When you consider just how large, successful, and dare I say… dominate Microsoft has become in the computer world, I am dazzled by how much trouble they’ve had getting in on the Web 2.0 scene. I’m sure Microsoft doesn’t enjoy playing second fiddle to Google, Yahoo, and bunches of others Johnny-Come-Latelys. I also think Microsoft’s massive executive hierarchy is pretty worked up about addressing their online presence deficit. In truth, I imagine a never-ending barrage of internal emails flying around the MSFT corporate network. Emails saying: the future of our company is at stake!. But, what I think is really interesting is how Microsoft reacts to this fear, and their attempts at growing their online business.
Side note: In 1995 Microsoft really started focusing on the Internet, with Bill Gates’ famous May 26, 1995 Internet Tidal Wave memo, where he directed his executive staff to attack cyberspace and for “…every product plan to try and go overboard on Internet features.” In this memo he also said: “Now I assign the Internet the highest level of importance”.
Over the past decade, Microsoft has struggled to leverage it desktop market dominance into the online world, and they’ve had less than spectacular results. Microsoft’s massively developed marketing and distribution arms are pretty useless in the online world. They have built so much critical mass in all desktop-software aspects, which is all simply not transferable verbatim into Web 2.0 (Note to self: Since the computer world can’t agree on exactly what Web 2.0 means, I’ll use this term to appear trendy and “in the know”)
The crux of the issue is this: Microsoft was built on the software buy/sell/license mentality. But, it’s really more than a mentality, it’s a firmly ingrained culture completely encompassing a very fixed business model: sell software by unit (100 here, 1000 there), divide software into different segments (Office, Windows, etc) and have these business segments complete for desktop market share. The result: more money allocated to the more successful segments for cool.new.applications. Going on twenty years now, Microsoft has outwardly become an expert (and definitely the dominator) in developing desktop (non-online) software.
It really is a very deliberate decision: Is my company a services-company, or a software-company? Committing to the software-company track: you generate most (and nearly all) of your revenue by selling software by: unit… and after a while, you don’t generate revenue from your existing product until you ship a new version (Windows 2000, XP, Vista, etc). This drives how you do: planning, marketing, distribution (including Best Buy shelf space), development (native C++, VB, .NET, etc), leadership, etc. This really drives your whole company top-to-bottom, from your Steve Ballmer to your Joe Coder.
A software-company can profit by charging for services, but that’s very different from building a software-as-service company, such as Google. If a company wants to be service-based, then the core revenue model becomes: how much service can I sell, lease, or rent on a monthly basis (which is drastically different from: how many copies of this version of my program can I sell). The longer your software-company has been around… the more software-company infrastructure you have. And, all this becomes deadweight when you try to swim in the cool, new, sexy, and profitable online-services swimming pool.
I believe that before Microsoft can establish a significant market presence in the online business world of Web 2.0 (which I like to pretend Ballmer calls the Interweb), the MSFT culture and business-model needs to change. If I were Steve Ballmer, I’d create a Microsoft subsidiary that would operate completely independently from Microsoft (sort of a Skunk Works operation) and be a ground-up online service-company. If Ballmer won’t do that, then mitosis is the next best option: divide Microsoft into two separate companies: software-company Microsoft and services-company iMicrosoft. (I think this mitosis scenario is about as likely as everyone in the U.S. winning the lottery on the same exact day).
Instead of Skunk Works, or mitosis, Microsoft has chosen Plan C: Microsoft Live division. This division is dedicated to the online world, but ends up competing with all the other Microsoft software-centric divisions. And, from the Microsoft news I’ve read, there has been a large amount of executive turnover in this division. I quietly wonder, if one promising executive after another has been consumed (wrung-out) trying to run a service-company within a software-company (I sure wouldn’t want that position).
On several occasions, Microsoft has ventured to buy significant online market share. Just recently, MSFT submitted a $44.6 billion dollar bid to buy Yahoo. While the results are unknown, I could see Yahoo wanting a lot more money. And, if the sale did go through, I’d hope that MSFT keeps the two companies 99% separate (i.e. Skunk Works) – they could share some branding and technology transfer, but I think pushing Yahoo and Microsoft into one company could result in operation square-peg-in-round-hole.
Since buying an online presence hasn’t yet yielded Microsoft a major piece of the internet pie. Building is the next best thing. Case in point: Microsoft Office Live, which is the latest and greatest attempt by Microsoft to build a firm foothold in the online world. Simply put, this is an online version of Microsoft Office. (Did you notice the online version of Microsoft Office tacks “Live” onto the end? This appears to be how they are going to differentiate the desktop and online version of the same product)
I have not had the time, nor the incentive, to check out Microsoft Office Live. So, if you have, please drop me a comment and tell me what you think. Personally, I like using the desktop version of Office. I don’t need, nor want, to do that work online – In fact, I don’t see clear benefits to online-izing (or social-networking-izing) Microsoft Word. There are plenty of sites doing truly new and innovative things in the online world. Maybe one day Word Processing may go predominantly online. Until then, I’d rather use my traditional desktop version of Microsoft Word (I like the idea of Abiword and Open Office, but I never made the transition)
Since this post may be a bit dry (boring), I’ll leave you with this great Microsoft advertisement I just received for Microsoft Office Live. This ad really makes me wonder if Microsoft Office Live is desperately struggling to get people to use Office Live. Maybe I got this impression when the ad called me “chicken” for not trying it. Hey, are we in third grade? Well I double-dog-dare you to make Vista faster and more reliable. OK, I TRIPLE-DOG-DARE YOU!