Thursday, 17 September 2009

The tech company we love to hate

Remember that company from the last century whom many consider to be the inventors of personal computing? Older than Google, and even older than Apple (just). To jog your memory, here are some of their products:Windows, Word, Excel, PowerPoint, Outlook, Office, Explorer, MSN (bit of a give-away there), Encarta, Live Messenger, Xbox 360, Age of Empires, Halo, Zune (OK maybe you haven’t heard of that one), Bing. Most of us grew up with some of these (sub)brands.

Founded in 1975, Microsoft (for it is they) has created four $billionaires and some 12,000 $millionaires from Microsoft employees. Today Microsoft employs some 95,000 people worldwide, of whom 56,000 are based in the USA. For the fiscal year ended June 30, 2009, Microsoft reported revenue of $58.44 billion, a 3% decline from the prior year. Operating income, net income and diluted earnings per share for the year were $20.36 billion, $14.57 billion and $1.62, which represented declines of 9%, 18% and 13% respectively. In January this year, Microsoft announced plans to cut 5,000 jobs by the middle of next year. These cuts are now well underway. CEO Steve Ballmer hasn’t ruled out more. We are living in extraordinary times.

Always controversial, Microsoft seems to have acquired a serious image problem in recent years. Compared with Google and especially Apple, it’s just not regarded as ‘cool’. Some have even suggested that Microsoft will turn out to have been “a 20th Century company” and that it is now being forced to pass the baton on (to Google/ Apple/ Dell presumably?). Ballmer is said to have ‘bet the ranch’ on Windows 7 (which launches next month) being a big success.

Microsoft has consistently attracted much criticism. In particular Microsoft, and William Henry “Bill” Gates III, as its very visible (and until June 2008 very hands-on) leader, have been accused of choking competition by bundling its products; especially Internet Explorer shipped with Windows PCs as a pre-emptive strike against Netscape (anyone remember them?). As for desktop applications, Word ‘killed’ Novell’s WordPerfect and Excel ‘saw off’ Lotus 1-2-3. Many have questioned Microsoft’s bullish tactics which have leveraged the dominance of Windows as ‘the’ PC Operating System. Indeed Microsoft has contested several lawsuits and paid heavy fines for ‘anti-competitive’ practices especially in Europe.

Steve Jobs

A world without Microsoft?

Damaging legacy of I.E.6

Steve Ballmer is the larger-than-life successor to Bill Gates; he certainly loves his company but he’s facing an uncertain future.

Here is the viewpoint of a tech-savvy friend:
“Ever since IBM first agreed to ship Microsoft software with their PCs, Microsoft has been charging us for providing an operating system for our computers. The frequent complaints of bloat, backwards-incompatibility and bug-ridden releases (infuriating for PC owners) are frankly justified. If you have been saddled with Vista on a newly-bought computer, it is reasonable to feel defrauded if you have to pay at least $120 to buy what is in effect a bugfix in Windows 7 - just as the poor saps who bought Windows 95 had to pay to get a usable system in Windows 98 a few years ago.”

Strong stuff. And this far from being an isolated case of an informed anti-Microsoft opinion. Vista has been widely criticised (especially when it first came out) by IT professionals and users for being released before it was ready; many claimed it was inferior to Windows XP which preceded it. People won’t forget these bad experiences. The web age is increasingly offering us more choices about technology. So what does the future hold for the nerds from Redmond, WA?

If you want to find true innovation at the moment, and a rapidly growing market, look at netbooks and nettops. These are small, inexpensive, low-power consumption desktop computers designed for basic tasks such as surfing the Internet, accessing web-based applications document processing, and audio/video playback. Originally the netbook market was dominated by Linux. When it emerges, Chrome OS (operating system) will be a big player, although it is in early development at the moment. Also operating in the Cloud will be other players including Jolly Cloud and Ubuntu. Microsoft has established a foothold by offering Microsoft XP as a very low price, but it will be interesting to see if they can compete as the netbook market grows.

Internet Explorer is, in any case, only available for Windows, and so if the operating system of choice is not Windows in this, the fastest growing area of the hardware market, that could have big implications for the future. Currently, IE is at the top of the heap, chiefly (as critics say), because it has for years been bundled in with other products including the various Windows operating systems. Firefox has gained ground in second place.

You work quite differently with a netbook than with a full laptop, and you may not need Windows if all you are doing is email and surfing. The crossovers are also beginning to be interesting... even for a full size laptop, manufacturers are starting to experiment with hardware with low power consumption to get some of the benefits of a netbook.

Currently, cloud computing comes with a price: you give up control over your assets by putting them in the cloud; if a piece of the cloud goes down and it happens to contain your data, it’s bad news. Cloud computing as a concept is itself still under development... there's a lot of work to be done to put regulation, privacy and protection in place. The interesting question is, what is Microsoft going to do in that market? Their corporate style has been very bottom-line driven, and seen by many as aggressive and protectionist. How will they fare when users have a free choice between their products and the competition?

Microsoft is still struggling to adjust to the web, and the choices that it gives people. Bing 2.0 is rumoured for release in the next couple of weeks, but it is still bumping along in third place with less than 10% market share, far behind Google. Google is successful because it works, not because they have monopolised search or hypnotised web surfers; users simply see no reason to go elsewhere. Microsoft haven't made something that really catches on as a choice in the web sphere...yet. People mainly get their products by default when they buy hardware. Yes, there is Linux for geeks with a technical bent and the additional cost of Apple for those with deep pockets, but basically, if you're buying a PC it is still a ‘no-choice’ choice of one OS...currently.

Even before Google’s Chrome OS hits, it is possible to see the potential impact of consumer choice on the market. And more and more power is being handed to the people: the introduction of Google Wave allows individuals to participate in the Cloud without handing over control of their assets to a third party. Wave will merge IM, email, document editing and Twitter functionalities, while giving you control of your data and who is allowed to access it. Instead of subscribing to Flickr or Picasa you will allow them access to your data stream, and control where you store backups, who gets access to your stuff, and where.

The future isn't going to be about bigger, better hardware, it will be about convenient/ appropriate hardware for a specific situation and having an OS which can morph into a lot of things so it can do specific jobs very well, whether on your phone, netbook or nettop.

Google has moved into the mobile phone market with Android, a Linux variant for mobile devices. Geeks are very excited about Android, which is Linux, open-source and has great apps. The word is that Netbook makers are already preparing versions running Android, even though it wasn't intended for netbooks. Who knows what will happen when Google releases their product actually intended for those pieces of hardware?

Most innovations in Microsoft come from the purely technical side of things... and they are not very exciting. The .NET framework has gained some traction on the server side of things. They have been steadily improving their server products. Microsoft certainly excels in creating developer communities and developer tools... they offer a fully integrated suite of tools for .NET programming. (The JAVA world is a lot more fragmented). BUT: these initiatives are hardly likely to set the average consumer on fire; the user’s opinion of Microsoft won’t be improved by having to purchase Windows 7 to replace the much criticised Windows Vista.

There is already an open-sourced alternative to Office in Open Office, which is a useable alternative, and must be considered a real threat to the upcoming Office 2010. Open-sourced alternatives to most graphics programs are already available (e.g., Blender and Gimp). In many fields open-sourced software is no longer the territory of the geek and nerd, but a viable alternative to expensive proprietary software. The world is changing.

Whether or not Microsoft deserves all its negative publicity, it will increasingly be operating in a world in which computer users (and IT managers) are in a position to make genuine choices, in which open-sourcing and crowd-sourcing create viable alternatives to each of those previously dominant Microsoft products. Bluntly, it needs to adapt or face decline and ultimately extinction.

It will be interesting to see what 'Microsoft 2.0' looks like…