Microsoft is switching from defense back to offense

Microsoft is switching from defense back to offense

Summary: Microsoft has been back on its heels playing defense for a decade, since its antitrust trial with the U.S. Department of Justice. However, recent events point to a Microsoft that's ready to start playing offense again. But does the company still have any touchdown passes left?

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It's easy to forget that Microsoft started its life making programming languages. The world's largest software company, which was founded in 1975, didn't throw its first touchdown pass until it backed into the contract with IBM to supply the operating system for the first IBM PC in 1981.

Microsoft snatched that opportunity and sprinted with it over the next two decades, building operating systems and applications that powered the majority of the world's personal computers and turned Microsoft into a technology empire that eventually outgrew even IBM itself.

During the 1980s and 1990s, Microsoft may not have built the best products or been the first mover in most of the markets where it built products, but it was the scrappiest and the most tenacious (and sometimes, the most ruthless) competitor in the computer market. And, that's why it succeeded.

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But, when Microsoft was hauled into court by the U.S. Department of Justice in 1998 and charged with monopolistic and anti-competitive practices, the company lost its edge. It became a much less aggressive company.

At that point, Microsoft had also won the operating system war against Apple, it had won the Web browser war with Netscape, and it had won the desktop applications wars with WordPerfect, Lotus, and others. It was no longer a challenger. It was the incumbent champion that everyone else was gunning for. And Microsoft fell into the same trap that ensnares most incumbents. Instead of playing to win, it started playing not-to-lose. The whole company switched from offense to defense.

Even worse, Microsoft was not even playing an aggressive man-to-man defense. They've been laying back in a zone defense. The sports term for this is a "containment defense." And that perfectly sums up Microsoft's strategy for the past decade, as they've allowed smaller, quicker competitors to pick them apart, little-by-little, yard-by-yard.

However, there is mounting evidence that Microsoft is casting itself as the underdog and going back on offense, as Larry Dignan pointed out last week. Here are the five plays that Microsoft has run recently that make me think the company doesn't want to simply defend its turf any longer, but wants to move the ball down the field:

1. Microsoft's new PC ads draw complaints from Apple

Microsoft has been running its popular Laptop Hunters series of ads that show average tech buyers going into computer stores with a certain amount of money, comparing PCs and Macs, and then walking out with a PC with more features that costs several hundred dollars less. This is an effective argument, especially in tough economic times. Microsoft COO Kevin Turner recently revealed that Apple called Microsoft and demanded it to stop running the ads because they were inaccurate - Apple had dropped the price of its machines by $100. Microsoft employees are still high-fiving each other in the hallways over this one.

2. Bing has essentially become the Google alternative

The company recently unveiled its new Bing search engine, which drew praise from tech pundits and even stole a little market share away from Google and Yahoo. I still think Bing was a huge waste of time and money, but Microsoft executed almost perfectly on the launch, delivering a useful product, drawing buzz away from Google in the search market, and overtaking Yahoo for the No. 2 spot in search.

3. Microsoft Office 2010 includes a bold play for the Web

Google Docs and Zoho have stolen much of the thunder in online productivity apps while Microsoft made several half-hearted attempts (like officelive.com). With Office 2010, Microsoft is throwing off the shackles of the past and delivering robust Web versions of Word, Excel, and PowerPoint (I've been very impressed by the demos I've seen so far). Licensing cost is still a big question mark, but if Microsoft gets that right, it has an excellent chance of solidifying mainstream businesses on the Web versions of its already-familiar office suite and keeping those companies from experimenting with Google Docs or Zoho.

4. Microsoft is planning retail stores next to Apple stores

Not only will Microsoft unveil its retail stores this fall, but the company recently hinted that many of the first stores will be located in close proximity to Apple stores. That's a surprisingly gutsy move, especially since no one expects the Microsoft stores to be as flashy and successful as the Apple stores, but it could be a decent strategy for getting overflow traffic from the average technophiles who stop by the Apple stores (not the Mac fanboys). Also, if Microsoft hires the same people that design its booth at CES every year than the retail stores could be a successful outlet for showing off the best gear in the PC ecosystem.

5. Windows 7 has been radically trimmed down

The most significant part of Windows 7 is not what's going into it, but what's coming out of it. Microsoft is subtracting more than it's adding, and still charging for it (I'll have more on that leading up to the launch on October 22). This streamlining is long overdue and is significant because it will allow Windows 7 to run on low-power devices and provide better performance on high-powered devices. Microsoft will take some heat for this addition-by-subtraction approach, but it will likely result in happier users and extend the reign of the Windows OS.

The billion dollar question

Microsoft could certainly make a lot of money and retain a measure of relevance for years by simply keeping Windows and Microsoft Office on life support. Even if there's a slow bleed siphoning off its revenue drop by drop, Microsoft could still have a very profitable business for a decade. But, Microsoft doesn't want to fade into the background and just cash checks. It wants to be a flag bearer for the tech industry. Otherwise, the company wouldn't be messing around with distractions like a search engine or the Xbox.

The big question is not whether Microsoft can continue to milk the cash cows of Windows and Office. Even if Microsoft maintains its high market share in both categories, the two products are destined to become far less profitable, due to the OS sliding into the background and much stronger Web-based competition in productivity software.

Microsoft's recent scrappy behavior shows that it has embraced the underdog role and decided to play offense again. But does Microsoft have any more touchdown passes left in its arm? That, more than anything else, will tell us whether Microsoft has truly gotten its swagger back.

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Topics: Software, Apple, Hardware, Microsoft, Operating Systems, Windows

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40 comments
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  • This is just a repeat of...

    Larry's "Edge" article.
    bjbrock
  • A huge waste of time and money?

    [i]I still think Bing was a huge waste of time and money[/i]

    Why? It has you talking. And Ed, And Christopher. And even Paul Murphy!

    [i]drew praise from tech pundits and even stole a little market share away from Google and Yahoo[/i]

    Now, how much does Apple spend in marketing (more, or less?) and then ask if Bing, for no other reason then to get a good name out there, was a good PR endevour?
    GuidingLight
    • Spending time and money on another word processor was a waste...

      Or at least many pundits said so when Word was released. After all, everyone knew Word Perfect was king and could never be taken down.

      Hmmm... I think I heard something like that about IE too. Again, Netscape OWNED the browser market. It would be a huge waste of time and money..... ;-)
      No_Ax_to_Grind
      • One of your examples is why MS was convicted of monopolistic practices.

        In case you might have forgotten, that would the one where MS used its monopoly OS position to destroy Netscape's Web browser business.

        The Word fiasco was more involved, but not a whole lot more. In a nutshell, MS conned WordPerfect, Lotus, Borland, etc. developers into expending effort on developing their applications for MS-DOS by assuring them that DOS would be the OS of the future even though MS knew that they were going to drop DOS as a stand-alone OS. MS's own efforts went into developing their own applications for Windows, and thus were pretty much the only applications that worked well on Windows for several years.
        Letophoro
        • Sorry but you are dead wrong.

          Do a little reading. At no time has having IE in Windows been called monopolistic by the courts.

          As to DOS??? On what planet??? MS talked aobut Windows for at least three years before it hit the street.
          No_Ax_to_Grind
          • You must NOT have read the "Halloween Documents"

            You don't seem too well informed about their contents.

            http://en.wikipedia.org/wiki/Microsoft_Halloween_documents_leak

            http://catb.org/esr/halloween/

            http://catb.org/esr/halloween/halloween1.html

            http://www.opensource.ac.uk/mirrors/www.opensource.org/halloween/faq.html

            After all, a little education never hurt anybody, did it?
            Ole Man
          • Completely meaningless in the real world

            No one cares.
            No_Ax_to_Grind
          • Yeah, right!

            For anyone foolish enough to swallow the hyperbole whole, hook, line, and sinker.
            Ole Man
          • the "Halloween Documents"...another one MS got wrong.

            This is kind of a funny one. From all the anti-MS, anti-Windows crowd, they just love to point out just how wrong MS gets it some times.

            They love to point out how, when MS looks at a situation and predicts what the public is thinking and what the public needs; MS just plainly blows their prediction and reaction an idea that was born out of over or under prediction.

            From the Halloween II document:

            http://catb.org/esr/halloween/halloween2.html

            " Long term, my simple experiments do indicate that Linux has a chance at the desktop market ... "

            "Consumers Love It"

            Linux was and still is a free product; in many respects it works much like any operating system, and works well. Nothing MS could ever do is going to change that, Even MS seems to have recognized the FUD factor would have no long term meaningful effect on that.

            From Halloween Document I:

            "OSS is long-term credible ... FUD tactics can not be used to combat it."

            One thing we know MS did get right here, Linux is long term credible, and there seems no reason why that would change in the near future. But credible and becoming any kind of significant major force in the OS market is something else. Linux is majorly credible and still, not even significantly showing as a major force in the desktop market and no amount of FUD you might attribute to MS has brought about that result.

            I'm not sure of what the line "Linux has a chance at the desktop market" means, but unless it was merely referring to surviving, as opposed to being wiped of the map completely, MS concerns about Linux proliferation clearly was unfounded. And for anyone at MS to say that "Consumers Love It" when talking about Linux, as it turns out it has to be taken with the same kind of grain of salt as when someone says "people love it" when they are talking about haggis. Make 100% no doubt about it; there are many who really love haggis, allot. And for them, its a good reason they really love haggis. But when one looks at the profile of this crowd they are in the vast majority of Scottish heritage and really love traditional Scottish meals. In other words they are of a very narrow group of people in a world of 6 billion plus people.

            I guess MS can be forgiven to some degree for not recognizing haggis when they see it due to the fact that in the software OS market there are so few players in the market place as compared to food; one additional player in the OS market always will look more like a real up and comer then any one single culturally centric dish will in the food market place.

            But no matter how you cut it, MS clearly over estimated Linux potential in the desktop market so they really blew that one.
            Cayble
          • Read the whole story

            to get the "big picture".

            Taking sentences out of context and trying to hyperanylyze one small section may occasionally grab headlines, but mostly result in a completely different picture on another track. Sometimes referred to as tunnel vision.
            Ole Man
          • IE in Windows wasn't monopolistic. (At least outside the EU)

            MS telling OEMs like HP that installing any other Web browser besides IE would result in revocation of their Windows license was monopolistic.

            As to DOS, I didn't say that MS didn't market Windows to end users by saying it would even let them run their DOS applications. MS conveniently 'forgot' to tell developers that developing their applications for DOS would mean that end users would have to leave Windows to run them. Heck, I still have some old games such as Ascendancy laying around that tell you how to leave Windows 95 to run the game in DOS.

            I don't have to read history that I've lived through. I remember the period where I wouldn't install the latest MS-DOS until WordPerfect had been patched to run on it. You know, the old "DOS isn't done until WordPerfect doesn't run" era. That very quickly became the "Windows isn't done until WordPerfect doesn't run" era.
            Letophoro
    • BING = $$$

      Sorry, Larry, but again you write nothing more
      than biased dribble. Bing is not a huge waste
      of money given how much money is and will be in
      play as time passes in terms of Internet
      advertising. The next big step for M$ will be
      to get bing married with Yahoo's home page, at
      which point M$ will have about 29% of the
      search market and a much greater chance at
      stealing away an additional 5-10% from Google
      along with some of the "did you bing it"? mind
      share.

      It would be idiotic for M$ to simply concede
      the entire search/paid ad market to Google,
      Yahoo, etc. With bing now released to solid
      reviews and an advertising campaign that has
      clearly gotten under Google's skin. You're
      right about one point: M$ has gotten its
      offensive MOJO back.

      The really unfortunate or lagging opportunity
      is that WM7's release is still at least nine
      months out. Had M$ gotten its act together and
      released WM7 this September along with the Zune
      HD, then M$ clearly would have hit a three run
      homer in 2009. But, the upshot is that the
      Christmas W7 momentum will carry right into
      next April. Hopefully, the Windows Mobile
      Marketplace will be up and running later this
      year in advance of WM7's release.
      jjworleyeoe
  • Bing ruin NBC even more

    I was watching The Philanthropist which is a awesome show. However a Bing ad is built into the show.

    The earth picture which shows where Teddy is has a Bing logo on it.

    Then Teddy body guard calls in and ask a bunch of question which the office person looks up on Bing.

    I couldn't help but think:

    That Google users knows how to use a search engine on their own as where Bing user have to call in Tech support. ROFL
    Randalllind
    • No ROFL for the thinking person.

      You may think in some silly way it was something to laugh about, but it IS working. (MS market share rising.) By the way, you need to spend a little time using Bing. You'll say goodbye to Google...
      No_Ax_to_Grind
    • That was painful to read.

      Wow. Just... wow.

      Hallowed are the Ori
  • To put it all in to one word: Ballmer

    Oh yeah, the anti-MS crowd likes to make dumb comments about Steve Ballmer but the man is a competitor in every sense of the word. (Ask any one that has spent any time with him if you have doubts.)

    His persoanllity simply has no place in it for just holding the line or milking anything for very long. Take a serious look at Microsoft R&D and it is blatantly apparent MS isn't just looking at next quarter, or even next year. Some of the things they doing R&D in are 5 or 10 years away from being a commercial product.

    Yes, Ballmer plans for MS to still be the dominant force in software for a very long time to come.
    No_Ax_to_Grind
    • The only problem is ...

      that Ballmer took over as CEO in 2000, so he is the one who has presided over the "lost decade" at Microsoft.

      I agree that he is very driven and very competitive, but I'm still skeptical about whether or not he has the vision to throw the next touchdown pass for Microsoft.

      That said, you're right that Microsoft R&D is stepping up its game and so the next great thing could come from the bottom up at Microsoft.
      jasonhiner
      • "he is very driven and very competitive"

        Yes, all one need do is watch him a few seconds........

        http://www.youtube.com/watch?v=wvsboPUjrGc

        http://www.youtube.com/watch?v=edN4o8F9_P4

        http://video.google.com/videoplay?docid=-4860483760049380308
        Ole Man
        • That's kids play, you should be kick an employee's

          azz when I am not happy with them.

          Oh I know, your an open spource (MS ranter) type and we all live in big warm and fuzzy world and everyone should sing kumbaya...

          Do the world a favor, GO AWAY. You rant is old and BORING.
          No_Ax_to_Grind
          • Opps, should say "you should see me"

            ...
            No_Ax_to_Grind