The Microsoft middle ground

The Microsoft middle ground

Summary: Microsoft occupies a middle ground between the vertically-integrated control of an Apple and the bazaar-like atmosphere of the open source world. Microsoft abandons that middle ground at their own peril.

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On Monday, I wrote a piece explaining what lessons Microsoft should draw from its competition with Apple. In essence, I was completely in favor of the development of strong hardware design and user interface competencies (in other words, Microsoft should build more hardware in-house), but strongly opposed any attempts to copy the Apple business model. Microsoft's platform orientation has led to a development tools and infrastructure side of the house that is simply second to none, and benching them in any competitive endeavor would be like sidelining your best players in the final game of the World Cup.

Microsoft occupies an interesting and highly-profitable middle ground between two worlds. On the one side, you have Apple, a company that views software as a feature of the hardware from which they make the bulk of their profits. You can't buy Mac OS X to run, legally, on any platform but an Apple-branded computer, and some of the newer products that use it, such as iPod and the iPhone, are tightly controlled. This business model is highly profitable, offering hardware margins that are the envy of the computer business. It does, however, mean Apple must stand alone when it comes to finding interesting ways to use Mac OS X. That fact also changes their approach to software design. I have a hard time believing that anyone with exposure to both worlds believe that Mac development tools and technologies as on par with what's on offer in .NET 3.5 and Visual Studio 2008.

On the other side is the open source development world. Open source software is often hardware-agnostic to a degree that even Windows is not, drawn along to new hardware pastures by any group of programmers decide they wish to support. That's the magic of open source: you can do almost anything you want with it, a fact enhanced by complete access to source code. This often makes open source software considerably cheaper than proprietary alternatives. From a business standpoint, however, that is also open source software's Achilles heel. Quite often, the lack of revenue deprives open source of the benefits of revenue-generating business models.

Those benefits, as I've explained before, relate to how profit incentives turn the attention of developers towards the interests of other people (in this case, the non-technical). A corporate, profit-based relationship also creates a unique source of information regarding user needs, as well as a certain self interest-derived tunnel vision with respect to those needs.

Microsoft lives in the intersection between these two models. They have the profit levels to be derived from a business model that sells access to a secret (you don't have access to much Microsoft source code, though that is starting to change). Though they don't support desktop platforms beyond x86 (which has a certain logic in a world that is still plenty binary-centric, and which doesn't apply to the embedded space), they are software licensing oriented, and that has shaped the way they design their technology. Microsoft's development tools and technologies are Microsoft's standout characteristic. Historically, Microsoft was notable for the manner in which every product was designed with reusability in mind, extending the platform in the process with every new software creation.

Standing in the middle is a great place to be, and partly explains the market share Microsoft has and continues to maintain. Microsoft systems (running, as they mostly do, on non-Microsoft hardware) are much cheaper than Apple systems. They are, however, more expensive than might be possible with Linux (though $3.00 Windows in developing markets aims to alter that equation, and more of that seems in the pipeline. It's a nice mean, and I think Microsoft would be crazy to abandon it in ANY product category they choose to enter.

Topics: Hardware, Apple, CXO, Microsoft, Open Source, Software, IT Employment

John Carroll

About John Carroll

John Carroll has delivered his opinion on ZDNet since the last millennium. Since May 2008, he is no longer a Microsoft employee. He is currently working at a unified messaging-related startup.

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32 comments
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  • Some Middle Ground

    Billysoft is up to its eyeballs in scandals and corruption. It's flagship product is driving victims - er, customers - to Apple, and Internet Explorer is commonly ranked the third or fourth best browser. Zune is a joke.

    Bill Gates' new obsession is public relations, and his favorite scam is the Gates Foundation. But if word gets out that it's actually a corrupt investment firm, Billysoft's reputation will be toast for all time.

    David Blomstrom
    Candidate for Public Office
    David Blomstrom
    • Actually, Apple is making some MS mistakes.

      I have read how iPhones are having lots of problems. MobileMe, etc. Apple seems to have lost some of it's focus on quality in a rush to grow it's market. I think they have spread themselves a little thin.

      TripleII
      TripleII-21189418044173169409978279405827
      • Which brings us to the value of capital markets anyway ...

        ... do they actually create and drive growth, or are they just a self interested thing which gets in the way only for its own good?

        BTW, this question is already being answered.
        fr0thy2
      • Idiot

        Nice to see you ignore the fact that Apple has taken responsibility for it NOW rather than waiting 18months THEN doing something about it, in the case of Windows Vista.

        Windows Vista released beginning of last year, Service Pack 1 was released, and it still sucked - various updates and 'boosters' and it still sucks. Dear god, wake up and smell the horse crap, because the aroma ain't going to get any better.
        Kaiwai
  • Price vs TCO

    Your piece fails to mention the well-documented costs of owning MS-based desktops and servers. The delta in the TCO of MS- vs. OS X- or Linux-based hardware is widely thought to be in excess of the so-called "savings" of said hardware.

    It's no coincidence that the legions of MCSEs out there continue to thrive--fixing problems inherent in the MS universe.

    Unfortunately, human nature being what it is, the easy decision was to calculate costs of buying, and ignore the more-difficult to calculate life-cycle costs. This naturally led to the buy-in of "cheap" MS-DOS and Windoze computers, which cost oh-so-much more to support over their life cycle.
    MacVet
    • Yes, but the current perceived credit crunch

      should get rid of a lot of the "me-too" fat from the system.

      Only the genuine knowledgeable IT lovers will be left ....
      fr0thy2
  • MS strength is also a weakness

    MS gets a large percentage of profit from the
    Windows desktop OS. It gets most of its sales
    of that OS from OEMS who install it on new
    machines.

    Unlike most other parts suppliers to OEMS, MS's
    product is featured and is THE interface with the
    machine.

    When something goes wrong, is it the OS or the
    machine? Is it MS's fault or the OEM's? How
    about any peripheral equipment? Are printer
    problems caused by Windows, the printer's
    drivers, or the printer itself?

    The problems that people complained about
    with Vista are indicative of the problem. Some
    OEMs installed Vista on machines that were not
    capable of handling its features. Some
    peripheral makers released poor drivers. MS is
    still being haunted by this.

    Of course, any machine from any maker might
    come with a bad hard drive that causes
    continuous crashes. That would go for other
    hardware parts in the machine also. The user
    might well blame Windows when it has nothing
    to do with the problem.

    When compared to Apple, this can be a
    weakness. When you get an Apple machine and
    something goes wrong, it's Apple's fault and
    you have one point of blame and one point to
    get it fixed.
    j.m.galvin
    • I agree

      Apple has the advantage of tightly controlling the hardware configuration, and it might do well for Microsoft to have a stricter certification process for Vista (and successor) compatible machines.

      That, however, doesn't mean that the only viable model is the closed Apple one. Microsoft can improve its licensing model while still creating a platform that is licensable to third parties and which can benefit from third party innovation to a degree to which Apple restricts itself.
      John Carroll
      • Yep!

        In a talkback to your first post
        about MS being more Apple like I
        said that each company is what it
        is and they can both prosper.

        No matter what any company
        does, in any market, there are
        plusses and minuses. As it
        stands right now, it seems that
        both Apple and MS are
        succeeding with their business
        methods. Both are growing
        revenue and both are increasing
        gross profit.
        j.m.galvin
  • I don't see MS moving to the middle ground.

    That is not what the current and legacy MS upper management have ever done. It was all about 100% control of all markets.

    Now, honestly, MS lacks the resources to really focus on it's core products. Big as they are, they are extended way too thin on too many fronts.

    Zune can be saved, it needs real focus and imagination. I say to MS, give up on I.E. The internet is no longer locked, you can never re-lock it, why not just give up on it? Sure, develop IE 8 but let the world know, that's it, move away from the only thing IE is needed for ActiveX.

    XBox - easy, make it it's own divison, sink or swim on your own. It is really really easy to be mediocre when you know you have an endless stream of money.

    Search, concede and work WITH Google. Live services, focus focus focus. How many services have been introduced then aborted, removed, replaced. What really is live. Either do it right or stop wasting the money.

    Vista and Windows 7, refocus. Eliminate all the lock in measures and free the engineers up to make it fly, be efficient, and reliable. Honestly, I think Vista is what happens when a non technical committee designs the OS then tells the engineers/developers, here are the 14,288,123 rules you have to follow, GO!. To a large extent, I think SP1 was simply a removal of crap and refinement the way developers know how to.

    I keep saying it, it all comes down to will and what you need to do. They can keep throwing inadequate resources on 100 fronts and try to make "good enough" or they can refocus the resources and make their core products "excellent".

    This requires something MS has never done. Concede a market. That is MS's achillies heel.

    The one exception, where they really and truly have to compete is in the enterprise and server area. That division gets it, you MUST make it better and more reliable since you don't own the entire market.

    TripleII
    TripleII-21189418044173169409978279405827
    • I never cease to be amazed

      at the advice people give Microsoft on how to run a business.

      MS is highly profitable and their tools are second to none.

      Sometimes I can't decide if the posters are serious or are just trying to be outragous!
      High Plains
      • It is amazing.

        The assumption that Microsoft has a bad business model just doesn't make sense. Open source and Apple still haven't made much of a dent in Microsoft's market share. If Microsoft should be crying about all of that, they're crying all the way to the bank.

        You may not like Microsoft's programs or their policies when it comes to software but they certainly have good business sense. There is no need for them to change their model. Frankly, Apple and Linux aren't much of a threat to their profit margin. While this may eventually change, I doubt if it will happen anytime soon.
        slaskoske
        • Well,

          if Apple's Market share keeps going up exponentially as it has in the past 4 years, MS has something REALLY big to worry about, and it isn't just in the desktop space. The iPods and iPhones that run OS X are an even BIGGER threat than the desktop arena to MS. Look for the Zune Phone here in the next couple of years as MS tries to hedge the bleeding.

          MS's limitless cash pile to throw at mediocre projects is gonna come to an end if this trend keeps up. Those who don't see the fall of MS in the next decade are fooling themselves if MS does not improve their core money makers. People are stealing this right out from under their noses. I am not implying that Apple's or anyone elses products don't need improvement, because they do, but there has got to be some serious hand wringing going on right now in Redmond.
          Kid Icarus-21097050858087920245213802267493
      • Their model was GREAT for 1998.

        When they owned everything. They believe they can re-own everything, and spread themselves too thin. They don't have enough people to make great software and development on all fronts. If they don't change this soon, their erosion from relevance will accelerate.

        Take I.E.8. It is in beta and already 3rd place in terms of function. If they are going to go I.E. seriously, then seriously do it, make it #1. That means you have to pull resources from somewhere else.

        Take Live. It is directionless, constant churn and even MJ who follows it religiously can't really tell you what it is. Features come and go, change, etc. If you are going to do live, DO IT RIGHT, which means pull resources from somewhere else and make it rock.

        The constant "ok" and "good enough" won't cut it. MS is propping up all these battles with IIS and OEM revenue.

        Seriously, where, which product line is MS leading the way, breaking new ground and beating the competition? (ignore the legacy lock on OEMs). That's what MS needs to get back to.

        TripleII
        TripleII-21189418044173169409978279405827
  • lock-in is MS business model

    ...mean Apple must stand alone when it comes to finding interesting ways to use Mac OS X. That fact also changes their approach to software design. I have a hard time believing that anyone with exposure to both worlds believe that Mac development tools and technologies as on par with what???s on offer in .NET 3.5 and Visual Studio 2008...

    Actually I dont care about Visual Studio and .net. I use a plethora of Open source & Unix technologies, Solaris & freebsd on the server side & MacOSX as workstations.
    First, Apple dont stand alone when come to "finding interesting ways to use MacOSX"; most relevant software originated on the mac platform, including Word, Excel and PowerPoint.
    Now if you look the top20 list of best selling software on Windows, 12 are MS applications and the rest are antivirus, antimalware and system utilities to keep the machine running.
    Nothing to trumpet about.

    Now we can argue long time if my tools are better than yours but there is not point. The relevant point is that, as a mac user, Im part of a bigger ecosystem, OSS. And in my ecosystem there is a tool, a technology and a platform for everything I need, But not lock-in

    PF
    theo_durcan
  • Why speak from a position of ignorance?

    "Microsoft???s platform orientation has led to a development tools and infrastructure side of the house that is simply second to none..."

    The why are they playing catch-up with Mac OS X.

    "I have a hard time believing that anyone with exposure to both worlds believe that Mac development tools and technologies as on par with what???s on offer in .NET 3.5 and Visual Studio 2008."

    Of course this depends on the task, but spoken like someone that has no exposure to XCode and Interface Builder, the Cocoa frameworks and WebObjects.

    JC how about getting your hands on Xcode for a weekend and writing an blog from a position of knowledge rather than ignorance.

    Ars had a storey about someone that actually did:

    http://arstechnica.com/articles/culture/what-microsoft-could-learn-from-apple.ars

    Guess for some it is easier to take the MS money.
    Richard Flude
    • JC craps on and on and on

      and never replies to people who make valid points; unless the question is something giddy and stupid, he'll never address those issues that you raised.

      He is a dyed in the wool fanboy of Microsoft who has never used a computer outside that of running a piece of Microsoft software - and it shows. If he had any knowledge of systems outside that of Windows he would realise what a ball of pathetic compromises it is.
      Kaiwai
      • Calm down

        I didn't have time to respond yesterday. I do now.

        I will answer questions from most people. The people who I don't answer tend to be the insulting ones. That's why I rarely respond to Richard Flude.

        It's a free world, and people can respond to me (and read every post I make) to their hearts content. I never, ever request that posts be removed from the Talkbacks (well, there was one time, but that was because someone was making racial attacks). I won't, however, engage in dialogue with insulting people.

        It's that simple.
        John Carroll
        • NO!! I WANT THE CRAB COUNT AND I WANT IT NOW! (nt)

          (nt)
          TripleII-21189418044173169409978279405827
          • lol

            Watch it Sig... you'll have a mutiny on your hands.
            Hallowed are the Ori