Its a tough time to be Microsoft, as todays challengers are tough, smart and well funded.
This week marks several important events:
Google announced their broad Web-as-a-platform developer toolset.
Microsoft showcased part of their Windows 7 user interface and set the date for their PDC which indicates their new OS, Windows 7, is approaching Beta.
In addition, I and a number of the folks I work with are seeing what appears to be a rather massive move to the Mac platform, which hasnt seen this kind of growth since the 80s.
Finally, Linux is beginning to get some actual traction, showing up on a number of low cost Netbook offerings and MID (Mobile Internet Devices); it is starting to look like even this platform may have some legs.
I have not seen this level of competition before and Microsoft has never appeared more exposed. In my lifetime I have never seen a major vendor allow the kind of attack-marketing Apple is using without challenge. And, coupled with initial problems with Windows Vista, Microsoft suddenly looks like they are in a fight for the desktop the likes of which they and we have never seen.
Recalling IBM in the 80s
IBM had a similar fight on their hand in the 1980s against their mainframe platform, which was dominant prior to their collapse at the end of that decade. As the dominant vendor, they simply could not be overtaken if they maintained customer satisfaction and fueled the perception that they were the safest choice on the market.
For a lot of the IT market the phrase no one ever got fired by buying IBM was reality and they initially had a leasing model that made it virtually impossible to displace them.
However their market became saturated and they needed to show growth so they sold their leases to their customers, eliminating what was their strongest defense in exchange for getting a couple of really great revenue years. Then they decided to milk their customer base because they believed these customers couldnt move. IT saw their payments to IBM increasingly as a tax.
A challenger to the mainframe showed up in the form of client/server computing, which promised to do what IBM did at a far lower cost and in what was an amazing lack of strategy IBM publicly agreed. This effectively validated this challenger at a time when they had lost their leasing protection and had really upset their customer base.
Microsoft entered the market initially as an IBM partner, realized by the end of the 80s that IBM fundamentally didnt understand the market it was actually blessing, and they separated. IBM then tried to compete with Microsoft in this new market that Microsoft had been designed, partially with IBMs help, to address. IBM, which was still vastly larger and more powerful, failed.
Currently they dont even have an offering in the PC space they helped create and are looking up at HP (which effectively not only leads the market IBM once dominated but is redefining this market) to create a cloud-based world with most of the aspects that made IBM great. But, in this instance, its only working for HP.
Yes, the mighty can fall.
The 2000s and Microsoft
In the current decade the emerging technology is cloud computing and the company that was built on that model is Google. Google leveraged Microsoft partners and some competitors to get into the position they have today. But they arent yet in Microsofts core markets and will likely need an OEM partner or two to get there.
Microsoft has made some but not all of the mistakes IBM made. They have effectively raised prices for core offerings without ensuring that the perceived value has increased making many customers feel, like they did with IBM, that they are overcharged. Firms like Gartner fuel this belief with services that sell the idea that Microsoft customers are overpaying for their offerings. Increasingly, IT buyers are viewing their payments to Microsoft as a tax.
Microsofts current platform, Windows Vista, is struggling. While there is actually some increasing evidence it can provide substantial savings over Windows XP, this information is being overwhelmed by coverage of Vista problems and the effective Apple attack campaign.
Apples Leopard has had similar problems but Apple has marketed through them, creating the perception that the MacOS is fundamentally better and driving growth that Apple hasnt seen in decades.
At the low end of the PC market, Linux-based systems have started to show up. Some from partners like Lenovo are targeted an emerging consumer opportunity, others based on unique distributions like the gOS seem to blend an Apple-like user experience with a Google-based backend to create something really interesting. While not yet fully mature, this offering could with Googles help become a real threat.
The Google Attack
Of the three attacks, the Google attack is the most serious. Linux continues to suffer on the desktop largely due to the lack of a solid economic model; it simply does not generate enough cash to truly compete with Apple or Microsoft except at the very low end. And even there it is iffy.
Apple is hardware bound; there is only so much you can do with a limited line no matter how good. Apple is closer to the PC equivalent of Saab or Volvo in scale then they are to General Motors or Toyota. In addition both competitors really are more designed for the PC market the way it was, not the way it will be, if we think of Cloud Computing as the future.
Google, on the other hand, is a different beast entirely. Younger, designed with the Cloud in mind much as Microsoft was designed for the PC Market in the 90s and very well funded Google represents a real challenge to Microsofts desktop dominance.
Currently rolling to market with their first true developer platforms, and likely to use subsidized smart phones and browser-based solutions to first deny Microsoft revenue and then displace the company, they represent a very real threat.
Windows 7: Microsoft Fights Back
The mistake IBM made and Microsoft may avoid and I use the word may advisedly is that IBM agreed that the market was making a move to client/server and they eliminated by choice their leasing protection.
Microsoft is not eliminating their similar enterprise agreements. While they are investing in the Cloud with their Live offerings they are not supporting the argument that the desktop PC is dead yet.
In addition, they have begun to reinvest in Windows and recently showcased a multi-touch user interface which could help the desktop OS become relevant again, protecting both Apple and Microsoft from the premature shift to Could-based desktop computing, assuming, as is likely, that Apple is doing the same thing.
They have recently brought on board one of the most creative marketing agencies in the world and if (a big word here) this agency is given the knowledge and the latitude they need to become successful it could make a huge difference. But Microsoft is used to being technology- and not market-driven, so making this change at a critical time in Windows 7 development wont come naturally.
Will History Repeat Itself?
While Microsoft is in better shape to fight this fight than IBM was, they are facing several competitors at once and two are well-funded. Google has some control over Web marketing and Apple is a marketing powerhouse second to none in the technology space. (And Microsoft has proven particularly vulnerable to marketing-based attack.)
Finally, the Cloud is coming, and unlike Client/Server, which didnt have much of a foundation, the Internet is here and forms a better foundation than existed for that early challenge. In other words, the transition to Cloud computing could happen vastly faster than anything we have ever seen before.
Still, just remember, people dont like change. If Microsoft can create a compelling new platform they can probably hold most of the market. And the multi-touch capability in Windows 7 is an interesting, and possibly even compelling, start. Its a new Windows team. I wonder if they realize they probably have the future of Microsoft riding on their shoulders.