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Microsoft's Midlife Crisis
pillageplunder writes "This article from Businessweek covers the recent memo sent to all Microsoft employees by Steve Ballmer. Interesting tidbits through-out: how Microsoft will try to cut a Billion dollars in expenses, and its cost per employee is about $300K"
Microsoft's problem is not competition. In most markets, they own a huge share. So Mac's ~5% and Linux's small share are not the problem.
The problem is that innovation (?) is getting more and more expensive. And in order to keep revenues up, they need to spend huge amounts of money on advertising, etc.
The low-hanging fruit has been picked, and now they need to go after new markets, new products, and the more difficult dollars.
No reason to lie.
You are correct. Even if your company makes money, Wall Street look at the rate of revenue and income increase. Wall Street also sees the $50 or $60 Billion in cash that Microsoft has and asks "Hey, where are our dividends on the stock?" A $0.16 per share dividend isn't much when you have $60 Billion in the bank.
Exactly. And it is not just Microsoft - it is a general weakness in the shrink-wrapped software business model. In that model you depend on sales of the previous version to fund additional features for the next version which in turn drives sales, and the cycle continues. The problem is that at some point your product becomes mature, and you have already implemented 90% of the features that 90% of the people want. Now there is still alot of potential functionality to be added but, each feature will appeal to only a small audience. Therefore even though you may have done as much work between versions 5 and 6 as you did between 2 and 3, you have deminishing returns on the number of purchases. Lastly, ever since the dot-com boom ended the number of first-time purchases (as opposed to upgrades) has been going down dramatically as well, so you are much more dependent on upgrades sales, which we just determined will also go down with time.
So basically the shrinkwrapped software business model sucks for mature software. Unless you can keep improving the software in a way that appeals to a large number of people, you will not be able to generate enough money from sales to continue development at your current pace. Then your product will stagnate, and newcommers who focus on different niche features that you don't have will eat away at your market share.
Once your software becomes mature, you really need to move away from the shrinkwrapped business model to some type of service business model. Interestly enough, OSS kicks ass in just about any service business model. If you are being paid for the act of writing and deploying software, rather then selling it as a product, it doesn't matter if you control the software or not. It just matters that you have the experience and talent to improve an existing piece of software (ie helps alot if you wrote the software to begin with).
OSS has the opposite problem - it is easy to get paid to improve mature products, but getting a piece of software to maturity is harder (financially).
Yeah--cost per employee is a common stat used to demonstrate the general average force an employee has in the business. Another common one is revenue per employee. High cost per employee frequently shows that a company is working hard to expand, spending a lot of money on something (whether it's R&D or plant infrastructure) to build capacity, technology, etc. It's good that ms is doing this--if they cut that much, the employees will, on average, not be as empowered to expand. Don't forget that microsofts market cap still assumes pretty high growth rates compared to the average (i.e. high P/E).
Simple math would answer your question, too: the article says 57,000 employees, so do 57k * 300k and you come out with $17bb in expenses.
Read jack phelps dot net
Mid life crisis is exactly the right term. Please look at the following template, and see if it fits Microsoft.
When a man reaches 40 or thereabouts, they suddenly realize their mortality. They suddenly realize that all those dreams they had and plans they made in their twenties are not going to happen. They aren't going to be able to build all of the software libraries they were imagining even in their early thirties. Furthermore, they find that the number of times per week that they have sex is less than the timer per DAY when they were ninteen.
Usually, this results in: the sudden need for a boyfriend/girlfriend that is half their age. The kind of toys that they wanted at age 20 (usually a certian kind of mp3 player, 3D graphics card, or sportscar). I remember a dear friend describing the waitress he was dating, and one of the plus points was "well, she's at least almost half my age!".
Different people have different views on what follows. I'll express my own view. This is highly personal. And not all people agree. I perceive that part of the issue is whether you have your eyes focused on this life or the next one. Since my real hope lies in what is to come, and not is what is present, I have not had, and don't expect to have a midlife crisis. Someone said something like: "where your stock options are, there your heart will be also.". Although I don't want to hasten the event, I'm ready to go, and frequently think about it.
Back to the subject. So does this sudden middle age realization of ones own mortality seem to fit Microsoft? In other words, they might have as many years still ahead, as they have behind them, but suddenly, there is the realization.
Those who would give up liberty in exchange for security and DRM should switch to Microsoft Palladium!
DISCLAIMER: I work at Microsoft as a developer. Nothing I say here is official company stance. This is just my personal opinion based on my time both before and after joining Microsoft.
Microsoft's main problem is a refusal to take quick action by trusting in common sense and instinct.
For example, it took upper management over a decade to finally see that users didn't trust Microsoft products. The rest of the world knew it all along, but management had to wait for mountains of hard data to come pouring in before taking any action. The Trustworthy Computing effort is genuine, sincere, and effective, but it's also about fifteen years overdue.
Do you think Bill Gates wrote BASIC for the Altair, or pulled off his buy-an-OS-and-name-it-MS-DOS move, based on mountains of official market research and hard data telling him that it's what people wanted? I'm betting he didn't. I'm betting he did it because he was smart and trusted his own instincts -- just like a professional chess player who doesn't realistically have the time to scientifically evaluate every possible move at every turn.
Microsoft isn't a bad company. People here really do care about satisfying customers and making the best stuff in the world. I really hate the false accusations so many people make about this company. But I also have to say that this company has grown timid and too slow to act, and that is our real challenge.
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And it looks like you missed it: the point of all their free drinks and the food court theme is to keep you THERE and WORKING, as much as possible. No need to go out for lunch (even if a brief change of scenery would be refreshing), nor even a stroll to the corner 7-11 for a soda or Starbucks for a coffee.
It looks like you missed the point. I have never worked for or interviewed with (or applied to) Microsoft. However, I've been in the buildings as guests of employees and am long-term friends with employees. They provide (or provided, I've not been in for a while) those things to give people a choice. You could go out for your hour lunch, or you could stay in. If you are on a long support call (most of my friends were in premier support, where they only talked to people with really big contracts, not any pay-per-support), you could toss the caller on hold for a very short period and get anything you needed to keep you going to do what it takes.
It is unreasonable to tell a customer with a multinational network outage to wait an hour while you took lunch, or call back in to the queue and repeat everything to someone new. It is also unreasonable to have an employee work straight through without breaks. Microsoft found a happy medium.
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