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?
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