What's Microsoft's next billion-dollar business? (Hint: it's not search)

What's Microsoft's next billion-dollar business? (Hint: it's not search)

Summary: Now that Microsoft's SharePoint sales have passed the $1 billion barrier (they were $1.3 billion for fiscal 2009, which ended for Microsoft on June 30), what's Microsoft's next big thing? What products are CEO Steve Ballmer & Co. betting on to become the next big, near-term hits?

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While many company watchers continue to fret over what Microsoft will and won't do to make money in the search/online advertising space, there are other less sexy Microsoft business units plodding successfully along with relatively little public notice.

Until fairly recently, SharePoint was one of those businesses. But now that Microsoft's SharePoint sales have passed the $1 billion barrier (they were $1.3 billion for fiscal 2009, which ended for Microsoft on June 30), what's Microsoft's next big thing? What products is the company betting on to become the next big, near-term hits?

At Microsoft's Financial Analyst Meeting (FAM) last week, company officials shared a few tidbits about one of those businesses: Microsoft System Center.  System Center encompasses a variety of system-management tools that Microsoft sells to IT professionals who want to manage their Windows -- and Linux/Unix -- clients, servers, hypervisors and more.

CEO Steve Ballmer told Wall Street analysts that System Center already has passed the billion-dollar mark. It's growing at a rate of 30 percent year-over-year, according to Microsoft officials.

System Center is one of a handful of server-side product families that Microsoft is planning to push more in its coming fiscal year. (The others: Windows Server 2008 R2, SQL Server 2008 R2, the forthcoming Forefront Protection Suite, SharePoint 2010, Exchange 2010 and Office Communications Server 2010 -- about which Microsoft has said very little to date.)

Microsoft officials mentioned in passing last week that System Center Online Desktop Manager (SCODM) is likely to be a big revenue generator for the company in the near-term. The Online Desktop Manager is one of Microsoft's own hosted "Online" services that it is touting as a way for cash-strapped customers to save money. Microsoft's pitch: By having Microsoft manage your users' desktops and provide the anti-malware, desktop configuration, remote assistance and IT asset-management for them, IT pros won't have to shell out for on-premise products and people to provide these services.

Microsoft SCODM, which is built on top of Silverlight, is in private testing with select customers now and is expected to be released in final form in 2010.

Beyond 2010 -- but before search and online advertising move in any noticeable and serious way from being in the red, to in the black -- what else is Ballmer betting on?

Microsoft has a number of technologies in what it calls its "business incubation" bullpen. The goals for these technologies are far more modest than $1 billion per year in sales. (Microsoft's first step is to get them to $150 million to $200 million, partners say.) Some of the technologies in this group: Windows Server High Performance Computing (HPC), Business Productivity Online Suites, Windows Azure, desktop virtualization, storage (Data Protection Manager) and identity services.

In spite of a number of recent articles and blog posts, claimng that Microsoft has "turned the corner" with products like Windows 7 and Bing, there are still a number of Microsoft watchers calling for Balllmer's resignation. MSNBC is running a story with the bold headline "Investors: Steve Ballmer's a Failure," based on a week-old poll of Wall Street Journal readers. (I have a feeling more than a few of these Ballmer-haters are Yahoo shareholders, mad that Ballmer didn't buy Yahoo outright 18 months ago.)

I've been critical of Microsoft execs spreading the company too thin. But you can't say Ballmer doesn't have a lot of ideas and that he's methodically attempting to nurse them along. Ballmer's first year without Bill Gates involved in day-to-day operations has been one of cleaning up leftover messes, reprioritizing, and, frankly, pushing out more than a few Friends of Bill. I'll be curious if Ballmer's "grades" with business-focused investors improve by this time next year....

Do you think Ballmer is making the right technology bets for Microsoft going into 2010? If not, what would you do differently?

Topics: Collaboration, Enterprise Software, Microsoft, Operating Systems, Software, Windows

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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167 comments
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  • Typo

    "Business Productivity Online Services, Windows
    Azure, desktop virtualization, storage (Data
    Protection Manager) and identity ser[b]v[/b]ices."
    Mam00th
    • thanks

      The "v" is back in services. (My V key is stuck on my keyboard. I think it's from typing Vista too much... or maybe CRTL-V...) Thanks. MJ
      Mary Jo Foley
  • Me: I would really work much harder on mobile

    I think Microsoft is doing the right thing in the Enterprise space. I even think it is a good idea to keep it low-key. In these areas, the open source crowd has no competing products.

    The search war, which is far from over, has been engaged in earnest with Bing.

    Now it is time for Mobile, particularly with some of Intel's move with the Atom. Microsoft needs more than just an offering in this space, they need a domination product. Multi-tasking, RIM functionality for the enterprise (syncs with Exchange, Live, Gmail, Yahoo, & Lotus Notes, email calendar, journal and todo. Backup and restore, application installer, wifi, and great browsing.
    DevGuy_z
    • I completely agree

      M$ has to get Windows Mobile 7 right and out the
      door on time with a robust marketplace supporting
      mobile dev. In additional to creating a much
      better product with faster deliveries, M$ has to
      start advertising heavily with some outstanding
      angle that puts Apple and to a lesser extent
      Google on the defensive.
      jjworleyeoe
      • dream on

        when will that be? 2011? get used to it, microsoft is in decline (17%
        revenue down, 29% profits down, there are much better offerings on
        all fronts - remember the hardware may be cheap but microsoft
        software is expensive).

        take the online division (the fabulous bing): it is having a greater loss
        than revenue in the last quarter - imagine that! windows phone is a
        bad, derivative and clumsy copy of the iphone and the android os and
        not on the market for a few more month. have a look at the windows
        mobile demo here: http://blip.tv/file/2430145 it is emberassing.

        i always knew that they have no taste and no pride. and they have no
        shame eighter. they copy, copy, copy. and they copy bad. it will even
        have multitouch somewhere in the future, "when we have worked with
        our hardware partners."

        you better face the truth. the dark age of computing will soon be over.
        bannedfromzdnetagain
        • Windows Mobile is a copy of iPhone?!?

          Unless they used a time machine, I can't imagine how this could possibly be the case. They started making phones out of the Pocket PC before iPhone was even a gleam in Steve Jobs's eye.

          If you mean they appropriated interface elements, sure -- but no more than android and the newer touch Blackberries have. That's just responding to the market. Apple, on the other hand didn't invent the multibutton mouse, so they [i]still[/i] won't ship notebooks with a second freaking button.

          The real problem with WinMo is that there are elements (especially in the UI) that are too dated, not that it's a Johnny-come-lately knockoff. WM7 has taken way to long to respond to the market -- we'll have to wait and see what happens when it arrives.
          wanorris
          • I would emphasize convergence

            For instance, a consumer version of Microsoft's Unified Communication system for the enterprise springs to mind. It's a great system and could be deployed on windows mobile. Let customers receive incoming calls for free and charge them for outgoing calls.

            I'm already approximating this with Google Voice and SIP but its a bit clunky. One of Microsoft's big advantages is the incredible ecosystem that's built up around windows. If Microsoft offered something like this to consumers, all sorts of players would be dying to help them along with e.g. USB headsets designed specifically for Windows Unified Messaging and all sorts of other bells and whistles.



            BTW, there are no physical buttons whatsoever on MacBooks now :-)

            zdnet-gregc
          • Follow the link

            If you follow elllroy's link, you'll see what he meant.

            Windows Phone is a straight rip-off of the iPhone. Any argument is
            pointless. Microsoft is clearly incapable of designing anything original.

            And what are you talking about with the "the multibutton mouse, so they
            still won't ship notebooks with a second freaking button."?

            I'm using an Apple mouse with FOUR programmable buttons and a scroll
            button. It's by far the best mouse I've ever owned.

            Plus, Apple MacBook Pros all have a multi-functional, programmable pad
            that allows you to click in a much more intuitive manner than any
            windows box with its nasty clunky buttons, extra switches, useless LEDs
            and hideous stickers.

            Check your facts please.

            Graham Ellison
          • Additional input on the iPhone rip-off.

            In elllroy's link where they are demoing the
            "New" (copied) MS Mobile OS, they incorporated
            Apple's patented technologies (swipe and
            flick)(as well as coppied almost everything they
            could)... Apple owns those gestures, so MS is
            about to either pay through the nose and/or
            change the UI. Overall, yes, it is a total rip
            off of the iPhone. And I'm thinking that Apple
            might just own them on Surface as well.
            i8thecat
          • Interesting

            Microsoft's been working on Surface for years -- since before Apple acquired the company they got multitouch from. They probably have a boatload of multitouch patents as well, so it's possible that the two companies quietly cross-licensed with each other.
            wanorris
          • I worded it pretty carefully.

            The Mighty Mouse I used a couple of years ago was pretty good, though I thought the squeeze thing was a little weird.

            Last I checked, the single button that ships on a MacBook Pro or iBook still doesn't right-click. Yeah, you can get an external mouse, but a lot of people use notebook computers in places and ways where an external pointing device is a pain.

            And yeah, you can do all sorts of stuff with the multitouch trackpad. It's nifty, and I'm glad the OEM trackpad manufacturers have all picked that feature up.

            But there's still no reason for Apple to ship notebooks without at least a second button on the trackpad other than not-invented-here syndrome.
            wanorris
          • The second button is there, you just can't see it.

            It's called [i]put two fingers on the trackpad near the bottom and
            press down.[/i] You've just right-clicked.
            Vulpinemac
          • Ignorance is bliss in the Microsoft world.

            Use TWO fingers on the Apple trackpad - that's a double click.

            Just like use TWO fingers at once to SCROLL the page. One finger just moves the cursor down.

            Guess you can't write about what you don't know. And Microsoft Windows users only know what Microsoft tells them!
            No More Microsoft Software Ever!
          • right clicking with the touchpad

            Will it work under Linux and Windows when I triple boot? If not, it does me no good.
            wanorris
          • right clicking...

            In Boot Camp, it probably would. It works well enough in Windows
            Vista.
            Vulpinemac
          • Nice

            I didn't know it would work under other OS's -- I figured it was a Mac software thing.

            I don't really have much reason to use OS X, but I'll keep that in mind next time I shop for a high-end notebook, because Apple makes good hardware. Usually I prefer ThinkPads, but Apple hardware is always on the short list.
            wanorris
          • Just so you know...

            Boot Camp provides drivers for all the hardware in the 'generic
            PC' mode. They're extensive enough that I can use my
            bluetooth Apple keyboard in Windows paired to the system as
            though it were hard-wired. The display, memory card, front-
            side bus, everything is already available. Just follow the simple
            instructions and you're there.

            Oh, and I absolutely love the instructions for connecting new
            hardware to a Mac. With Windows you get instructions like,
            "Install drivers before connecting device." With OS X, all you get
            is "Simply connect device to your computer." You'll usually get
            applications to take full advantage of the device's capabilities,
            but guess what, you don't really need them. Install what you
            want and ignore the rest.
            Vulpinemac
          • Windows Mobile 6.5

            [i]Windows Phone is a straight rip-off of the iPhone. Any argument is pointless. Microsoft is clearly incapable of designing anything original.[/i]

            6.5 certainly isn't Microsoft's best effort. It's a quick and dirty hack to try to keep from being completely wiped out in the phone market while everyone waits for WM 7.0, and it contains purely UI changes with no underlying OS enhancements.

            Then again, it's worth remembering that Microsoft could thrown a real wrench in the works for the iPhone, had they chosen to. Business users get iPhone synchronization with Exchange because Microsoft let Apple license the technology they were already using in Windows Mobile. And it certainly wasn't because they had to: are Fortune 500 companies really going to migrate away from Exchange servers because Apple didn't make phones that sync properly? Not likely.

            Honestly, I've used Windows Mobile through a lot of device generations (I still remember when the first Handheld PCs came out, before Palm). And, other than background tasks, I can't think of a single software feature on my WM phone that's an improvement over the iPhone. (well, maybe Remote Desktop.) So yeah, WM is at a low point.

            Then again, the reason I'm going to buy another WM phone in a couple of months is the real advantage over iPhone: choice of hardware. Apple lets you choose how much memory you want, and that's it. But I need a phone with a physical keyboard, and I want one with a removable SD card, so I guess Apple doesn't want to sell me a phone, but Microsoft and HTC do. Sometimes, it's that simple.
            wanorris
          • 1

            well said on most points (Although I wouldn't cal WM6.5 a hack... more of a "positive UI evolution", if not the complete refresh people are expecting with WM7).
            johnmullinax
          • well

            Thats like your opinion, man
            davidhite