Analyst: 'It is game over for Microsoft in consumer'

Analyst: 'It is game over for Microsoft in consumer'

Summary: What if Chief Software Architect Ray Ozzie and other leaders at Microsoft are wrong and integrating the consumer and business worlds doesn't really matter? One very influential market watcher, Mark Anderson, author of the Strategic News Service newsletter, is betting that instead of a melding, there will be an increasing chasm between the consumer and business market.

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Microsoft started out its life as a consumer/developer-focused company. The company subsequently switched strategies and became a largely enterprise-focused vendor. These days, consumer is king for Microsoft -- at least as far as corporate strategy and where its ad dollars go.

But what if Chief Software Architect Ray Ozzie and other leaders at Microsoft are wrong and integrating the consumer and business worlds doesn't really matter? One very influential market watcher, Mark Anderson, author of the Strategic News Service newsletter, is betting that instead of a melding, there will be an increasing chasm between the consumer and business market.

Anderson, whose word carries a lot of weight with corporate execs (including those from Microsoft), venture capitalists and other movers and shakers, held his annual predictions dinner in New York City on December 10. His list of 2010 tech predictions, which included a number of things that won't surprise some tech watchers, Anderson acknowledged, were pretty dire for Microsoft. The ten:

1. 2010 will be The year of Platform Wars: netbooks, cell phones, pads, Cloud standards.  Clouds will tend to support the consumer world (Picnik, Amazon), enterprises will continue to build out their own data centers, and Netbook sector growth rates continue to post very large numbers.

2. 2010 will be The year of Operating System Wars: Windows 7 flavors, Mac OS, Linux flavors, Symbian, Android, Chrome OS, Nokia Maemo 5. The winners, in order in unit sales: W7, Mac OS, Android. W7, ironically, by failure of imagination and by its PC-centric platform, actively clears space for others to take over the OS via mobile platforms.

3. All content goes mobile.  Everything gets tagged, multi-channeled, and the walled gardens open up.  TV and movie content, particularly, break free of old trapped business models.  We are moving toward watching first-run TV and movies on phones, for a price.  Which leads to no. 4.

4. MobileApps and Mobile Content drive MicroPayments, which move from niche to mainstream payment models.  Payment for content will split along age lines, at around 35; above, pay; below, don’t pay.

5. The Phone vs. the PC: A Split Along Two Paths (enterprise vs. consumer).Note: The phone is now the most interesting computer platform, and it is driving innovation: software, business models, distribution. Netbooks are next up as drivers.

6. There will be a Cloud Catastrophe in 2010 that limits Cloud growth by raising security issues and restricting enterprise trust.  CIOs will see the cloud as the doorstep for industrial espionage.

7. A huge chasm opens in computing, between Consumer and Enterprise (government/business.), with Apple, Google and most Asian hardware companies in Consumer, and Dell, IBM, Cisco, and MS on the Enterprise side. HP will straddle both. Before 2010, talk was all about unifying consumer and enterprise. Now, talk will be about their split.

8. Microsoft loses in its Consumer play: except for gaming, it is Game Over for MS in Consumer. This will make Consumer the place to be, where the most robust and exciting change artists will work.

9. News media that survive will move to the subscription model, in whole or in part, along age lines.  (See no. 4)

10. Connecting remote data to people and things in real time will lead to a series of exciting new devices and applications. Possible examples: real time comparison and recipe-driven shopping, facial recognition (in social spaces) linked to bios, self-guided tours by phone, voice-queried information about your personal environment.  Many of these are technically proved out today, but they will start to emerge as an exciting and brand new trend in applications in 2010.

Anderson's contention that Microsoft has no hope of redeeming itself in the mobile market is one a growing number of company watchers share. (I'm no Anderson, but I'm going to predict Microsoft still has something up its sleeve with Windows Mobile 7, due in 2010, that could pull it from the brink. Or at least keep the company's market share from eroding toward zero. If Microsoft could at least make good on its hints to cut the time between delivery of mobile operating systems to phone partners and the delivery of those phones to consumers from six-plus months to a few weeks, that would be a good start...)

But it's Anderson's prediction No. 7 about the growing chasm between consumer and enterprise that could really spell doom for Microsoft, and especially Ozzie, if it comes true. (And if Microsoft doesn't revert to focusing more on enterprises, where it's strong and credible.

Anderson doesn't believe that Ozzie's "beautiful world" of three screens and the cloud will ever come to pass. Part of the problem is Microsoft cannot recover from its mobile failure, Anderson claims. But the whole story of the importance of connecting front-end platforms that can integrate tightly to a strong back-end platform isn't resonating. Instead, customers are more interested in the fully-integrated user interfaces (with apps, marketplaces and the like) with an OK, but not great, back-end integration story. Apple, Android and others are better positioned here and going to win, Anderson told dinner participants last night.

Anderson, who noted that Ozzie is a friend of his, said he wouldn't be surprised for Ozzie leaving Microsoft some time in the relative near-term. Ozzie hasn't found it easy fitting in culturally in Microsoft's dog-eat-dog culture. And if Ozzie's three-screens vision and "consumer experiences first" push don't resonate with users, will he want or need to stay?

I've never been a big believer in the consumerization of IT theory. And I've said a few times I felt Microsoft has been spreading itself too thin and risked alienating its enterprise users with too much attention going to consumer. If Microsoft were two different companies -- a consumer-focused one and an enterprise player -- it might better serve its users and be less scattered in its focus, I think.

Anderson's track record on predictions is pretty darn impressive (95 to 97 percent accurate on his 2009 list, he claimed last night). Do you think he's right about the growing chasm between consumer and enterprise? Is Microsoft's three-screens strategy nothing but a perfect world in a bubble?

Topics: Microsoft, Hardware, Mobility, Operating Systems, Software, Telcos

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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319 comments
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  • Open_Source is the erosion from beneath

    Google stock = $590 +/- some change
    Microsoft stock = $29 +/- some change

    You can't make money with Open_Source now can
    you?

    I converted to Open_Source about 8-9 years ago
    and when I achieved my RHCE I really knew from
    that point on, Windows is no longer an option.

    Career wise, Open_Source technologies is what
    companies want someone to be imaginative and
    utilize THEIR BRAIN and put together an
    ecosystem that is not hinged on licenses,
    renewals and leaning on their employees
    strength to keep the company running, not
    some MEGA corp like Microsoft telling them
    to re-register, license, activate, pay them
    money!
    linux_kernel
    • Stock price?

      You are using stock price for what reason?
      Any argument you make after that is diminished by the fact that you make a senseless attempt at making some sort of point by using stock price as a frame of reference.
      Salonikios
      • It's game over for consumers

        US consumers will go through a tougher time than those in 1930's. Trust me this depression is that much worse than the last one. If consumers are gone, so are any companies relying on consumers' lavish spending. It's about time to think of a new market instead of trying to get US consumers buy more of your products. They are gone. Not gonna be back in a decade.
        LBiege
    • RE: Open_Source is the erosion from beneath

      Google stock = $187 billion market cap, P/E 38.15
      Microsoft stock = $265 billion market cap, P/E 19.41

      What was your point again? That Google makes money with open source? Um, no. Google makes money with advertising. Lots and lots of advertising.
      Cerowyn
      • Lots and lots of advertising WITH Open Source

        NOT by using code and rhetoric and anti-competitive tactics to force sell to Joe Bloggs.
        fr0thy2
    • Stock Price?

      If I remember correctlym ENRON had a pretty hefty stock price for a while as well. . . .

      Stock Price <> True Value of Company
      medezark@...
    • Erosion takes time. Lots of it.

      Generally speaking, there is nothing wrong with open source. Its great that open source software exists and is widely available but its hardly the be all and end all.

      Its always the same; someone who has been won over by open source for a number of years always seems to gradually slip into some kind of world where they lose sight of what the vast majority of the real world is doing and using and they drift off into this fantasy land where they have visions of open source stomping MS and the like into the ground. Thats not real and its not going to be real any time soon, if ever.

      And ya, as posted above, your stock quote has little relevance to the predicted extinction of MS.
      Cayble
      • Hey guys... this post wasn't about MS extinction...

        ... but rather its diminishing leverage power on the consumer market, sans the video game one.

        When people compare Google with Microsoft they tend to do an apples-vs-oranges comparison.

        Most focus on the fact that Google is no threat to MS immensity. Others say that open source is a dream and has had no dent on MS-wall.

        These are slanted arguments that don't shed light on the real truth. Just as the market cap of I.B.M. was once N-times bigger than Microsoft, but started receding once IBMs products became niche players (nowadays IBM is considered a Services company... go figure!?).

        Same might happen (or could already be happening) with MS market share. Windows sales were never greater than mainframe/midrage money values, but growth and penetration were way higher. Same way, Google could charge $10 bucks for Chrome OS and still make more money than MS in netbooks. Why? Because MSFT model *depends* on >$40 OEM prices, and lower cost netbooks reach a sweeter spot.

        My two cents.
        cosuna
        • In a nutshell ...

          ... people are too strapped to keep blindly throwing money at Billionaires, no matter what bullsiht comes out of that Billionaires mouth.
          fr0thy2
          • People are always too strapped...

            And everyone doesn't stay strapped forever. Nothing has changed.

            Yet.
            Cayble
    • Google's search engine is proprietary

      Their open source efforts are funded by ad revenue. The vast majority of profits in the software world are from proprietary endeavors.

      Open source can be useful but when people describe themselves as "converting" it makes the whole thing sound like a tech religion.

      Software is a tool, don't turn it into a religion.
      connor33
    • I believe (re the article) the opposite is true of Microsoft.

      They will become a consumer company and will have to leave the business technology field.

      The one size fits all model is no longer appropriate. Companies are developing systems that work precisely how they work. Companies would rather pay developers the same amount of money to build systems suited to their needs (on FOSS) than to keep throwing money again and again at Microsoft (the source of many of their woes - insecurity, failures, unreliability, an army of mouse wielding monkeys, disruption at some foreign monopolies dictation etc etc).

      That said, the Red Ring of Fire, and the fact that Microsoft can no longer be fashionable, to name just two, are hurdles which the company must overcome.

      Note to Steve Bullmer, sorry Ballmer. Lies don't help in the long run.

      First they ignore you, then they laugh at you, then they fight you, then they lose.
      fr0thy2
    • You can't compare stock prices that way

      It's an invalid comparison. All the same, MSFT's problems are self-inflicted. Their products have shown a progressing lack of quality and stagnating innovation. Their working atmosphere is toxic and that problem stems from very top.

      I mean, what does it say about MSFT that Vista is actually the superior product to Windows 7?

      Windows Mobile is the laughing stock of the industry. Anderson is right that segment of the market will elude them.

      I agree that Google is the superior company and that will continue as long the management at the two companies remains the same.
      Chad_z
    • Why do people still use Windows?

      I honestly don't know why people still use Windows. After the debacle of Windows Vista, and now Microsoft demands its customers shell out more cash to upgrade to Windows 7 to fix the Vista issues, people still follow like lost puppies, and PAY Microsoft yet AGAIN. Why? My only guess is that they do not know about Open Source, GNU/Linux. Personally I migrated to GNU/Linux (Fedora/Red Hat) a year and a half ago, and I've been FREE. Free of constantly paying, free of quirks, bugs, and the whole plethora of problems. Goodbye Microsoft, you lost this customer years ago!
      Chris_Clay
      • Because it works

        There was no Vista debacle, it gained 20% of the overall market, 7 times OS X's share and 20 times that of linux.

        Vista works fine, as does Jaunty and Leopard. Win7, Karmic and Snow Leopard are just better.
        rtk
        • Made me laugh so hard...:-)

          Again with the market share. 70 % share of netbooks where you lose
          money with each one,,, is NOT a good thing. :-)

          People use Windows cause they need to use something on those
          cheap pc units and MS had the industry pretty much where it wants
          them.

          Mac OS only runs on Apple machines so that leaves HP, Dell, etc pretty
          much out in the cold.

          PS, Apple can sell 1/3 the share but make 3X the profit...... And profit
          is what really drives a company.
          Just a thought.
          en
          eldernorm
      • Why stick with Windows?

        Probably because they want an OS that runs the programs they want to use, is familiar enough that they don't have to learn a new way of doing things, comes with their computer so that they can run it right out of the box, and one that just plain works. Most people could care less about Linux just because all they want is a computer that does what they want it to and that they don't have to spend a bunch of time learning to use and keep up to date. Windows 7 does all that and does it quite well.
        boomchuck1
        • But if you didn't have any Windows experience

          Windows wouldn't do ANYTHING for you, out of the box or not.

          And you DID have to learn about Windows to get the Windows experience, didn't you? You were NOT born Windows capable, were you?

          Windows 7 does nothing. It requires a USER to accomplish ANYTHING at all. Just like any other software.
          Ole Man
    • What?

      Since when did Google=Open Source...because of the g-phone? What else is open source with Google. Don't tell me that Google cloud offerings are going to use an open standard...because they're not. In the end, they will be no different than Microsoft or Apple...they are going to want to hold on to their marketshare and they will use proprietary technology to do it.
      bmonsterman
  • Uh, '95% - 97% correct' in 2009?

    Not by my assessment. Judge for yourself.

    http://www.fastcompany.com/blog/linda-tischler/design-times/mark-ansersons-10-predictions-2009
    Justa Notherguy