsoft "You Find It, You Keep It" TV ads, that's just a minor tactical loss for Microsoft.  In the long run, however, the ads are a possible early warning signal that Microsoft is starting to think on a more quantitative basis about what the real problems are that it faces as a corporation. For now, Microsoft is stumbling a bit with that thought process. The company is not in habit of operating and marketing at the same level of excellence as Apple. However, if a change is coming, how will it happen?

I suspect that Microsoft is sensing that it's time for a fundamental change in their foundation. Back in 2000, when Microsoft's quarterly profit equalled all of Apple's quarterly revenue, there was little need for concern. A fundamental change in Microsoft's Windows foundation wasn't necessary to either succeed in the enterprise or against Apple. So Microsoft drifted from 2000 to 2008 while Apple was building a sound foundation with Mac OS X. Apple had to do that to succeed; Microsoft had to not change to succeed.

Apple's success with the iPod and iPhone, built on that OS X foundation, has to be regarded by Microsoft as a new threat, one that cannot be ignored any longer. 30,000 iPhone apps in one year is the tipping point for Redmond's thinking. So what's the first thing a company does when it realizes that it's facing a crisis? Buy time. Look for weaknesses in the competition, skirmish, and buy more time for R&D.

The "You Find It, You Keep It" ads are the first skirmish.

That brings up two critical questions. What does Microsoft have to do in the long run to avoid having its frog boiled by Apple? And secondly, what are Apple's weaknesses and how can they be exploited?

Of course, no company is invulnerable, not even Apple.  The history of business in America has shown over and over again that companies succeed in cycles of ups and downs.  There is no better example than Apple itself.

Business Boom and Bust

Apple soared with the Apple II in the late 1970s, got into trouble with the Apple III, strained under the pressure from the launch of the original IBM PC in 1981, soared again with the initial enthusiasm for the Macintosh in 1984, strained over time when all the early adopters had their Mac and the rest of the world came to realize the Mac's lack of expandability, and really, really wilted under the pressure of Windows 95. Then, just like the U.S. economy from 1992 to 2007, Apple has enjoyed a long period of success, thanks to Steve Jobs. But eternal success is never guaranteed in business.

Few companies are in a position to give Apple headaches. One of them is, in fact, Microsoft, who is both burdened by an insecurity complex while simultaneously enjoying over 90 percent market share. Shaking out of its doldrums and recognizing the new crisis is the next challenge for Microsoft. Fortunately, it only has to slow Apple down a little to buy some time.

And so Microsoft's hand has been forced. They can maintain the status quo as the eternal whipping boy of Apple, be satisfied with a slow, steady decline as Apple boils its frog -- or they can fight back while they still have the resources.

Fighting back requires, perhaps for the first time, a hard nosed, practical and smart approach to its own weaknesses as well as Apple's weaknesses. After all, when a company is gaining PC market share at the rate of only one percent per year, more or less, it shouldn't be too hard to put a dent in that growth, especially during a recession when customers are more cost conscious. (Even if the PC business is temporarily suffering even more.)

For example, despite all the Apple community rhetoric about the illogic, silliness, technical absurdity of Lauren and her PC quest, the one thing that remains is that Microsoft is, for the first time, showing that they're at least thinking about how to slow down Apple's steady growth.

Even if the first attempts are somewhat amateurish, the real question, as Apple would also ask, is: are the ads making a difference?  Is Microsoft obtaining a return on its investment (ROI) in these ads?  Time will tell, but if they don't get the job done, Microsoft will learn from the experience and keep trying. After all, the Apple community has conveniently told Microsoft everything they did wrong in the first attempt.

Microsoft's Weaknesses

There is no doubt now that Windows is the single most important noose around Microsoft's neck. PC vendors refuse to show their hardware with Vista on the display in print ads and catalogs. The OS has reached its technical limits. Its brand is broken. The very word Vista has become a symbol of Microsoft's Big Problem. Microsoft cannot move forward until that problem is solved.

The solution is to clean up Vista (a little) and rebrand it as Windows 7 to buy time to develop a next generation OS. Microsoft is very late doing this, but the iPhone may have finally convinced Redmond that the days of the desktop metaphor are numbered. Now it's a race: can Microsoft hold on until the desktop OS is irrelevant? There are, once again, persistent rumors that Microsoft is spending R&D dollars on a next generation OS. This time, it better be for real.

What's clear, however, is that Microsoft no longer has the luxury of not acting. While its managers and engineers figure out how to implement a vision for the future, for now, exploiting Apple's own weaknesses, to buy more time, is in order.

In Part II next week, I'll look at that aspect of Microsoft's strategy.

Comments

Paul

I don’t really see this as a problem…if Microsoft improves its software, everybody wins.

Tim Harness

One interesting tactic for M$ would be to build an entirely new OS, that looked enough like windows that existing users would be comfortable, but with little or no compatibility, so malware writers would have to start from scratch. Business users would have to decide which is more costly, windows vulnerabilities or replacing custom applications.

geoduck

Personally I think the You Find it, Keep It ads are a distraction.

Last night I saw another one of the I’m a PC ads. This one had a 4 year old uploading pictures and printing them. I had to admit that these are effective ads. No hype, no unfair comparisons like the YFiKi ads. Just a person doing something with a Windows PC. I think that in the long run these are going to be more effective. Apple needs to start answering them.

Has Apple produced any new I’m a Mac ads since the first of the year?

daPrinz

?if Microsoft improves its software, everybody wins

That is not as easy as you might think.
You of the main problems is that whenever a new OS comes out form Redmond’s laboratories it has to be back-compatible until 95. In my opinion this limits the stability of the new OS a lot. Also, the fact that there are hundreds of different motherboards, graphic chips, Ram memory chips, sound cards etc doesn’t really help the system to become more stable, specially if Microsoft refuses to open the source code to the developers of the drivers.
I do professional audio recording and even with a professionally set-up Windows system we kept having problems once in a while. Losing only one instrument track and having to get the musician flown in is not an option.
With Mac we never had any major problems that couldn’t be fixed in minutes. That is the main reason why I use a Mac.
For private purposes I enjoy the Mac OS also because of the software bundle it comes with. I think Microsoft should learn from it and maybe develop some “good” goodies to add to the software - for FREE of course!

John Martellaro

I don’t think so.  Chances are slim they’ll use my idea.

http://www.macobserver.com/tmo/article/proposal_for_apple_get_a_mac_ad_to_counter_microsoft/

-JM

Lee Dronick

whenever a new OS comes out form Redmond?s laboratories it has to be back-compatible until 95.

They seem to think so and most Windows users as well but, I think that it is time for that to change. A new Windows OS that is very secure yet can read older files, but not run the programs. However, maybe it is tool late for that, maybe there are legacy programs considered by users to be irreplaceable.

As to Apple’s response to the new PC ads, they are probably working on something that will be very effective.

gezebo

It’s very simple for Microsoft to beat Apple.
1. Copy everything Apple’s done since Steve Jobs’ return.
2. Hold a press conference to tout Microsoft’s position as the innovative leader of the computing world.

fultonkbd

Microsoft will end up like IBM. Still a large player but certainly not the powerhouse it once was.

Microsoft is a software company and will be fine as long as they have software available at a cost someone is willing to pay.

Apple has set themselves up just fine. They are a hardware company that has expanded from just computer related hardware into entertainment hardware.

Sure both companies have products that overlap but if I was Microsoft I would be more worried about Linux and various Office Suites that can run on any OS and be shared across multiple platforms. If I was Sony, well Apple would be my major concern.

As a company (in general) I think Apple has a much better product foundation to move into the future with than what Microsoft has. Microsoft “won” the “desktop wars” but the price for that win is that they are committed to it and just like IBM and mainframes… the desktop continues it’s decline.

aardman

A successful company is one who is willing to win their customers over and over again as the state of the art in the industry advances.  Microsoft won their customers back in the 90s and promptly got scared of having to win them over again.  Thus every new version of Windows had to be compatible with legacy apps.  Which leads to the current bloated, resource-hogging version of that gerry-built, multi-patched OS.

What they should have done with the billions used to write (than rewrite) Longhorn/Vista was a.) use part of it to build a lean, modern OS from the ground up and b.) use the rest of the money to subsidize their customers’ transition from the old Windows to the new.  Aside from plain old free tech support, this subsidy could have come in the form of porting shrink-wrapped legacy apps to the new OS and giving it away as a free upgrade.  If worst comes to worst and some legacy apps cannot be upgraded, then the solution was virtualization not building in legacy apps compatibility to the new OS.

It’s really not that hard to pitch this to enterprises.  First, MS will subsidize the transition.  Second, if MS put a sunset date on old Windows, really what can the enterprises do? Go somewhere else?  Who has the resources to match MS?  And what will they do with all those installed PCs?  Their best course of action would be to stay with MS.  Third, MS can (truthfully) claim that this will really benefit the enterprise in the long run.  The new OS will be a sleek, leading edge OS and it will be more secure, less resource intensive, easier to administer and most importantly, it can run on most of their existing hardware.

But it takes courage for a company to willingly let go off their customers and hope to win them all over again.  And Microsoft, like any monopolist doesn’t have that kind of fortitude.

Gareth Harris

Above all else, Microsoft needs to move their computing on to a stable platform to gain stability and flexibility like Apple with UNIX. This conflicts with their marketing goal of backward compatibility. And most importantly, MS is a marketing company NOT a technical company.

They recognized this once before and hired DEC’s OS crew when DEC folded. The redo of VMS onto Intel hardware, while not my favorite OS, was quite good UNTIL MS marketing got hold of it. Then it became like an aircraft which gets redone by a committee until it is a pig that cannot fly.

Apple has been in a similar position before and made major migrations more than once - brutalizing their customer base in the process but Apple was in a change or die posture and their customer base and market share was almost negligible at that point. They almost had nothing to lose. Losing half their base was a small number.

MS, on the other hand, is market dominant and has much to lose. The cost of change to them is huge. Until now, they have not felt the need to bear the cost of change. Now losing half their base is many millions of customers.

How long can they stall? Like John, I think they are waiting for a wind shift in the market to lower their costs, then they will introduce major changes, perhaps too late to maintain their posture.

I am reminded of the days when we said that computing consisted of Snow White and the Seven Dwarves [IBM and the other mainframe builders]. IBM spent more on R&D than the combined revenues of their competitors. But Big Blue did not respond. Two guys in a garage in Silicon Valley and a Harvard drop-out ate their lunch while they slept.

Ian Cheyne

When Apple introduced Mac OS X they benefited from having a small but loyal user base that wanted them to succeed.  Those users didn’t see Microsoft Windows as a palatable alternative.  Many downloaded the public beta and 10.1 when it was immature but evident (to the Mac faithful) that great things were in store.  Apple provided the backwards compatibility to Mac OS 9 and because of this, and the excellent implementation of OS X, users (and developers) made the change to the new OS and marketshare has increased ever since.

But for Microsoft to do the same would be very difficult.  Imagine if Microsoft did provide a new immature OS with backwards compatibility to Vista or Windows 7.  What would be the incentive to upgrade, where would the excitement be.  Look what happened to Vista and it was based on an already mature product.  My guess would be that their marketshare would fall and make Microsoft even more nervous.

For Microsoft to succeed they will need to produce their new OS with backwards compatibility and it will need to equal, nay exceed, what Vista/Windows 7 already do or it will be ridiculed.

But something else is at play.  Go back five years and many “ordinary” people were not on the internet, maybe only had their first home PC.  They have no brand loyalty and now its time to get that new machine and they want a change and have heard of something better.  And all they really want to do is manage their music, videos and photos, browse the internet and email.

And when they change they probably won’t go back!

Bregalad

While it’s clear the days of the desktop are coming to an end I don’t understand it. I know there are a lot of people who need or at least think they need the mobility of a notebook, netbook or smart phone. That’s great for them, but I have neither the need nor the interest in 24/7 connectivity. I like to get away from the internet and experience the real world without worrying that I’m missing an important tweet.

Tom Hurley

How refreshing to run across a comments page that is reasoned and sane. No idiots screaming hatred of Microsoft. I have a close friend who is using an MS program in her job and says it is simply the best available. I have a nephew who has been an MS programmer for 20 years and says the OS is just fine if you don’t expose it to the attacks on the Internet, and that covers a whole lot of in-house business software.

Remember, the ads from both Apple and Microsoft are aimed at the home user, not businesses.

MOB

When I was a child in the 80s I remember using my first computer, a blocky Acorn something-or-other running Microsoft zygote. In those early years, tapping away at Paint, and Word, I remember thinking to myself “I feel like this should do more.”

I still felt that way when I got my first home computer in 1999 with Windows XP. The OS was somewhat stable, but nothing worked with anything else with any degree of intuitive ease. In 2005, when I saw my soon to be wife using her iBook with OSX I was struck by one thing. She was using multiple programs across multiple files, for everything from recipe collecting, banking, surfing the web, email, finances, journaling and research, video conferencing with her parents, editing digital photos, compiling photo albums, making presentation projects…ALL with programs that came WITH the OS! I had NEVER seen anyone use a windows machine that way. Never. Finally, I thought, a computer and operating system that can really do something.

Microsoft knows that it is surviving on borrowed time. It grandfathered in a lot of people from a certain generation who will simply will not use another operating system. The die-hards that wave the Redmond flag will forever eschew ease-of-use, intuitive interface and GUI, real plug-and-play and flexibility linked with easy programming simply because ‘it’s not what we were brought up on”.

There are also the people, middle-aged upwards everyday home users, who will go to a computer store, see a $500 dell or HP slab, and buy it because it has the Windows Logo on it. They feel safe. They don’t know that Mac is better, that OSX is superior and never will, because they won’t switch from what they’re familiar with and there’s not enough presence from APPLE in these stores. Now, when this generation passes and we have a whole new group of people who use computers for every aspect of their lives, M$ is going to see a demand for a high-quality OS, seamless integration of SW and HW and a system that will have the flexibility and (we tend to overlook this) the user contribution on the level of the the Mac OS community. Without this, Microsoft and its Windows will remain (as it is increasingly becoming) an OS dinosaur, too big to change, too slow to keep up and completely inflexible.

The catch 22? If M$ needs to change Windows so incredibly, so totally, as to have to scrap all compatibility (from a user perspective) from 2010 backwards, what then will the so called enterprise (i.e., corporate dinosaurs) have as an excuse to not then switch to UNIX based Apple Mac machines?

macmikey

What they should have done with the billions used to write (than rewrite) Longhorn/Vista was a.) use part of it to build a lean, modern OS from the ground up and b.) use the rest of the money to subsidize their customers? transition from the old Windows to the new.? Aside from plain old free tech support, this subsidy could have come in the form of porting shrink-wrapped legacy apps to the new OS and giving it away as a free upgrade.? If worst comes to worst and some legacy apps cannot be upgraded, then the solution was virtualization not building in legacy apps compatibility to the new OS.

They tried this. It was called Windows NT. It had protected memory, better virtual memory (don’t know about virtualization, which wasn’t really an issue back in the day), and NOT Win95 compatible (though you could run those apps under emulation).

But your point is still good. Now it must be asked, why did MS walk away from that product? As soon as OSX started showing some fortitude, all efforts for VistaHorn should have been abandoned and WinNT should have been resurrected immediately.

macmikey

Slight correction to the above. Windows has had protected memory since Win95. What I meant to mention was that NT always had multi-processor/multi-thread support, something that didn’t exist in any Windows iteration until XP (if memory serves.)

geoduck

Microsoft has had two OS lines. The Win95/98 line that ended with ME. That old code is not used any more. The other was the NT line that went through NT4. The NT kernel was used as the basis of Windows 2000, which became XP and now Vista and Windows7. The NT kernel was a great development for its time. but it’s now rather dated and more importantly has become so buried under bloat that it’s time for MS to toss the whole thing and start over.

IMO they should <once again> copy Apple. Buy up a good UNIX, like Red Hat and build a new Windows on that. As has been pointed out with modern systems they could include backwards compatibility through virtualization rather than making it part of the kernel. Stability, security, and standardization, it’s only one big bank draft away. That would truly be an Apple killer.

But I think I’ll see frozen porkcicles flying over the River Styx before that happens.

Lee Dronick

How refreshing to run across a comments page that is reasoned and sane.

Yes, the subject could have triggered a flame war.

The competition is good for Apple, good for us end users, because being #2 means they have to deliver the goods and services better than MicroSoft and “PC.”

“I have a nephew who has been an MS programmer for 20 years and says the OS is just fine if you don?t expose it to the attacks on the Internet, and that covers a whole lot of in-house business software.”

Well that is an important point. If you need a computer to run just one program or control a machine then you can use that system for a very long time.

“Remember, the ads from both Apple and Microsoft are aimed at the home user, not businesses.”

Well not just home users, a lot of businesses, well business tasks, need something that can do more than just crunch numbers or control a lathe.

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