Microsoft is dead

The fire has gone out of the belly of the corporate giant that once dealt with potential rivals the same way that the conquistadors treated the Aztecs. Bill Gates was the driving force, but when he resigned as CEO last January, despite his public appearances, Bill really did leave Microsoft's direction in Steve Ballmer's hands. Steve Ballmer is no Bill Gates.

Win, lose or draw, the Department of Justice case also has drained Microsoft's energies. If Gates drove Microsoft's hyper aggressive business practices, senior VP Joachim Kempin was the one who snapped the whip and Kempin has been put out to special-projects pasture.

It was Kempin, subject of Sm@rt Partner's - then Sm@rt Reseller - first cover story, who made the deals that determined how much computer vendors would pay for Windows. These market development agreements (MDA) insured that Windows, and only Windows - and later, Internet Explorer - would appear on every major computer brand. In 2000, though, the MDA would become Justice's smoking gun. With Kempin's departure, Microsoft also is bidding adieu to its most questionable strong-arm tactics.

Microsoft's profits have gone down for the last two quarters. The only reason why the first drop went unnoticed was that Microsoft hid underneath investment earnings. And there's nothing Microsoft, even if Gates were still at the helm, can do about it.

The PC revolution is over. The PC companies, like Gateway and Dell, are taking their lumps, and the companies behind them, like Microsoft and Intel, also are feeling the impact.

While PCs still sell at a healthy clip, the market finally has stopped growing at an astronomical rate. Almost everyone who wants a computer finally has one. In the journalism biz, we saw this coming ages ago. That's why there's eWeek now instead of PCWeek. Wall Street was slower, a lot slower, on the uptake, but when even Microsoft issued a profit warning, analysts finally woke up.

What's a company to do? Well, in Microsoft's case, it's shifting its focus from product sales to service. Oh, make no mistake about it; it'll also try to squeeze every cent it can from products. Its recent decision to try to force customers to upgrade to Windows 2000 Professional by taking away volume discounts for Windows 95 and 98 clearly shows that products are still important to Microsoft's bottom line.

But isn't it interesting that instead of just hurrying Whistler, W2K's successor, out the door, MS is playing games with pricing schemes? Perhaps it's not only that the PC market is slowing down. Perhaps Microsoft also is finding that people no longer feel a need to upgrade their systems to the latest, greatest Windows. After all, at the eleventh hour, Microsoft has elected to keep going with NT certification testing. Sounds to me that W2K hasn't proven to be half the business success that Windows 95, 98 or NT were.

Simultaneously, deploying .Net is as big a play as Microsoft will be making in 2001, but, at heart, it's an infrastructure play, not a product play. Microsoft also is delivering Microsoft Media Server services from, believe it or not, a Linux platform. Who ever would have thought that Microsoft would approve delivering anything off a non-Windows platform? And, despite recent ASP failures like HotOffice, Microsoft still is moving ahead with plans to deliver Office functionality as a service.

How will Microsoft's reinvention work out? I think it'll have trouble, but sheer market momentum should carry it through. But, make no mistake: The Microsoft of the '90s is dead. Long live the Microsoft of the 2000s.