Microsoft happy to kill off other ISVs' code businesses, but not it's own

Microsoft happy to kill off other ISVs' code businesses, but not it's own

Summary: Can Microsoft fend off the twin, albeit inter-related, interlopers of open source and an expanding roster of low-cost business services built of open source stacks?

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TOPICS: Microsoft
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Based on a smidgen of new detail on how Microsoft will proceed into the business services market, it appears that Redmond will be happy to add services that augment its core Windows, messaging, and Office applications -- and thus stab in the back those ISVs that have created the third-party safety net for Microsoft users. But when it comes to building out services that may in any way replace the functions of its core code products -- the equivalent of "Business Live," if you will -- Microsoft appears to want no part of it.

The essential questions now is, Can Microsoft have it both ways? Can they anoint and bless some business services, such as those that augment their core products, but remain hands-off for other services that encroach on and then embrace the Windows license to print money? The question remains: Can Microsoft have it both ways? Or is the move to business services for large businesses a slippery slope, a finger pulled from a dike, that sets off a cascading torrent of more business services supported increasingly through advertising that converts the licensed enterprise software business into a buggy whip factory in a matter of only a few years?

Moreover, can Microsoft fend off the twin, albeit inter-related, interlopers of open source and an expanding roster of low-cost business services built of open source stacks? To remain close to the on-premises licensed software model is to compete against an increasingly sophisticated open source universe for those new code installations.

Yet moving to the business services model for Microsoft diverts more revenue (never to be replaced at similar levels) from the licensed code model to, in effect, swap out a high-margin lock-in business for a dynamic free marketplace of ad-support services on demand. And yet Microsoft cannot stand still either, or open source eats their lunch on the on-premises side, and venture-based Web 2.0 business services companies eat their suppers as services take off.

Talk about soul searching. Makes eradicating malaria seem the easy part.

Based on Mike Ricciuti's as-always excellent reporting, Microsoft is putting it's fuller services agenda behind what it serves up to homes and consumers, sure, but it still needs to soak businesses on CALs and enterprise licenses or Wall Street will slap down their stock price post haste. This is the position between a rock and a hard place that Microsoft is sliding into but still doesn't seem to want to address head-on. Hence the leak to News.com about the adjusted stance on business services for enterprises, which seems to amount to a retreat from earlier declarations about its intentions with regard to such services.

If we're to take Bob Muglia, Microsoft's senior vice president in charge of servers and tools, at his word, then Microsoft will not soon build out services that may have a net negative revenue impact on its licensed code products for businesses. In other words, Microsoft's licensed code products will be protected, but other vendor's licensed code products -- for malware protection, management, migrations, application lifecycle management, etc. -- will be eviscerated.

Nice. That's how to build out a partner ecology, all right. But what it actually points up is a major catalyst for those ISVs and third-party providers (especially green field ones) to move even more quickly themselves to provide business services that begin to replace Windows and Office functionality. And those services will not be limited to augmenting Microsoft's core business code products. No, they will soon encroach by a thousand cuts -- a long tail lash that guts Microsoft's golden goose monopoly money gusher -- probably sooner than we may think.

For the green field Web 2.0 business services players who can build out their own equivalent of the Google-like LAMP stack architecture for less money and hassle than ever, and who have no incumbent business margins to preserve, can proceed to give away the Windows replacement business services and monetize their investment and operations through contextually based, business-oriented value-add content (otherwise known as targeted text ads).

Indeed, if Microsoft begins to add anti-malware protection as services -- just like what IBM recently ramped up -- then ISVs will wake up pronto to the fact that they need to beat Microsoft to the business services punch and put themselves out of business before Bill and Steve do. If McAfee, Trend Micro, and Symantec see the writing on the wall, then so too should any other third-party support providers to the universe of Windows and Windows Server Systems world-wide.

Google and Sun remain coy on how they would enter the business services field that directly targets Windows and Office (client and server). Microsoft may force their hand, however, by a FUD-oriented, having-it-both-ways reaction to its strategy on enterprise business services. Microsoft's hubris here may actually accelerate the investments in, and movements toward, those very business services that threaten Redmond's cash flow the most.

Google and Sun (or the "other" open source stacks) could then rapidly provide the picks and shovels -- through the advertising business model and low-cost, high-performing infrastructure, respectively -- that empower the miners to chip away at Microsoft's gold mine.

Microsoft may be better advised to move aggressively to the very business services that replace its Windows/Office function set, and thus vastly reduce the incentive for others to go there. Such a pre-emptive move would resurrect the "no one wants to compete against Microsoft" boogeyman by elevating the competition to business services. But, of course, any one with a git of sense would sell MSFT short once they recognized that unfettered competition, not monopoly, was Microsoft's future.

The question remains: Can Microsoft have it both ways?

Topic: Microsoft

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  • What the heck is an ISV?

    This article violated one of the primary rules of writing. Before you start throwing acronyms around willny nilly -- like ISV -- first use the complete phrase and put the acronym in parentthesis. Then, after that first use you can use the acronym in place of the whole phrase.

    Every industry has jargon, and while you can determine approximate meaning from context, would be helpful to spell it out at least one in first use.

    I have a business degree, I am a news junkie -- I actually work in the news media, I have built many computers and keep up with the computer industry as a whole -- especially Microsoft, Google, Yahoo, etc. Having read this article, I'm still not quite sure what an ISV is.

    Does ZDNEt not have editors?
    ChazzMatt
  • What an ISV? - Independent Software Vendor

    I?m not sure that Microsoft really has anything to worry about at this point. If the main question of this article is will free ad-supported software replace Microsoft?s licensed code mode, than the answer is no. Would any business trust the security of their network to software that loads ads (unknown code) on its system that handles sensitive data? I know that I wouldn?t.

    I do feel some sympathy for the situation Microsoft is in; how do you grow the business when there is no compelling reason for your customers to replace your core products?
    mhuddy
    • compelling reasons to upgrade Microsoft products?

      > I do feel some sympathy for the situation
      > Microsoft is in; how do you grow the business
      > when there is no compelling reason for your
      > customers to replace your core products?

      The Amercian automoibile industry had the same problem in the 50s and 60s. There were only so many gee-whiz features you introduce every year. How do you get people to upgrade to the new model year automobile? More chrome and bigger fins? So, Detroit decided to help themselves by incorporating built-in obsolecence. Cars were engineered to last only about 50,000 miles or so. After that, repair costs started to eat you up, and you needed a new car. So, the car companies were assured of a steady supply of new customers even though everyone already had a car. Every two or three years, you HAD to go buy a new automobile.

      I know Microsoft thinks wisfully of that business model -- they probably wish older versions of Office would just expire or something. Some people are still using Office 98 and are quite happy about it! Except for Outlook there's nothing that newer versions of Office (Office 2000, Office XP, Office 2003) has that is really necessary for most people. Some features like so-called "personalized" menus and the (Word 2003) "reading pane" actually detract from productivity and I turn them off as soon as I can figure out how.

      Micorosft even named Office XP to correspond with Windows XP to fake people into thinking they needed to upgrade to Windows XP to be able to run that Office Software. Office XP had nothing to do with Windows XP. I've run Office XP on Windows 98 machines. And the individual Office XP modules were released and sold as Word 2002, Excel 2002, etc. So, why not call it Office 2002? That would make more sense. The ONLY reason Microsoft would slap the XP moniker on the whole suite would be to confuse consumers. Can you smell the desperation?

      Yet, back to the automobile industry ananlogy: Honda and Toyota (outside competition) came along and managed to sell fuel-efficient cars engineered to last 100,000 miles or more. And they still make cars that are compelling enough to be the best sellers year after year. What Detroit (and Microsoft in our analogy) suffered from was a lack of imagination and competition that would force them to make relevant products that people WANTED to buy, not because they had to.

      Time after time we see that Microsoft only makes substantial relevant changes to their products when they copy features of the competition. But the Microsoft monopoly has quashed most competion -- especially among the Office suite products (Word, Excel, PowerPoint). That's why there's no compelling new features in recent versions of Office -- there's nobody left to steal from. :) Only with their OS do they have someone like Apple to lead the way. Thank goodness for Tiger OS X! (Hopefully Microsoft can copy the functionality as well as the look.) Or web browsers? IE 6 is long in tooth and only with Firefox gaining in popularity does items like tabs and RSS feeds belatedly make their way into the next version of IE? ooh, where did they get those ideas from? Even one of the most useful features of Windows XP -- System Restore --- was not present in Windows 2000 (the almost identical predesssor that was released just the prior year), but was added when another company started selling almost identical software called "Go Back." Suddenly that new feature got added to Windows XP -- and "coincidentally" -- caused conflicts with Go Back if installed on the same system. It's a good feature -- I've used it many times -- but my point is that Microsoft has NEVER been innovative in their life. The have always copied, stolen or bought any relevant new features to any products. Another example -- the hard drive defragmenter for XP is licensed from another company. I use the original from that company because it has more features -- the built in XP defragmenter is a stripped down version -- but with 45,000 software engineers why can't Microsoft build their own world class defragmenter?

      Even in the begining, Bill Gates didn't even write MS-DOS himself -- he BOUGHT it from another company, then turned around and "licensed" it to IBM -- which started the whole licensing concept for software. Also, Microsoft didn't even write IE -- they licensed a prior version of Netscape called Mosaic -- to compete against Netscape. They competed against Marc Andreeson and company by using a product written by Marc Andreeson and company because they had no clue how to create such a product themselves. They killed Netscape but the ashes rose again as Firefox. Now they are stealing ideas from Firefox. If it wasn't so tragic it would be funny. Think what the original Netscape could be by now if the monopoly of Microsoft hadn't interfered. Think what WordPerfect (or word processors in general) would be now if the stagnant Word hadn't been given the inside track. Think what media players we could have if Windows Media Player hadn't forced RealPlayer to become a street corner prostitute.

      Microsoft needs more competition and THEN they will sell more products -- not because people have to buy, but because the competition will generate ideas that Microsoft can claim as their own.
      ChazzMatt
  • In dealing with MS, all ISVs

    should recognize that their role is that of the male black widow spider getting cozy with his chosen mate. It often turns out being a life altering experience.
    OldGreyGeek