Ray Ozzie's vision lacks an economic foundation

Ray Ozzie's vision lacks an economic foundation

Summary: Will Microsoft provide and nurture the innovative sparks that foment the universe of services and content better than a global bazaar can? Not so far.

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TOPICS: Microsoft
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Some interesting analysis today from fellow ZDNet bloggers reacting to Ray Ozzie's speech last week. But if I distill this all a bit further I keep coming up against an economic conundrum -- one that pinches Microsoft between an Apple model and a Google model.

Microsoft, if it tries to do both models, wins against neither ... and falls. Getting out of this scrap will not be as easy for Microsoft as the Netscape/browser/Web problem of 1995-97, nor the Java jam of 1998-2003.

If as Ray says that Microsoft is the "middleware" between servers, data, and clients, then there's this little issue of the content and the applications/services that also play in this total ecology. With today's Internet -- more than ever before -- content, services and the architectural approach of mashing them freely for productive pursuits is both more powerful and more decentralized than any tightly coupled client/server model has -- or could attractively -- manage.

And that content and those services are increasingly, and -- I'd say irreversibly -- untethered from a dominant platform and development framework. So Microsoft, despite its gargantuan presence on the PC desktop with Office et al, and its Web portals, and games console, and content holdings, and mobile pursuits, and its billions, and its developers, can not really believe it can offer monolithically a compelling critical mass of the business and lifestyle services that individuals and businesses want and need, and somehow tie that altogether better than a creative-chaos enriched open model.

Will Microsoft provide and nurture the innovative sparks that foment the universe of services and content better than a global bazaar can? Not so far. For Microsoft to attract enough content and services to the universe now being described by Ray and via the Windows Live pivot-point approach, it's going to have to make a lot of providers and creators offers they can't refuse.

Microsoft understandably thinks it has the users to play off of for the unqualified alligance of the creators, and that will remain a possibility for a time; Vista must keep and deliver the users. And yet the providers -- and increasingly the users -- won't be locked in, not on the client, not on the server, not in the architecture.

Time Warner walked away from Microsoft earlier this year, and why wouldn't any other major media company? I'm still a bit pessimistic that Vista will bind ISVs and SaaS providers to Windows going forward. Will Vista keep the users on the farm enough to capture the content and service providers? Ask YouTube.

Microsoft's only hopes in pulling off Ray's Dream are to offer a better fully integrated approach than Apple with iLife et al, and do it far cheaper and with better security than Apple does in the home, mobile, and in the SOHO. And Microsoft will -- and this is crucial -- need to attract more content and media companies to its model than Apple. Haven't seen it yet.

At the same time, Microsoft is going to have to provide the services delivery platforms and tools combo that hosts, carriers, content providers, SaaS vendors, ISVs, and IP content-driven providers of all stripes -- from VOIP to podcasts -- will bet their futures on. And this infrastructure will have to be at the best price points, with the best support of legacy and future content and services. And this super services delivery platform must have a better TCO than an open source-endowed assortment of alternatives can offer.

And the only way that Microsoft could do that with an economic probability of success over a long period of time would be to go up against Google and the media establishment and win a significant growing portion of the global online advertising pie, with which to subsidize the cost of the platform and "middleware" ecology Ray is describing.

By using the revenue from ads, Microsoft would offer the lowest-cost super service platform -- charging its users and datacenter operators open source prices -- and perhaps make its latest vision work. Problem is there's Apple, Google, the media companies, the developers, the carriers, Madison Avenue, and all the content and services creators -- the actual people and businesses that both produce and consume content now -- who may have a different vision, and are already well on their way to building it without all that much need for Microsoft's help.

Without the critical mass of mass adoption on both creation and consumption, well then the economics required for Microsoft to over-run the now unleashed Internet Age won't support the notion of a Microsoft set of integrated, combined, and largely closed "middleware."

It's just too late. Ads will drive the new low-cost economics of Web services for consumers and small business, and SOA will be too compelling for large enterprises to even try and unify away from general heterogeneity. By the time Microsoft can begin to wage the ad dollars against the cost of using their stacks and "middleware," the myriad alternatives will be too irresistible.

Microsoft's offer will not be one the critical mass of providers, creators, and consumers cannot refuse.

Topic: Microsoft

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5 comments
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  • Sell the name Microsoft

    The Microsoft name has huge value among the uninitiated masses as does the name Bill Gates. Ozzie will use that name to good ends as do all Microsoft's partners. So the statement..

    "Microsoft's only hopes in pulling off Ray's Dream are to offer a better fully integrated approach than Apple with iLife et al, and do it far cheaper and with better security than Apple does in the home, mobile, and in the SOHO." is wishfull thinking.

    The fact is that many businesses and government agencies have policies in place forbidding the loading of software until it has been approved and everyone in IT knows that without the Microsoft seal of approval it will not be. You do not get fired for recomending Microsoft software. Many cases of getting fired for recommending open-source Java and Linux can be found.

    Regarding the statement "And Microsoft will ? and this is crucial ? need to attract more content and media companies to its model than Apple." is right on. But haven't they done that with Blockbuster, the old Enron partner. When Enron went under who took over the 20 year arrangement with Blockbuster for film distribution? I have assumed that was Microsoft.

    Frank L. Mighetto CCP
    thanks for the article.
    mighetto
  • Yes!

    You hit the nail on the head Dana. Microsoft doesn't seem to have realized that the world has changed. They're trying to do way too much, and there are too many better competitors out there. They're going to get squeezed. Excellent writeup.
    ryanstewart
  • MS has lost its way

    MS clearly has little idea what people are wanting from their products. They miss on key thing KISS, keep it simple stupid. Vista and Office 2007 are grossly over wight and bloated. Take out the extra crap and provide good solid product that does what the customer base wants, and sell it for a fair price. Vista is so huge and bloated with unwanted and uneeded items I suspect we are looking at Windows Me the second. As to Office2006 MS needs to look at why Office97 is still in wide use and well liked by many. It is simple, works well, and delivers what the customers want with minimal fuss. The more MS trys to shove unwanted "enhancements" down the throats of the customers, the more they continue to prove what we know, they continue to behave like a monopoly.
    drichards1953
  • Great post--on the mark

    I think this period of time will be looked back at in great detail as a real time study in a classic business model of a paradigm shift and disruptive technology in action.

    It is much easier to start from scratch to compete in this new market than to have to re-learn 25 years of practice THEN start from scratch.

    I have been watching the Microsoft blogs and it is interesting to note that Mini-Microsoft claims he has 'thrown in the towel'. Chaos seems to be reigning in the halls of Redmond and the window where we could hear reflection outward of a bickering family seems to have been closed for now.

    I also believe Microsoft is toying with the Apple business model of a bundled system including hardware as a stopgap means to compete in a world of open source. That too would be a failed strategy because the world still wants to choose hardware and OS separately if needed.
    WinnebagoBoy
  • Compelling! And, if true, marks the...

    ...beginning of the end for Microsoft. Which is why they should embrace my patent-pending integrated and synergistic (Advertiser - Seller - Searcher - Shopper) reward point system. Falling on deaf ears.
    rayted32