What ails Microsoft

What ails Microsoft

Summary: Worth reading: BusinessWeek has a good package on what ails Microsoft--innovation stagnation, slow product development, sagging morale, too much bureaucracy and slower growth (but record profits). Included in the package in an in-depth interview with CEO Steve Ballmer, who of course disputes the notion that Microsoft is struggling.

TOPICS: Microsoft

ballmersept3.jpgWorth reading: BusinessWeek has a good package on what ails Microsoft--innovation stagnation, slow product development, sagging morale, too much bureaucracy and slower growth (but record profits). Included in the package in an in-depth interview with CEO Steve Ballmer, who of course disputes the notion that Microsoft is struggling. "We've got the greatest pipeline in the company's history in the next 12 months, and we've had the most amazing financial results possible over the last five years, and we're predicting being back at double-digit revenue growth in fiscal year '06'," Ballmer said. He also talks about 'winning' the Web, which means beating Google, Yahoo and other Web-centric companies like it vanquished IBM and others in previous decades.

Microsoft has always stood out as the most competitive company in the business--win at almost any cost. This time around Microsoft isn't the small, fleet company in the equation. The DOJ, which didn't do much to curb Microsoft's appetite, can't protect the company from new computing models that encroach on the sacred Windows and Office franchises. The next five years will be a tipping point--either Microsoft manages to radically morph itself once again or it will become a legacy company milking its installed base. My bet is that Microsoft won't win the Web (no one should or can monopolize the Web, given it is an open platform that belongs to the users), but it will be in the thick of the fight for delivering tools, applications and services over the next decade.

Topic: Microsoft

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  • will?

    Will become a legacy company?

    Look at the dustup going in Mass and tell me they aren't.
    • LOL!

      The "dust up" in Mass? Gimme a break. MA probably accounts for about 10 minutes worth of Microsoft revenue even if they were to drop all MSFT software which, I'd be willing to bet, they won't do. If you were old enough you'd probably be one of the people who predicted IBM's demise 10 years ago and they continue to thrive. Microsoft is still MUCH more profitable than IBM and is better positioned competitively. I don't see them becoming legacy any time soon.
      • Look at the "dust up" at many large corporations.

        Companies that have phased out their Unix systems and replaced them with Windows Server, SQL databases, Great Plains Software, ect., not to mention retaining Windows on the desktop,

        Yeah, looks as though they're really getting "dusted".
        John Zern
        • Don't see that here

          Hasn't happened at the 5th largest corporation in the world. Which "many large corporations" are you talking about?
          Roger Ramjet
        • Large Corporations....

          The top 500 money making companies (Fortune 500) are backed by a embedded database structure which is run on unix system, or solaris.

          So being as it may, I'm not sure where these facts came about.

          But I can tell you this...

          60% of those companies use Progress which has the backend requirement of AIX, Solaris and Linux.

          80% of the Fortune 100 use Progress.

          The one thing I find weird about the whole thing is that if you look on their site with their customers. They actually have quite a few missing which I find interesting. Seeing as one noted one I know that's missing is a 2 billion a year company. Now that boggles me.

          Mid-size companies may move to windows... but big companies know Unix is the way to go.
          • I remember....

            That Microsoft was also missing this group and was gunning for them. But they have ALOT of work to do to get these people in this group.
      • If it's so little

        Then why don't they leave it? They can pull out easily enough.
  • hit "enter" too soon

    as for the "can't protect the company from new computing models that encroach on the sacred Windows and Office franchises", I never relized the DOJ was protecting MS all these years.

    MS will always be in the "thick of things" as you never know what they have waiting in the wings...
    John Zern
  • microsoft

    Having known several people at Micro$oft, most of whom have quit (one got himself fired to protect his options or something) -- the tone of the place has changed dramatically in the last 5-7 years. Previously, they had a cult-like conviction that they were seriously better than everyone else; their success was based purely on merit in the marketplace; and that their continued ability to thrive and grow were a birthright. From the few contacts or friends-of-friends still there, I think M$ under Ballmer is a completely different entity than it was under Gates. As hyper-competitive as BillG was, he believed his own BS, and was still a charismatic motivator. He's apparently more like Steve Jobs than pundits would have us think.

    But Ballmer is a Harvard CEO of the standard type -- smart, hard-driving, but basically in it for the win, not the game. He has no intrinsic love of the technology; for him, everything is purely bottom-line. I think he's drunk too much of his own coolaid over the years to be objective though.

    Can anyone name a single Microsoft director other than the founders? Do any funds or investors ever really challenge their assumptions, like at a normal company? Not yet, because they haven't had the deadly drop in revenues that is the wake-up call to mismanagement. IMNSHO, that is because they have so much cash, and such a strangehold on their distribution channel, that they can keep squeezing things this way and that, and manage their cash flow to keep Wall Street happy. But you can't play that game forever.

    If I were a major shareholder, I would be working furiously behind the scenes to loosen Bill & Steve's grip on things, and create a more balanced (modern!) public company. I would start with a seasoned, outside tech veteran as new CEO.

    The dividend was the telling thing. Their growth is tapped out, and now they have to transition to a more mature style, or risk a spectacular crash trying to stay young, Joan Rivers-style.

    Just my late-night 3c

    -dave S
    • Option three

      [i]"now they have to transition to a more mature style, or risk a spectacular crash trying to stay young"[/i]

      Option three: create new markets for their new products. Microsoft has enough cash to, basically, buy a brand new customer base. They are self-sufficent to the point that they can keep profits at record-setting levels by doing little more than maintaining the status quo. Most successful company ever? Hmm, it's worth a thought...

      Otherwise, and this is their third option, they can diversify in ways that many doubt they ever will. For example, an MS-branded Linux distribution, or just application software for Linux. Yes, Linux is a small market compared to Microsoft, but it may be in Microsoft's best interest to keep their enemies close, and what better way to do that than participating? No doubt this will raise the "EEE" alarm from the ABMers, but does that matter? It's still money in the bank for Microsoft.

      It seems that many, including MS themselves, see the web-based software field as the next flag to capture, but I tend to agree with Farber's assessment of the market. It will be fiercely fought with little opportunities for growth, and there will be no clear winner. You're dealing with mature, entrenched companies (given the industry, of course) that know how to play.

      It's true that Balmer is a northeastern business-minded CEO who is not inherently a 'geek' in the was that Gates and Jobs are, but that may go a long way towards expalining Microsoft's success. That may have been exactly what Bill was looking for when he stepped aside. It must be refreshing for Microsoft stockholders to know that their capital is being applied with concern for things like market position, diversification and growth as opposed to the cool new toys.

      At the end of the day, as long as the money keeps rolling in, Ballmer is doing his job. He's not supposed to have an intrinsic love of technology. He's supposed to be in it for the win.
      Real World
      • I would buy it....

        but as others have pointed out before, Microsoft would be cutting their own throat if they made anything to help run Windows programs on Linux.
        Patrick Jones
        • I disagree

          Keep in mind, I'm talking a long-term strategy. Basically, IMO, it's inevitable that the OS will stop being the centerpiece of the PC, which leaves applications, either light-weight distributed apps or 'heavy' feature-rich client side apps. I think the latter is an area where Microsoft would excel (pun not intended). In much the same way that they have continued to develop software for the Mac, they should be considering porting their applications to as many hardware platforms and operating systems as possible. If nothing else, its an untapped market. There have been many people around here (and this NOT being a representative sample of the public at large) who have said they would buy Office for Linux. If you consider the difference between OEM pricing for the OS/Office suite and what the retail price would be for Office for Linux, I think the difference would be pretty small.
          Real World
          • Yes and no..

            It really depends on how they position themselves since Windows is a majority of their income. Most of their other applications, besides Office, are only viable because of Windows, IMHO.
            Patrick Jones
        • I disagree too

          While Microsoft has been somewhat slow in the past to recognize and respond to new trends, it can't be said that the people at Microsoft are stupid. Despite Ballmer's blusterings and hard-line pro-Windows stances, I would be surprised if Microsoft doesn't have some Linux and other OSS projects in the works.

          Carl Rapson
          • They may be looking at OSS projects..

            but I doubt they are going to do anything. They would be killing their cash cow. The only way I see them doing this is if Windows gets reduced to less than 50% market share. And that isn't happening anytime soon.
            Patrick Jones
    • .... need anyone say more?

      Reverend MacFellow
  • Too much Kool Aid

    With a long line of victories stretching back ad infinitum, people tend to start thinking that they can NEVER lose. They get fat and lazy (metaphorically) and their leadership becomes inhabited by sychophants. Pretty soon, there does not exist a single person in management that has EVER seen a downturn or has dealt with any hard decisions. THEN the rude awakening happens and the giant struggles to "re-invent" himself. Some succeed, but most don't . . .
    Roger Ramjet
  • Sychophants!

    Reverend MacFellow
  • Sycophant

    It's spelled sycophant. Too much computer stuff; not enough spelling, grammmar and communications.
  • Software has actually gone backwards

    in productivity. It's bloatware. MS needs to fix what they have, make it more productive and less problemsome, and quit offering only eye candy with no real productivity gains.

    As far as OS's, Windows 2000 was as close as they have come to having a top notch, problem free workhorse that was worth the investment. XP is a step backwards and I shutter to think of the nightmare of Vista.

    They need to get back to the basics of productivity because their creativity is killing us!!!