MS at Crossroads

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    Posted: 25 June 2012 01:05 PM

    I watched a video last week on CNBC where an analyst speculated MS would also create its own branded smartphone.

    Last week we saw their own tablet. 

    Here is an interesting article in the NYT about the MS dilemma.

    http://www.nytimes.com/2012/06/25/technology/companies/with-tablet-microsoft-takes-aim-at-hardware-missteps.html?_r=1

    Horace has talked about this for years and it is finally coming home to roost.

    MS partners are not doing their job to innovate and build better products because they are bleeding money like crazy.

    MS is not doing its job to build better software because they are sitting on a cash cow they can milk for another 50 years.

    In the mean time Android comes along to help the manufactures, but it does not stop the bleeding.

    When this war is over there will only be three big players and Apple will still reap most of the profits.

         
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    Posted: 25 June 2012 04:40 PM #1

    A Windows PC is clearly a commodity now, even among higher end PC’s.

    We have iPhones, iPads and Macs as the leading devices.    Even Android might be argued as a step above Windows with the right apps.

    3 product lines ahead of the late majority of PC.

    Linux is ahead of Windows by some people’s standards. 

    Windows is what people get when they cant afford money and time and they dont know about iPads, assuming basic internet usage.

         
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    Posted: 25 June 2012 05:05 PM #2

    Interesting insight (if true) on Microsoft’s relationship with OEMs.

    Privately, PC OEMs are enraged about Surface, and not necessarily why you may think.  Sure, they are angry that their partner is now their competitor, but they are angrier about the way Microsoft did it.  It gets back to Microsoft?s access to OEM tablet designs. I am told Microsoft had early access to OEM?s Windows 8 physical designs, so they reportedly knew exactly what OEMs were to launch.  Apparently, a few weeks ago I am told, Microsoft held executive- level reviews with Windows 8 tablet OEMs to get even further details on OEM launch and marketing plans and pricing.  Then a few weeks afterward, the Surface launch occurred which to most industry observers looked professional, but rushed…

    ...Microsoft has access to virtually every OEM design well before it ships, too, which could give it an unfair advantage in that it now has access to its competitor?s design well before anyone else.

    http://www.forbes.com/sites/patrickmoorhead/2012/06/25/can-windows-8-pc-partners-trust-microsoft-in-the-future/

    The partnership aspect is gone now in PCs and OEMs need to start to invest in unique approaches, remain happy to pick up the lower end, lower margin business, or simply exit segments of the PC business.

    Some great choices there.

    Ironically, some OEMs I?ve talked with post-Surface announcement will now reinvest in Android-based Chromebooks and Android tablets.  Short-term, this isn?t good for Microsoft.

    Not exactly good for OEMs either. How have they done with Chromebooks & Android tablets so far? That’s what they want to “reinvest” in?

    This won?t really solve anything long-term as the big question must be, ?will you invest to win,?  ?invest to survive,? or exit.  If certain OEMs now invest heavier in the Windows 8 ecosystem, this is good for Microsoft.  If OEMs retreat, this will be disastrous for Microsoft as the ecosystem they had built over 30 years rips apart at the seams. As we know more about Surface?s pricing, positioning, distribution and roadmap, the payoff or penalty for Microsoft will become quite clear.

    Seems to me the downside is very clear, but not the upside. What incentive do OEMs have to invest in either of the Surface tablets, or more broadly, Windows 8? It essentially guarantees that Windows 7 will be the next XP and dominate through at least the end of this decade.

    What this article fails to point out is that Apple maneuvered Microsoft into this direct conflict with their OEMs. And all with a product that Gates once described as (and probably still believes):

    It’s a nice reader, but there’s nothing on the iPad I look at and say, ‘Oh, I wish Microsoft had done it.’

         
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    Posted: 25 June 2012 10:03 PM #3

    I think in 5 years or less, there will only be three major players in the smart phone and tablet business.

    They will be Microsoft, Google, and Apple.

    Microsoft has the resources to keep working on cell phones and tablets for the next 7 years.

    Google has enough cash to pour into Motorola and Android to keep it viable.

    Apple we all know where they are.

    The OEMs of the world, like HP, Dell, Samsung, Nokia, HTC, Sony, Acer and so on will survive but in much smaller position relative to their once dominant place.

    Samsung can do well only because they build so much more then phones and tablets.


    But once Microsoft and Google really start to battle it out, the rest will suffer.  In the end I see Apple owning 40% of the smart phone business and 70% of the tablet business.

    Microsoft realized this and decided now to fight for the 60%  and 30% they will share with Android.

    WS sees this but is still not sure Apple can withstand the onslaught that will hit them if Surface trully sees the light of day or Google goes all out with Motorola in a Google branded phone.

    The next 5 years will be just exciting as the last 5.

         
  • Posted: 25 June 2012 10:16 PM #4

    Nice post, above, Drew Bear.

    omacvi - 25 June 2012 04:05 PM

    MS is not doing its job to build better software because they are sitting on a cash cow they can milk for another 50 years.

    Don’t be so sure of that.

    I know that you were using hyperbole to make your point, but Microsoft is truly at a crossroads or, more likely, they passed the crossroad long ago and now its too late.

    Think about it. Almost all of Microsoft’s profits come from Windows and Office. Both programs are trapped on desktops (and notebooks). “Nice place to be trapped”, you might well say, but you’d be wrong. Desktop sales are shrinking and Window’s share of that ever shrinking pie is shrinking even faster.

    Microsoft’s foray into phones was an utter flop (they’re actually LOSING share as Windows Mobile phone owners are leaving the market faster than Windows Phone 7 phones are entering it). And despite all the things that are supposed to happen this fall, Microsoft currently has exactly zero percent of the tablet market.

    Microsoft has lost its mojo and its mystique. No one is afraid of them anymore. No one in phones or tablets worries about Windows compatibility. Many still think that the Office Suite is the Holy Grail of business software but I think that myth is about to be shattered too.

    If Microsoft can’t acquire significant tablet market share, their role in personal computing isn’t just going to decline, it’s going to fall off a cliff. Everybody thinks that desktop computing and the Microsoft compatible programs that power desktop computing is going to go on forever. Everybody is wrong.

    Desktop computing is being starved of its developers. All the action is in mobile. When was the last time you heard of a seriously exciting product coming out for your desktop? For every new program being developed for the desktop, hundreds - perhaps thousands - are being developed for mobile.  And it’s only going to get worse.

    Desktops are going to be attritted to death. There were 50 million tablets sold last year. There will be 100 million sold this year. Next year? For companies like Apple, at least, the number of sales is only limited by the number of units manufactured. In desktops the opposite is happening. First, people will delay purchases of desktops. Then they’ll forgo them altogether in favor of tablets.

    Microsoft is not at a crossroad. They’re at the end of the road. They just don’t realize it yet…

    ...or, perhaps they do, which is why they’re so desperately trying to reverse the course they’e been on for the past 37 years.

         
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    Posted: 25 June 2012 10:52 PM #5

    I would agree with you Falkrik, when it comes to the consumer space.

    However I still think MS makes most of its money in enterprise and corporate world.

    Yes there is good adoption of the iPad in enterprise and MS is now feeling the heat.

    But MS makes more money in licensing fees for Windows, NT Servers and Office then in the sale of the 400 million PC world wide.


    They own the corporate world and will continue to do so for many decades.

    The 3 year old with the iPad may change the corporate culture when he/she becomes the IT manager in 30 years. 

    Until then it will be a slow going in getting rid of buggy windows world in the work place.

    One hospital I work for has a $1.3 billion dollar budget. They will spend $30 million on new software alone that only runs on Windows.  They spend thousand more on older buggy software three years ago that only runs on Windows.  The know nothing else but Windows.

         
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    Posted: 25 June 2012 10:55 PM #6

    As far as Microsoft goes they still have a significant server business and much of their Office business is multi year contracts which means short term not much will change in their financials.  With a Windows 8 launch approaching, they will be able to hide any failure well into 2013.  Ballmer is a fool and I don’t expect he is the man to lead Microsft away from the abyss.  The surface may sell in enterprise if they are cheaper then a full up laptop, but I don’t think they get much traction.  Desktops are already a replacement industry, and likely it is less then one for one.  As folks go portable there are less tasks which require the heavy iron and most of that can be virtualized or done via the cloud on servers for enterprise.  Microsoft is already past the crossroad and they picked the wrong route, can they turn around now and make a difference, I always say inertia is a powerful force and people hate change, so I wouldn’t count them out but time is working against them.

         
  • Posted: 25 June 2012 11:25 PM #7

    omacvi - 26 June 2012 01:52 AM

    I would agree with you Falkrik, when it comes to the consumer space.

    However I still think MS makes most of its money in enterprise and corporate world.

    Yes, I’m only talking about the PC space which is the face of Microsoft. They will easily endure and perhaps thrive as IBM has.

    omacvi - 26 June 2012 01:52 AM

    They own the corporate world and will continue to do so for many decades.

    The 3 year old with the iPad may change the corporate culture when he/she becomes the IT manager in 30 years. 

    Until then it will be a slow going in getting rid of buggy windows world in the work place.

    Not so sure about that. The times they are a changing and they are a changing a lot faster than we think.

    omacvi - 26 June 2012 01:52 AM

    One hospital I work for has a $1.3 billion dollar budget. They will spend $30 million on new software alone that only runs on Windows.  They spend thousand more on older buggy software three years ago that only runs on Windows.  The know nothing else but Windows.

    Understood. That’s why people think that Microsoft will go on forever. But check this story out:

    Chicago hospital doctors say iPads raise their efficiency | Reuters

    The times they are a changing.

         
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    Posted: 25 June 2012 11:55 PM #8

    FalKirk - 26 June 2012 01:16 AM

    Many still think that the Office Suite is the Holy Grail of business software but I think that myth is about to be shattered too.

    How? I’m not sure Apple is passionate enough about iWork to really unseat Office. Open Office & Google Docs don’t seem to be making much headway.

    You’re right that nothing exciting is happening in the Windows app world, but Microsoft doesn’t really need much to happen. It’s Office that anchors corporations to Windows; that and cheap hardware.

    The iPhone & iPad will take over many (even a majority) of the other computing functions needed by Enterprise, but Office will still be essential business software. Tasks like word processing, spreadsheets and database management are work for “trucks”.

    MSFT is at ~$70B annual revenue and growing relatively slowly. At some point that growth will stall. Windows 7 and Office 15 upgrades may keep them growing a while longer. It’ll be interesting to see if they ever hit the $100B mark.

    It’s not so much that Microsoft will crash and burn like Nokia and RIM, it’s that Apple has left them eating dust. Their superstar days are gone, but residuals will keep them comfortable.

         
  • Posted: 26 June 2012 12:50 AM #9

    Drew Bear - 26 June 2012 02:55 AM
    FalKirk - 26 June 2012 01:16 AM

    Many still think that the Office Suite is the Holy Grail of business software but I think that myth is about to be shattered too.

    How?

    Office rules the desktop. Many think that it will rule the tablet too. I’m not one of them.

    - Tablet Apps cannot, by their very nature, be the same as their desktop counterparts;

    - Microsoft’s Office suite contains some of the largest, most complex programs in the world. There’s no reason to believe that they will translate well to smaller screened, less powerful, single-purpose tablets. We’ll see.

    - Microsoft will have no monopoly advantage on the tablet. It will have to go head to head with the competition and win its sales fair and square.

    If Office is just one of dozens of of Word processing, spreadsheet and presentation programs on the tablet, then Office compatibility will become less important. People will start to user programs that work with the Apps on their tablet rather than the other way around.

    We’ll know soon enough. Windows RT will have Office and it’s rumored that Office might come to the Mac. It’s it makes a huge splash, then I’m wrong. If it hits with a dull thud, then I’m right.

    Drew Bear - 26 June 2012 02:55 AM

    You’re right that nothing exciting is happening in the Windows app world, but Microsoft doesn’t really need much to happen. It’s Office that anchors corporations to Windows; that and cheap hardware.

    We’ll see. I know that I’m going way out on a limb, but I think that the oxygen has been cut off to world of desktop computers. The “air” is just a little stale now, but soon the effects of the tablet revolution are going to be felt and felt hard.

    It’s a prediction and, like all predictions, we’ll only know for sure after its happened, one way or the other.

         
  • Posted: 26 June 2012 12:59 AM #10

    Falkirk - I don’t want to sound rude, but do you spend any appreciable time in the Enterprise?  You are making a ton of pretty extreme statements about Microsoft, that I don’t think are anywhere close to reality.  I think you are getting carried away.  As one example, how about explaining exactly how Office is about to have its place in the Enterprise displaced?  And I mean the desktop, which despite all the hype surrounding tablets, is not going anywhere in the Enterprise soon.  And this is coming from a HUGE iPad fanatic.

    Also, what do you mean when you say Office might come to the Mac? Did you mean to say iPad?

         
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    Posted: 26 June 2012 01:19 AM #11

    FalKirk - 26 June 2012 03:50 AM

    Office rules the desktop. Many think that it will rule the tablet too. I’m not one of them.

    Neither am I.

    - Tablet Apps cannot, by their very nature, be the same as their desktop counterparts;

    Again, we agree.

    If Office is just one of dozens of of Word processing, spreadsheet and presentation programs on the tablet, then Office compatibility will become less important. People will start to user programs that work with the Apps on their tablet rather than the other way around.

    Here’s where I have to go with SJ’s truck analogy and agree that there will always be a place for traditional computers and Office. They will grow less important, but that change will be slow. I can imagine tablet replacements for Word and Powerpoint for the basics, but extensive use of Excel on a tablet is really hard to imagine. Power users of any of the Office apps will most likely always prefer a traditional computer.

    Of course we don’t know what app developers will devise for the iPad in the years to come, but I think Windows PCs & Office are entrenched for a while longer. Remember that ~40% of PCs are still on Windows XP. This shift will take many years.

         
  • Posted: 26 June 2012 01:23 AM #12

    Drew Bear - 26 June 2012 02:55 AM

    How? I’m not sure Apple is passionate enough about iWork to really unseat Office. Open Office & Google Docs don’t seem to be making much headway.

    You’re right that nothing exciting is happening in the Windows app world, but Microsoft doesn’t really need much to happen. It’s Office that anchors corporations to Windows; that and cheap hardware.

    The iPhone & iPad will take over many (even a majority) of the other computing functions needed by Enterprise, but Office will still be essential business software. Tasks like word processing, spreadsheets and database management are work for “trucks”.

    Yep.  The industry-specific software is not easily portable and will—for the foreseeable future of 2-4 years—be anchored to Windows 7.  During the interim, I see the tablets as an extension rather than a full-scale replacement to most of what currently gets done in enterprise.  That will change as enterprise software gets better and adapts to the mobile platform. 

    Let me tell you, most of what I’ve seen (and used) in enterprise is dinosaur software (I’m not speaking of Office which for most is 80% overkill).  The developers are very slow to adapt, making Microsoft both safe (near-term) and vulnerable (longer term).

         
  • Posted: 26 June 2012 01:31 PM #13

    The only real question is how much longer Steve Ballmer sticks around. With him as CEO, nothing changes. With him out, all bets are potentially off. And I think that if the Surface fails, and if Windows Phone continues to lose ground (both highly likely outcomes) then it won’t matter how much profit Office generates—Microsoft’s board will need a scalp to demonstrate that they take the company’s complete failure in the mobile space seriously. Ballmer won’t be fired; he’ll be moved into some vague, harmless trophy position that lets him save face without getting into trouble. A new, aggressive CEO, recruited from outside the company (hopefully MS would have the sense to do this), could tear through the place like Sherman marching to the sea. They could buy Nokia (if Ballmer doesn’t first, not that he’d know what to do with it), or sell off the Windows Phone IP and ditch the whole mess. They could reinvent themselves as a mobile app company—not only putting Office on the iPad and Android, but using their enterprise credibility to make themselves best of breed in mobile business apps. Or they could quietly fade out of mobile and become the new IBM: a solid, boring, institutional provider of productivity tools, a company that will never go away and never make anything really exciting again.

         
  • Posted: 26 June 2012 02:09 PM #14

    Lstream - 26 June 2012 03:59 AM

    Falkirk - I don’t want to sound rude, but do you spend any appreciable time in the Enterprise?  You are making a ton of pretty extreme statements about Microsoft, that I don’t think are anywhere close to reality.  I think you are getting carried away.

    I’m making highly speculative comments which can lead to debate just like this. If Microsoft were to fall (in personal computing), it would be because a lot of “ifs” came true. Here’s my theory. Feel free to shoot it down. Pit your knowledge and experience against my theory.

    Microsoft Office in the “lingua franca” of enterprise computing. If you want to share your spreadsheets, presentations and word processing data with others, then you simply must own Excel, PowerPoint and Word. Microsoft’s position appears unassailable.

    IF Microsoft fails capture any significant share of the tablet market…

    IF Desktops (and notebooks) start to drop in sales…

    IF Microsoft’s share of the dwindling desktop market declines more and more rapidly…

    IF Tablets take off and replace desktops as the de facto standard…

    IF Microsoft Office cannot be successfully ported to the tablet as anything resembling its desktop counterpart…

    THEN, people will stop looking for mobile programs that work with their desktops and they will, instead, start looking for desktop programs that work well with their mobile devices. If most of your work force is using a tablet, then having some of your work force using a complex program that does not translate well to mobile will be a DISADVANTAGE rather than an advantage. Better to have a desktop program that works hand in hand with one’s mobile programs instead.

    That’s a lot of “ifs”. But I think they might all actually happen. And even then, it is speculative. Things could change, unknown events might occur or perhaps the effects of each “if” might be less dramatic than I am projecting.

    But I think it’s a possible scenario and I think it’s even more than possible. Meanwhile, most people have not even considered this scenario at all. Microsoft is at risk (in personal computing)  and I think they know it even more than most of us do. The iPad’s encroachment into Enterprise is swifter and more insidious that people realize.

    Office is the de facto standard precisely because it speaks throughout all Enterprise with one voice. But if that voice has to be translated when it goes to mobile, and if that voice has to be translated when it goes to the Mac, then the insistence on a common language and a common standard loses its power.

    When power shifted from Europe to the United States, English, not French, became the universal language of diplomacy. The French, of course, still speak French, but despite their protestations, few others feel a need to do so. When power shifts from desktop to mobile, people will want their programs to “speak” mobile, not desktop. Microsoft can protest all it wants but the standard moves to where the power it and all the power is now located in mobile.

    Lstream - 26 June 2012 03:59 AM

    As one example, how about explaining exactly how Office is about to have its place in the Enterprise displaced?  And I mean the desktop, which despite all the hype surrounding tablets, is not going anywhere in the Enterprise soon.  And this is coming from a HUGE iPad fanatic.

    Have I answered your question? I’m not saying that you have to agree with me. I’m asking you to show me where you think I’ve gone wrong.

         
  • Posted: 26 June 2012 02:20 PM #15

    Drew Bear - 26 June 2012 04:19 AM

    Here’s where I have to go with SJ’s truck analogy and agree that there will always be a place for traditional computers and Office.

    Here’s where I think we diverge. I agree that there will always be a place for trucks (desktops) in the future but that does not necessarily mean that all of those trucks (desktops) will made by a monopoly like Ford (Microsoft).

    If standardization on one OS and one suite of programs becomes less important, then Microsoft loses their reason for lock-in. Today, people say: “Which computer runs best with Microsoft Windows? Which programs work best with Office?” Tomorrow they will say: “Which computer runs best. Which Spreadsheet, Word Processing program or Presentation program works best across all of the platforms that I am on.”

    In that world, Microsoft Windows and Microsoft Office have to win on merit. And frankly, I don’t think they’re up for the challenge.