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Microsoft at the Tipover Point
David Gerard writes "In the wake of Microsoft's first flat quarter, The Inquirer brings us The IT Industry Is Shifting Away From Microsoft - Linux is being taken seriously, Microsoft is not trusted and our favorite monopoly is finding it harder and harder to compete with 'free.'"
It's an extended holiday, and any opinion peices you see during these days are little more than weak efforts to fill a quota. I would also assume that this article was posted on slashdot to fill a similar hole.
On one hand, I'm breaking out the wine for a little celebration. On the other, this is the Inquirer we're talking about guys. I might save the bottle for when a reliable source follows up this story.
To be fair, does Microsoft's flattening revenue have to do with "open source" taking their marketshare, or is it because many customers are quite happy with older Microsoft products and have refused to sign up to the recent licensing agreements? I know a couple of very large corporations whose desktops are NT 4, and they're only grudgingly finally upgrading to 2000. This same thing can be seen with countless users continuing to use Office 97, etc -- Given this, a flattening or declining revenue stream seems obvious.
> You know what this means right? We've backed Microsoft into a corner, so now it's going to pull every dirty trick in the book to get it's profits back...
And this differs from their previous behavior, how?
Sheesh, evil *and* a jerk. -- Jade
The editorial points mostly at Microsoft's failed offerings like MSN and Xbox, saying that the 80% profit numbers for Windows and Office can only sustain the failed products as long as Windows and Office remain profitable. It suggests that Linux and GPL'ed office products will erode that 80% profit number.
The "failed" products aren't a problem: that's exactly what big business is supposed to do. When you've got a product or two that bring in tons of money, you throw lots of money around trying to invent other moneymakers. You know that your main product or two will eventually run dry: that's no surprise, and that's why you continue to throw money at other ideas trying to come up with the next big moneymaker.
Most of these other sideline products (MSN, Xbox, smart phones) will fail. But that's not unexpected: most small businesses and startups fail. This is what big businesses do: fund R&D trying to come up with the Next Big Thing to replace their current revenue stream.
It's the same thing Microsoft did with Office: initially, they were an OS-only company. They got into Office because they needed to diversify, just like every big business did. Office started as a pretty crummy product that got routinely spanked by both WordPerfect and Lotus. But given enough time and enough money, Office became a profit machine. Microsoft is actually pretty lucky to have two dynamo products in the market at once.
Think of MS like 3M: could 3M survive simply by producing Post-It Notes? No, they have a huge amount of diversity and R&D running to find the Next Big Thing. The more products you throw at the market, the more chances you have of staying power.
What's your damage, Heather?
Long before Windows 95 there was OS/2. A far better implementation of a GUI interface. Stable, powerful and good looking. Better than Mac OS was at the time and far better than Windows 3.x and it didn't crash all the time.
:)
To be accurate you have to say that Microsoft has *never* actually created anything new. They are not innovators, they are remarketers of existing technology. Period. If you look at the history of the company, they have purchased, stolen or borrowed everything they have. Bill Gates didn't "invent" DOS, he bought it. He didn't "invent" Windows. He didn't "invent" Word or Excel or Powerpoint or Access or Front Page or... Remember Word Star, Word Perfect, Lotus 123, etc. ? Those were all forerunners of the Microsoft products and they were all better. The reason Microsoft took over was because they had the marketing behind MS-DOS and once they had their stranglehold on the OEMs with that it was just a matter of time before the rest happened. IBM REALLY screwed up there. Digital Research had a better DOS but didn't have the marketing at the time.
My point is that Microsoft has not done anything that someone else didn't do first or even better. It's too bad IBM didn't have Bill Gates in their marketing department. We'd be much better off than we are today.
Oh wait - we have Linux now so maybe not!
Have you hugged your penguin today?
As a Linux user/advocate and recent Mac "switcher", the issue of free software was not the one the deal maker for me when I decided on a PowerBook instead of an x86 lappy (i.e. Dell, Acer, Toshiba, etc). I didn't appreciate Dell, and many other reputable laptop makers telling me, "We're tacking an extra $200 to the bottom line for software you don't intend to use, you have no choice in the matter, and you have to agree to some arcane license just to take it off". The Microsoft Tax is what finally pushed me in the direction of the Mac. I use Linux exclusively at work, and had been running Windoze at home simply because I didn't feel like teaching my family how to use Linux systems. The last virus that hit our intranet was the straw that broke that camel's back and we went to a strictly 'Nix shop at home. So no, free was never an issue for me, reliability and integrity (both of which M$ has displayed less and less of IN SPITE of recent Anti-trust findings) is what sealed the deal for me.
The english language is in beta. It's evolving but has not yet reached a level of usability.
I have a feeling that Microsoft's slide won't be quick, nor complete... remember when IBM was supposedly going to fall into the ocean because they weren't able to compete with Sun, SGI, and HP in the UNIX market?
Functionally, the company can continue to generate revenue and remain "profitable" for a long time. If you look at Microsoft's strongest competitors in each business, how many of them can retain a lead on M$ for another 3-5 years while Microsoft tries to reinvent itself to boost profits?
IBM and HP each half-compete with Microsoft while shipping their products to their enterprise customers.
Sun and "The Linux Distros" (Red Hat, SuSE, etc...) all nudge Microsoft at the desktop level... although none of them may have the resources to survive a sustained competition with Microsoft. That said, Apple seems to thrive despite having a small market share because it has a loyal userbase.
Sony may have a real battle on its hands with the next generation consoles given that Nintendo's weakness and Microsoft's marketing muscle (and deep pockets) may give them a big boost to narrow the gap in marketshare.
And how is Palm weathering the Micro$oft assault on handheld operating systems?
Perhaps the most interesting thing will not be anticipating the inevitable downturn Microsoft will face, but to consider what form a "new" Microsoft will take when they try to claw their way back to the top? I have this gut feeling that X-Box and PocketPC create a new "low-end" strategy in markets where being the provider of an OS and a reference design can be very profitable.
They actually don't cost that much. Take you M$ reps out to lunch when they visit. Tell one of the interns to walk by the cube at around 3:10 and casually mention something about the "linux server" banter with the reps mindlessly for another hour discussing your problems things you'd like to see etc, then ask for some software licenses, chances are they will give them too you. We do this every year or so, we call it our "M$ shake down", it works.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
Microsoft may have been slowed by Linux, but if history has taught computer users anything over the last twenty-odd years, it's that Microsoft is exceptional adept at re-tooling itself and resuming it's domination of the software industry.
.NET and Longhorn product cycles. Then, of course, armed to the teeth with their own patent portfolios and unique proprietary technologies, their customer base will remain (they hope) safely in the Microsoft fold.
...And when Longhorn comes out and ties it all together, the One Evil Ring will very possibly remain firmly on Bill Gates finger.
Their doom has been forecast many times, yet it seems that they always rebound stronger and more profitable than ever before. Until they have shown YEARS of decline, I for one refuse to believe any reports of their death, much less serious injury.
To wit, they seem to have a palpable strategy in place to combat Linux. Basically, it is their hope that the questions of IP will slow adoption long enough for them to lock their corporate customers into the Windows 2003 server,
Remember that Office 2003 is actually a salvo in the Embrace, Extend and Extinguish strategy -- their XML formats are just proprietary enough to make that so, given the inertia that they have with the largest installed office-suite base as well as (frankly, like it or not) the most functionally integrated package on the market. Add to that the B2B interaction of sending Word, Powerpoint and Excel files and their strategy very well might work once again.
Windows Server 2003 and it's embedded technologies promises much of the same.
I say all this not as a Microsoft apologist but simply as a realist. While I strongly prefer Linux both on the server and on the desktop, the fact remains that there is much to be done, very much indeed, before it will topple the likes of a Microsoft.
Its likely that a group of hackers would crack it, and allow Linux to open the "secure" content, but that would be illegal, which kinda kills the idea of Linux as an OS for the masses...
This is the real threat, and considering MS's history I really do think they'll try it. OpenOffice can open Word files? No problem, DRM them and poof, no more (legal) OpenOffice. Legal doesn't much matter to you and me, I figure that if I've bought the content I can bloody well open it on the platform of my choice; but legal does matter to corporate adopters. If they can't *legally* open the MS Word document sent to them, they'll leave Linux, its that simple. And, ultimately, legal does matter to us, if we're forced to run pirate than we are open to lawsuits, arrest, etc. The DMCA must be overturned.
"Mission Accomplished" -- George W. Bush May 1, 2003
I just went through the software I use daily and while most of it runs on Windows XP, none of it's by Microsoft.
Yeah, well, there's your problem. You read Slashdot. You know of alternatives to Microsoft junk and are willing to seek them out. The vast majority of people are not, and will use just what comes on their machine.
The best examples of Microsoft lock-in are Outlook/Exchange and ActiveX. If you want to use Exchange to its fullest potential, you'd better have all Windows machines in your organization, or forget it. The Mac version was shit until late 2000. In Outlook 8.2.2, attempting to accept a meeting invitation would crash a Mac. Things got better when Outlook 2001 came around, but even that still doesn't do certain things like (IIRC) voting buttons. Now if you want OS X-native Exchange connectivity, you need Entourage. But Entourage does a shit job at it. It doesn't speak MAPI, instead relying on other protocols (IMAP, SMTP) for everything-- protocols that are typically turned off in most organizations, who won't turn them back on due to security concerns and whatnot. And the Windows version of Outlook is like the Roach Motel for your data. Ever notice that Outlook will happily import data from about a dozen different competing products, but that exporting data out of Outlook is a major pain in the ass? Think that's not intentional? That's lock-in. Make it painful to try to use or switch to something else.
Then there's ActiveX. A Microsoft concoction designed to appeal to lazy developers. They develop stuff in ActiveX, and if you want to use it on a non-IE browser, you're SOL. That's lock-in.
Bottom line: Microsoft products play best with other Microsoft products, and grudgingly if at all with other products. If you want cross-platform capability, you're better off with Linux or OS X-- those platforms MUST interoperate very well so they'll be adopted into Microsoft strongholds. Microsoft stuff doesn't HAVE to work with anything but other Microsoft stuff.
Here's another example of tacit Microsoft lock-in: the Snap Server applicances. Yeah, they run some Unix variant. Yeah, they provide Windows and Apple file sharing, or a reasonable facsimilie thereof. But here's something you need to know about it: files touched by Mac clients don't get their Windows backup flag set correctly, so Windows backup software can't tell what do put on tape when a differential backup is run-- Mac-changed files don't get backed up. The Snap people know, and they don't care. What's implied is that if you want everything to work right you should get rid of your Macs.
Now that Phoenix has signed on to "Trusted Computing" we are facing the very real possibility that the next generation of hardware (and MS OS) will have a very difficult to break content lock in. [Linux would] have to run in "Non-Trusted" mode, MS webservers wouldn't serve to a non-trusted computer... ... This is the real threat, and considering MS's history I really do think they'll try it. OpenOffice can open Word files? No problem, DRM them and poof, no more (legal) OpenOffice.
You are forgetting something - making the classic American mistake. America != The World. In fact, America is a minority when it comes to population.
The world is techifying. The most populace countries (China, India) are quickly arming their preverbial IT armies.
Your stupid DRM laws won't apply to us, the rest of the World. We don't care for them. We'll buy non-DRM hardware and run non-locking software on top of it. The large hardware companies would be mad to turn against us since we outnumber you, ooo, by about 32 to 1 or so.
I know we (the rest of the world) are all not rich yet. But the balance of power is shifting - just check your outsourcing statistics.
There is only a small degree to which American laws can be used to consolidate Microsoft's position. Microsoft knows it cannot ignore the rest of the world because it is the bigger market and the future market is a global one. Microsoft maintaining a global monopoly is a whole other ball game and one they are starting to lose.
Free Gamer - Free games list and commentary
It's perhaps ironic that China might become the beacon of freedom in computer software, when corporate America tries to tighten it's stranglehold around American (and even European) courtrooms...
I just hope they are far enough in the road to general freedom, that even if the "regime" of China decides they want to go back to hard line Communism, they can't any more...
Your stupid DRM laws won't apply to us, the rest of the World. We don't care for them.
What if big multinational corporations strong-arm governments to give in? This is why some countries have accepted large parts of the stupid US software patent system.
It will be an interesting fight.
Table-ized A.I.
We'll buy non-DRM hardware
Trusted Computing is subtle and insidious. If you have "non-DRM hardware" pretty much all that accomplished is that YOU get locked out. You can't run any of the new software. You can't use any of the new files. You get locked out of more and more websites.
Non-DRM hardware is like a speakerless computer. The "new enhanced" computer can do everything the old computer can do. There is no reason NOT to buy the computer that has free speakers (or DRM) attached, you can just leave the speakers (or DRM) turned off and it works just like a "plain" computer. Of course if you leave the DRM turned off you get locked out of all of the new software, new files, and new websites. Ultimately you may end up locked out of the internet.
As for other countries, either they adopt it or they get locked out of all sorts of things. I'm pretty sure they are also planning on having each country run its own "Root Of Trust". Most countries will absolutely JUMP at the chance to have that sort of power over all of the computers in their country. The Digital Imprimatur is a long read, but it contains an excellent description of how seductive Trusted Computing can be for any government.
I certainly HOPE that there is a massive rebellion against Trusted Computing, but do not underestimate the threat! They have a very very plausible route to conquering the world with this crap. In many ways it is exacly like Microsoft's notorious "Embrace and Extend" tactic. The new Trusted Computers will "embrace" ALL existing software and files and websites. It then "extends" new software files and websites. For anyone who goes along with the change everything "just works", all old stuff and all new stuff. Anyone does not go along with the change begins suffering more and more as they run into more and more "new stuff" that doesn't work. They get error messages when they try to instal new software. They get error messages when they try to open new files. They get error messages when they try to view a new website. They get error messages when they try to read E-mail. Error messages saying that they have "old" and "obsolete" hardware. Messages telling them they need to "upgrade".
Most people are not techies, they don't understand anything about Trusted Computing. They just want the damn computer to work. When they start downloading free music files and they get error messages about their hardware, they don't care why they are getting errors, they just want it "fixed" so it will work. They will choose the new "enhanced" computer because that is the only one that can play the free files. That is the only "fix" to be able to play all of the free music and stuff they will be offered.
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- - You can't take something off the Internet! That's like trying to take pee out of a swimming pool.
The Inquirer's article is interesting, but the underlying forces have little to do with open source, and have been building for years.
For years, Microsoft was the classic "growth" stock. MS revenue and profit regularly posted double digit gains and beat analyst expectations. As a result, the value of MS stock soared into the stratosphere, making Chairman Bill Gates the richest man in the world based on the value of his Microsoft holdings, and making millionaires of many Microsoft employees. Growth companies don't pay dividends: they plow thier profits back into the company, and people invest in them because they expect the value of the stock to go up.
What happens when your company hits the limits of its growth? The dilemma MS faces is its own success. They own 95% of the desktop world. Almost everyone who _can_ use Windows and Office _does_ use it. They won't get continuing double-digit increases in revenue and profit from thier core business, because they've saturated thier market.
They've managed to narrowly beat revenue and profit estimates the past few years, but if you look closely at thier numbers, they _haven't_ done it from sales of Windows and Office. They've done it from gains in and returns on thier investment portfolio. MS has something like $49 billion in cash and short-term securities, and is getting an increasing number of complaints from investors that they ought to start returning some of that cash hoard to investors in the form of dividends.
Microsoft is in transition from a "growth" company to a "mature" company. Mature companies generate large amounts of cash, but _don't_ show tremendous growth. If it _doesn't_ show tremendous growth, the value of MS stock will drop out of the stratosphere, and folks whose wealth depends on the value of their MS stock won't be happy.
The challenge Steve Ballmer faces as MS CEO is to somehow support the value of MS stock while looking for huge new markets MS can enter and dominate to continue its growth.
So yes, you can look for MS to use any means it can to generate revenue and increase profits. But we didn't back them into a corner: they did it to themselves by becoming _too_ successful.
______
Dennis