BriefingsDirect Analysts take Microsoft's pulse: Will the software giant peak in next few years?

BriefingsDirect Analysts take Microsoft's pulse: Will the software giant peak in next few years?

Summary: What’s driven Microsoft from day one, and continues to do so, is that Microsoft is the software company for Joe the Plumber. That’s their constituency, not necessarily Joe the Developer. They cater to Joe the Developer, Joe the CIO, and Joe the Analyst certainly likes to check in on what they are doing. It's this whole idea of disruptive technology. They have always targeted the under-served and un-served parts of the marketplace and move up from there.

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Read a full transcript of the discussion. Find it on iTunes/iPod. Learn more. Sponsor: Active Endpoints.

Welcome to the latest BriefingsDirect Insights Edition, Vol. 32, a periodic discussion and dissection of software, services, SOA and compute cloud-related news and events, with a panel of IT analysts and guests.

In this episode, recorded Oct. 10, 2008, our experts examine the state of Microsoft at the onset of the annual Professional Developers Conference. Two narratives emerge from our roundtable discussion, that Microsoft is behind on many new IT trends and is tied to past business models. The opposing view is that Microsoft will ride pedestrian app dev, business intelligence, data services, Xbox, unified communications, virtualization and cloud computing to become bigger and more pervasive than ever.

Please join noted IT industry analysts and experts Jim Kobielus, senior analyst at Forrester Research; Tony Baer, senior analyst at Ovum; Dave Linthicum, independent SOA consultant at Linthicum Group; Brad Shimmin, principal analyst at Current Analysis; Mike Meehan, a senior analyst at Current Analysis, and Joe McKendrick, independent analyst and prolific blogger. Our discussion is hosted and moderated by yours truly, Dana Gardner.

Here are some excerpts:

Kobielus: There’s some validity to the viewpoint that Microsoft's growth potential has capped on the business side, when you consider packaged applications, and software- and application-development tools, in the sense that the entire product niche of the service-oriented architecture (SOA) universe is rapidly maturing.

The vendors in this space -- the SOA vendors, the business-intelligence (BI) vendors, the master data management (MDM) vendors -- are going to realize revenue growth and profitability. Those who survive this economic downturn and thrive in the next uptick, will be those who very much focus on providing verticalized and customized applications on a consulting or professional services basis.

In that regard, Microsoft is a bit behind the eight ball. They don’t really have the strength on the consulting, professional services, and verticalization side, that an SAP, Oracle, or an IBM can bring to the table.

Microsoft, if they want to continue to grow in the whole platform and application space and in the whole SOA universe, needs to put a greater focus on consulting services.

McKendrick: Microsoft has its own economy. No matter what happens to the economy at large, Microsoft has its own economy going, and just seems to get through all this.

What’s driven Microsoft from day one, and continues to do so, is that Microsoft is the software company for Joe the Plumber. That’s their constituency, not necessarily Joe the Developer. They cater to Joe the Developer, Joe the CIO, and Joe the Analyst certainly likes to check in on what they are doing. It's this whole idea of disruptive technology. They have always targeted the under-served and un-served parts of the marketplace and move up from there.

... The base of Microsoft, these companies that are using Microsoft technology, don’t necessarily get virtualization or cloud computing. They just want a solution installed on their premises and want it to work.

Linthicum: I think they are behind the eight ball. A lot of the strategy I’ve seen coming out of Microsoft over the last few years, especially as it relates to cloud computing, SOA, and virtualization, has been inherently flawed. They get into very proprietary things very quickly. It really comes down to how are they going to sell an additional million desktop operating systems.

Ultimately, they just don’t get where this whole area is going. ... We’re heading into an area where they may not be as influential as they think they should be. They may be not only behind the eight ball, but lots of other organizations that are better at doing cloud computing, virtualization, and things like that, and have a good track record there, are going to end up owning a lot of the space.

Microsoft isn’t going to go away, but I think they’re going to find that their market has changed around them. The desktop isn't as significant as it once was. People aren’t going to want to upgrade Office every year. They’re not going to want to upgrade their desktop operating systems every year. Apple Macs are making big inroads into their market space, and it’s going to be a very tough fight for them. I think they’re going to be a lot smaller company in five years than they are today.

Meehan: Dave is absolutely right in that the one area that Microsoft never really conquered that it needed to conquer, given its strength in the desktop, is the handheld. If they are not going to be there with the handheld long-term, that’s a major growth area that they are going to miss out on. That’s where a lot of the business is going to shift to. ... On the SOA side, as I said before, Microsoft is just trying to be as service-oriented as they can for users who are trying to be not SOA-driven, but "As Service-Oriented As Possible" (ASOAP).

In fact, make that an acronym, ASOAP. There are going to be a number of users who are not going to go fully into SOA, because they have an enterprise architecture. It’s too hard to do, too hard to maintain. They’re never going to quite figure that out. They are just going to try to be tactical and ASOAP. Microsoft will try to service them and hold that part of their business.

What’s the next big thing they’re going to do? Joe referred to Microsoft having come up with that in previous downturns. I don’t see where they have got that right yet, and so I think that leads to them being smaller long-term.

Shimmin: [Microsoft is going to have an opportunity to change this perception] and simply because they don’t have to. I think back to a number of points that’s been made here that to be successful Microsoft doesn’t need to convince the world. It just needs to convince the people that attend the PDC. They have such an expansive and well-established channel, with all the little plumber-developers running around building software with their code, that just as 40 is the new 30, Microsoft is really kind of the new Apple, in a way.

They don’t need to be Oracle to succeed, they really need to have control over their environment and provide the best sort of tooling, management, deployment, and execution software that they can for those people who have signed on to the Microsoft bandwagon and are taking the ride with them. ... (Microsoft) is kind of capped out in many ways relative to the consumer market. But, gosh, they have shown that with things like SharePoint, for example, Microsoft is able to virally infest an organization successfully with their software without having to even lift a finger.

They’ll continue to do that, because they have this Visual Basic mentality. I hate to say it, but they have the mentality of “Let’s make it as simple as possible” for the people that are doing ASOAP, as Mike said, that don’t need to go all the way, but really just need to get the job done. I think they’ll be successful at that.

Kobielus: I think Microsoft will be larger, and they will be larger for the simple reason that they do own the desktop, but the desktop is becoming less relevant. But now, what’s new is that they do own the browser, in terms of predominant market share or installed base. They do own the spreadsheet. They do own the portal. As Brad indicated, SharePoint is everywhere.

One of the issues that many of our customers at Forrester have hit on -- CIO, CTO, that level -- is that SharePoint is everywhere. How do they manage SharePoint? It's a fait accompli, and enterprises have to somehow deal with it. It’s the de-facto standard portal for a large swath of the corporate world. Microsoft, to a great degree, owns the mid-market database with SQL Server.

So owning so many important components of the SOA stack, in terms of predominant market share, means that Microsoft has great clout to go in any number of directions. One direction in which they’re clearly going in a very forceful way that brings all this together is in BI and online analytical processing (OLAP). The announcements they made a few weeks ago at the BI conferenceshow where Microsoft clearly is heading. They very much want to become and remain a predominant BI vendor in the long run.

Gardner: ... On the total cost perspective, I think what I am hearing from you is that if you go all Microsoft all the time, there are going to be efficiencies, productivity, and cost savings. Is that the mantra? Is that the vision?

Shimmin: That‘s exactly right, Dana. That’s what they’re banking on, and that’s why I think they are the next Apple, in a way, because they are downtrodden, compared to some of the other big guns we’re talking about with Oracle, SAP, and IBM inside the middleware space. But that doesn’t matter, because they have a loyal following, which, if you guys have ever attended these shows of theirs, you’d see that they are just as rabid as Mac fans in many ways.

Microsoft is going to do their best job to make their customers lives as easy as possible, so that they remain loyal subjects. That’s a key to success. That’s how you succeed in keeping your customers.

Linthicum: Ultimately, people are looking for open solutions that are a lot more scalable than this stuff that Microsoft has to offer. The point that was just made, there are a bunch of huge Microsoft fans that will buy anything that they sell, that’s the way the shops are. But the number of companies that are doing that right now are shrinking.

People are looking for open, scalable, enterprise-ready solutions, they understand that Microsoft is going to own the desktop, at least for the time being, and they are going to keep them there. But, as far as their back office things and some of the things that Microsoft has put up as these huge enterprise class solutions, people are going to opt for other things right now.

It's just a buying pattern. It may be a perception issue or a technological issue. I think it’s a matter of openness or their insistence that everything be proprietary and come back to them. I heard the previous comment that looking at all Microsoft all the time will provide the best bang for the buck. I think people are very suspicious of that.

Gardner: We’ve heard quite a bit on this cloud operating system from Red Hat, Citrix, VMware, IBM, and HP talked it up a little bit. No one’s really come out with a lot of detail, but clearly this seems to be of interest to some of the major vendors. What is the nature of this operating system for the cloud, and does it have the same winner-take-all advantage for a vendor that the operating system on the desktop and departmental server had?

Linthicum: I think it does in virtualization. Once one vendor gets that right, people understand it, there are good standards around it, there are good use cases around it, and there’s a good business case around it, that particular vendor is going to own that space.

I’m not sure it’s going to be Microsoft. They’re very good about building operating systems, but in understanding my Vista crashes that are happening once a day, they are not that good.

Also, there are lots of guys out there who understand the virtualization space and the patterns for use there. The technology they’re going to use, the enabling standards, are going to be very different than what you are going to use on a desktop or even a small enterprise departmental kind of problem domain. Ultimately, a large player is going to step into this game and get a large share of this marketplace pretty quickly, because the cost and ease of moving to that particular vendor is very low.

... These virtualization operating systems that are enterprise bound or even in a gray area with the cloud are going to come from somebody else besides Microsoft.

Read a full transcript of the discussion. Find it on iTunes/iPod. Learn more. Sponsor: Active Endpoints.

Special offer: Download a free, supported 30-day trial of Active Endpoint's ActiveVOS at www.activevos.com/insight.

Topics: IT Employment, Virtualization, Storage, Software Development, Software, Microsoft, Hardware, Enterprise Software, Cloud, CXO, Browser

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10 comments
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  • Respect most of the comments but Dave Linthicum is a whack job!

    I respect and value everyone's opinion on this topic and conversation and it was interesting to read but where the hell did you find the whack job Dave Linthicum?

    He seriously doesn't have any clue and obviously doesn't speak or work with many small, medium and large enterprises, IT Managers and developers. Linthicum sounds likes he doesn't even get Software Plus Services himself and he is wanting to give advice to Microsoft!

    What about this stupidity, "I think they are behind the eight ball. A lot of the strategy I?ve seen coming out of Microsoft over the last few years, especially as it relates to cloud computing, SOA, and virtualization, has been inherently flawed." I mean the only company I see in the market who does actually get it and hasn't just bought into the hype of the cloud is Microsoft. Name me another company who end-to-end has thought about the entire industry and ecosystem from modelling, tools, blueprints, scenarios, users, business and consumers?

    Another stupid comment, "Ultimately, they just don?t get where this whole area is going. ? We?re heading into an area where they may not be as influential as they think they should be. They may be not only behind the eight ball, but lots of other organizations that are better at doing cloud computing, virtualization, and things like that, and have a good track record there, are going to end up owning a lot of the space." Name them? Who has everything worked out end-to-end? Google definately isn't one of them contrary to popular myth. Salesforce might be and Amazon offers limited utility computing. And behind the eightball? Only Microsoft can commodotise and roll this foundation out because they own the ecosystem. They have been working on it form 4 years and unlike others who have rushed out perpetual betas for tinkering nobody has thought about the entire ecosystem like Microsoft.

    This comment takes the cake, "I think they?re going to be a lot smaller company in five years than they are today." What an absolute crock. Are you serious? Look at Microsoft's consistent growth for the past 6 years and show me another company that has achieved that growth and profits consistently across a broad base which protects the company against threats and economic factors.

    I wont even get into virtualisation. Just read this stupid comment, "I?m not sure it?s going to be Microsoft. They?re very good about building operating systems, but in understanding my Vista crashes that are happening once a day, they are not that good." What the hell does Vista have to do with virtualisation? I have had Vista at home and on work laptop since Jan 2007 and the only crash I have had was casued by a crappy Creative sound card driver. Microsoft's Customer Experience Program which collects error messages from millions of computers means they totally understand what they do. Look at what has happened to VMware after Microsoft has come out with Hypervisor and what else it is doing with virtualisation. You are an idiot and have no clue.

    Finally, what about this ignorant comment "Ultimately, people are looking for open solutions that are a lot more scalable than this stuff that Microsoft has to offer." WTF? A lot more open and scalable than Microsoft!? Are you serious? You simply sound like a Linux fanbois.

    Hey Linthicum, you win the pinhead of the year award for your totally ignorant, wrong and stupid comments.
    Martin_Australia
    • You betcha

      You know, Martin, Sarah Palin's kid is fighting in Iraq to
      preserve your right to say these things.
      Dana Gardner
      • WTF???

        Is everybody drunk on ZDNet these days????
        Martin_Australia
  • News flash: MS already peaked ....

    ... and is in a down hill spiral.

    Just show me a single MS product that has being successful (for real, not artificially) in the last few years.
    wackoae
    • More drunk talk.

      Unbelievable. I guess we can kiss MS goodbye in the next few weeks because no company on earth can take anything close to the kind of punishment your implying over several major releases. I guess MS is dead. Lets see who is right, the above drunk or the rest of the world.
      Cayble
    • Wow and you are ignorance personified

      If anybody needed a sample of ignorance personified wackoae is it!

      SharePoint - zero to a billion + sales in less than a couple of years.

      PerformancePoint and SQL Server now put Microsoft into the top 3 Business Intelligence companies in the world.

      Windows Server outgrowing Linux servers.

      Office 97% market share.

      Windows 96% desktop OS share.

      Office Communications Server.

      XBox.

      Visual Studio.

      Exchange Server.

      Dynamics.

      BizTalk.

      ForeFront, System Centre etc etc etc.

      And do these numbers $USD look liked a company going in a "down hill spiral"? Idiot...

      Year | Revenue | Growth | Income | Growth
      2008 $60.42B 18% $17.68B 26%
      2007 $51.12B 15% $14.07B 12%
      2006 $44.28B 11% $12.60B 3%
      2005 $39.79B 8% $12.25B 50%
      2004 $36.84B 14% $8.17B 8%
      2003 $32.19B 13% $7.53B 29%

      And by the way EVERY company releases products which have problems or need a few generations to get right, some backwards to go forwards and even some of them fail and that goes for Apple, Google, Sun, IBM and every other tech company.
      Martin_Australia
      • Who pays you?

        Wow, Martin, you have quite a bit of information at your
        fingertips (and seem to write in middle of Australian night a
        lot) for just a MSFT fanboy. So who really pays your bills?

        I always disclose my sponsors. Why don't you?
        Dana Gardner
        • Wow so typical you simply attack the person rather than debate the issues

          Wow, you people amaze me. Rather than debate the issues or the merits of your arguments you simply attack me and then question my motives!!!!!

          All you have to do is go to www.microsoft.com/presspass and all the stats and facts are right there at one click after typing some words into Google. Maybe if the so called tech writers and journalists on ZDNet actually did some deeper research and less trigger finger subjective assessments and ignorant opinions prior to writing disengenious articles then you wouldn't get responses like mine.

          It's also funny that when someone defends Microsoft you all come out and start accusing the person of either being a Microsoft shill, drinking too much cool aide or being paid by them!!! (We do have an enterprise agreement with them and are very happy with our relationship with Microsoft).

          So, why don't you say the same thing to those people who needlessly attack Microsoft? Why don't you ask them who is paying them to write such ignorant and illinformed drivel? I don't think I have ever seen you or any other writer/blogger on ZDNet questioning the motives of people attacking Microsoft.

          You are a total hypocrite. If you don't like what I say then you question my motives and accuse me of being a person paid by Microsoft. It is a bit like zealot democrats, great intentions but if you don't agree with them then they attack you and call you an idiot, redneck or a moron. (By the way I like Obama but dem's are going way too far.)

          Look in the mirror and question yourselves first and just look at the consistently stupid, negative and agenda driven articles on ZDNet in relation to Microsoft.

          Have a nice day. :)
          Martin_Australia
  • Some of that sounded like drunk talk...

    Linthicum:
    "The desktop isn't as significant as it once was. People aren't going to want to upgrade Office every year. They're not going to want to upgrade their desktop operating systems every year. Apple Macs are making big inroads into their market space, and its going to be a very tough fight for them. I think they're going to be a lot smaller company in five years than they are today."

    Who ever upgraded Office every year?? Since when has there been a new Microsoft OS every year?? And what big inroads has Apple made on MS...unless you're really concerned that MS was winning over the mp3 world with the Zune. And certainly, he cant be implying that Apple has made "big inroads" into the MS operating system sales, big inroads would be at least taking 10%-15% of MS business, and some would even say that wouldn't be big inroads; in any event, Apple has only made some very minor inroads at best.

    Unfortunately this is obviously coming from a guy who must live in the IT world and not in the real world of what the majority of the world live in. In the "real" world nobody talks about cloud computing and if you spent long enough to properly explain it to the average person they always say the same thing. Everytime: sounds like if its free its great for people who are broke, and if it costs, simply no thanks.

    I often wonder if the people who keep crowing about computing in the clouds being the next big thing even get it. Computing in the cloud is all fine, its like a fun thing to be able to do if you really have to, or you just fancy doing what you think is the next big thing, but for the real world where you need your applications on hand, with or without internet, and thats about 75% at least of the real world then computing in the cloud just sounds like a slightly risky poor mans version of having the software yourself. Cloud computing is like public transit, it cost you less but it seldom lets you off right where you want to be, and if there are any problems with the service you have no say how to get things up and running again. Hire a cab.

    At a time when the price of HD space plummets at a regular pace, drive space is not an issue so there really isn't any reason to do cloud computing more then owning the application yourself. Unless of course you just cant afford the program, and in that case, good luck and I hope your connection doesn't go down when your working on that deadline.
    Cayble
  • Linthicum is an expert? Then Bush is a Master Jedi...

    What a pinhead...
    transposeIT