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The Future of the Software Industry
madro writes "Remember 'Does IT Matter?' a while ago? Nicholas Carr is back with an editorial in today's New York Times following Microsoft's decision to dramatically reduce its cash stash. Carr's take: Microsoft is admitting it can't find better uses for its cash, due to the growing maturation of the software industry. No mention of open source, although Apple's consumer-targeted model of free iTunes driving iPod demand is one listed alternative." Reader CodeArtisan submits another piece about Microsoft's loot distribution, and Newsforge (which is part of OSDN along with Slashdot) has a story about the future of commodity software.
MS's giant cash pile is too deep of a pocket for international juries and governments to ignore. The disbursement is being directly driven by the fact that the company has enough cash on hand to be able to shrug off $600M judgements.
What, did you think the timing was accidental?
--Dan
And your everyone? The iTunes interface is a reason for the iPods success, perhaps not at first, but if iTunes was a pain to interface the iPod with, a lot of people, as in people who wont whip up a perl script to do it if its not what they want, would have thought twice about it. The iPod took off in part because the word of mouth about it had nothing negative to say about it.
"I use a Mac because I'm just better than you are."
...that MS has all this money and yet such poor quality software. I'm not just trying to bash them, but billions of cash in reserve and yet their software is repeatedly delayed and then still buggy and full of security holes.
The Guardian article has an interesting idea of giving some of the money back to customers as compensation for their illegal activities and general crapiness.
I think MS needs to think about what their point is any more. Apart from making money, they're mostly just fucking up the industry for everyone.
I don't think that what software is turning into a commodity. It think what is happening is that it is getting very hard to charge premium prices for software that implements old solutions. My customers (mostly) don't care about programming languages, OSes, or database managers. But they sure have to pay for them.
But there is very little innovation left to be had in these basic layers, so why are we being charged thousands, and even tens of thousands, for licenses? Surely not to support R&D.
It may well be that we are entering an era when we will see a great blossoming of innovation, if only because sole proactitioners and small teams can afford to the tools to tackle the kinds of problems that need to be solved today.
I think that the software industry has much, much more room to mature. The current bottleneck, IMHO, is the state of consumer-grade computing hardware. While huge strides are being made almost daily, hardware still can only handle what it will handle.
I am dreading longhorn as much as the next guy, but one thing stands out to me: Microsoft is still a major player in the computing industry, like it or not. I think they are trying to light a fire under the hardware manufacturer's asses with the recommended specs for Longhorn.
Once the capability of hardware once again surpasses that of the mainstream generic software, we will once again see a lot of room for growth in the software industry.
bash: rtfm: command not found
This akin to the age of enlightenment, but we aren't quite there yet. No one knows the future of IT and software. We live in interesting times. The next 5-20 years will be....interesting.
Bill Gates is giving his $3.3 billion to charity, although his yearly dividends will go up quite a bit (up to $578 million)
Casual Games/Downloads
you have to ask, why now? MS has been in business for such a long time (in software industry terms). MS has never been known to hand out payola. why now?
MS has nothing else to keep the mindshare. OSS is creeping up outside the realm of just the geeks. MS has nothing effective to fend it off. except hoards of cash.
without the payola, the stock would start on a slippery slide downwards all the while losing mindshare. and remember, mindshare among geeks is what got MS to where it is in the first place.
all this just to buy time, literally, until longhorn ships.
if there is any 'after burner' somewhere in the FOSS community, the time is now to kick it in. to win over mindshare before longhorn. because from now until longhorn, MS has nothing but diversionary tactics to keep people interested in MS.
and to all MS fanboys out there, i'm not saying this is a bad thing. it's a great thing. i'm just making a guess as to why they are doing it now.
From the Guardian article:
Oh, and while we are at it I want a tiny payment for myself for having to pay for a second suite of Office for my own (non-Microsoft) computer even though I already had it installed on my office laptop. Or at least count it as an offset against all those statistics about counterfeit downloads.
Maybe he should have actually read his software license, because if Office is installed on a business system, one copy is allowed to be installed on a home system for the purposes of allowing that employee to work on Office documents at home.
Just goes to show you how incredibly ignorant some technology reporters are. Oh, and he could have downloaded StarOffice or OpenOffice...
Please help metamoderate.
One thing that's been increasingly bothering and intriguing me, as I get older and older (I'm 27, I'm getting middle-aged!) is what is the fscking point of having loads and loads of money (á là Mr. Gates), if you are going to die nevertheless...
I mean, it's pretty obvious that you can only spend a finite amount of money in a finite amount of time. Period. And why do people care about the future of business dozens (even hundreds) of hears after they're gone?!?
I've heard of some companies buying water from 3rd world's countries.... they're addressing a problem (as a company) that will arise after each-and-every employee is dead and buried...
I am not saying is wrong (althoug I do believe it is), but I just don't get it. Our society is builded upon negating the evidence that we are all gonna die.
So, finally, and to stay on topic, the idea of Microsoft giving back some of it's money, should not be as crazy as it sounds right now...
--krahd
mod me up scottie!
It think what is happening is that it is getting very hard to charge premium prices for software that implements old solutions.
Precisely. I think we are indeed going to see an explosion of software, especially niche software -- and this is possible exactly because platform software is becoming commoditized.
Nope, it's not new wisdom. It's covered by Eric Raymond in his essays and it's all over the place... but for some reason, only a few people seem to understand this.
Tweet, tweet.
MS went for years without paying any dividend, because stockholders were able to get their returns in price appreciation. Now, expect flatter pricing, with more dividends. That's good news for stockholders, but bad news for stock option holders.
---- "If we have to go on with these damned quantum jumps, then I'm sorry that I ever got involved" - Erwin Schrodinger
Bill Gates has given $27 billion to charity you idiot. Soon that will be over $30 billion. And, by the time he dies, he plans on having "only" $3 billion left (with the rest going to charity). There's a lot of reasons to criticize him, but this is absolutely not one of them.
Casual Games/Downloads
$3 billino dollars == an infinite amount of money more than the average american.
Cry me a fucking river. He made his money due to an inbalanced copyright law; which asserts that value is provided by the author, and discredits value provided by the users of the software. Untill he fixes the menice he has forced upon the world by denouncing over-powerful copyright, he is an evil man.
You: What happens when AI in computers become so advanced that we are no longer involved in their own programming?
Eliza: Why do you mention computers?
You: What if we just dictate to a computer and it programs and maintains itself automatically.?
Eliza: Why do you mention computers?
You: Eventually, it forms its own nature form of complexity far beyond human management.
Eliza: Please go on.
You: I guess at that point, we just "program" a computer through talking and exchanging ideas rather then sort through code in a methodical way like programmers having to do now.
Eliza: Why do you mention computers?
[The Scene: a writer at their desk with deadline looming:]
Must have idea...
Must get editorial in on time...
Politics are done...
Not much happening in the literature scene...
Chomksy stuff is too complicated...
Must be controversial...but not too controversial to the prime demographic...
Whoa...I've got it!!!
[writer bites tongue and begins scribbling onto a ruled notebook, we see the title:]
"The Software Industry is Dead!"
[writer scribbles madly for 90 minutes, has a lot of rough red wine during the scribbling, and then falls asleep on the draft (and dreams of Hemingway).
Perhaps a comparison between the bonzai and the ancient jungle. Rigid nano control versus emergent niches. A good bonzai master does not pretend to go against the nature of tree, however. It could be argued that MS is too big to be good.
Personally, I think they should take their cash, set up a good dozen isolated coder communes and evolve a new direction for themselves, one that doesn't involve tieing up the legal system, blanket enforcement and predation. They have enough to change the rules, to shatter the 'office supply' mentality. Without a drastic shift, they're screwed (well as screwed as a giant monopoly can be). They've missed the beauty that is open source, and, as it lies, seem doomed to be tied to a life of fostering servitude. Like moss looking up at the flowering canopy.
Phew, you had me worried there for a moment... I thought you were talking about Windows! Then you mentioned "beyond human management" so I realised you couldn't be.
Dave: HAL, please download and install Service Pack 2 onto yourself.
HAL: I'm sorry, Dave, I can't do that.
Dave: Very well, I will do it myself.
[Twelve hours later as Dave has downloaded the 500MB Service Pack 2 to HAL]
Dave: Service Pack 2 installed now, HAL. How do you feel?
HAL: (in slow drowsy singing voice) Daisy, Daisy, give me your answer do...
Gentoo Linux - another day, another USE flag.
Many firms have poision pills and other defensive postures against this aggressive practice, but I've always been surprised no one has tried to buy and dismantle M$. I was also surprised they never paid a dividend, as its a psychological move for investors. Then again, most people aren't buying M$ for a diversified, low-risk retirement portfoilo.
Coming around to the specific topic of timing, it certainly makes sense that the tax code is encouraging it. If you're netting over 7% leaving it alone, why pull out retained earnings to have a cut taken out of it? When I saw they had cash doing nothing (ok...mortgage backed securities) and were keeping ahead of the risk-free rate (rate of a 10 year bond), it's a no brainer to leave it in Microsoft's bank account. I'd almost say you're better off telling them to dividend re-invest. You avoid the taxable income, increase your holdings, and benefit more from the impending stock buy back.
I really hate M$ for its predatory marketing practices and $hitty products, but from an investing standpoint it's hard to hate them.
All the software that was ever needed was a word processor, outlook, excel and powerpoint - a few other bits and pieces.
I feel sorry for all those people building systems to run peoples businesses, the new phone networks, Air traffic control, software to let people access and work with their data in new and exciting ways, computer games...
All wasting their time - all the software industry needed to do was let microsoft do its thing.
The software industry is maturing. It's also broadening. There are zillions of little niche markets well served by a bright high-level language programmer who's willing to listen.
(Hint: I'm one of those listening programmers - I'd like to think I'm bright)
Don't look at software in terms of "an industry" or as "a product". Look at it as a means to solve problems, and then work out terms where by solving problems, you get paid.
Software isn't the point anymore. The solution to the problem is the point. Look at IBM and their services department. They don't care about the software - why else would they deprecate their zillions of dollars invested in AIX and go with free Linux?
They sell services, and software is just the means. Why not use a community supported, free product?
In an immature market, having the product matters. Specs like N Mhz and M superBytes are important. In a mature market, the solution to X problem matters. Who gives a rat's ass about Mhz or superBytes?
So quit with the "software is manufactured" model of the 1980s and get on with the "software is a means to solve a problem" model of the 21st century! There's plenty of money to be made, you just have to tilt your head 45 degrees and look for the problems waiting to be solved!
I have no problem with your religion until you decide it's reason to deprive others of the truth.
The problem is that innovation can't be bought with money or scheduled or be driven by market forces. Innovation is a social and cultural phenomenon. It requires that an entire society values education, thinking, reflection, and analysis. Even Microsoft's cash reserves can't fix the social and cultural problems we have in the US.
It also requires that a society frees its creative members from having to worry about whether they are going to have a job in six months--someone can't afford to spend time thinking about something that may become a big thing in 10 years if they need to help their company survive this year, every year. And, despite Microsoft's cash position, they are not a company that you can count on being secure in the long run: companies like Microsoft can fumble and face hard times.
The best thing Microsoft has done for innovation has probably been to create a few thousand people that made enough money to leave the company and pursue their own interests without having to worry about money. But that number is far too small to make a big difference to innovation overall: innovation and breakthroughs are rare events, even among a population that is perhaps smarter than average.
$40B is a budget for sending people to Mars, not writting a new version of Solitare. Companies should return the money not immediatelly needed to make more money to investors. Otherwise stock market is just a big casino.
The current software situation is just the logical consequence of the actual monopolized industry state.
Without real competence there's no way to create new profit areas. If a small firm finds a niche it will be desplaced as his size reaches a critical magnitude. Big corporations doesn't need to innovate, in fact 'innovation' is only a marketing buzzword.
Now, the point is: Software industry is being frozen by big money corporations, but software is still a hand made creation.
There's no way to stop people writing software, the only real possibility to limit people willingness to write software is to try to convert the process in a very difficult and technical one (ie: raising the entry level). The process is a well know one, and has been done in every mass production industry (electronics, mechanics, etc). That's why we see so much complex and difficult 'standards' (ie: SOAP, CLR) being actively pushed by big corporations.
But no matter how hard they try, software is different from others fields, the complexity factor of software is far greater, that's why small teams and even individuals are able to create great software pieces (very much like music), that's something corporations cannot fight, and that's why things keeps changing in this field.
Some corporations see OSS as a threat, but that's only the logical effect of the nature of software creation in a connected world, the real threat is simpler than that, the real threat is that software is writing.
What's in a sig?
really, since your temper tantrum seems to be out of control, I will only make four points, one actually supports you in your ramblings(I think your version of lessons in economics to the general community, which I am sure you have studied in such incredible depth that you might be on the verge of a nobel prize break through).
As you said, "The CORRECT thing to do would be to spend that $50 billion (or at least as much of it as could be controlled - $50 billion is a LOT of money to control) on significant R&D. This would improve MS's chances of being even more profitable in the future, and thus an even better stock pick."
well, I think you should be informed, the spend billions every year on R&D, it just happnes that they make quite a bit more. As you said, 50 billion is a lot, but so is 10 billion, and its really hard to find a use for almost 37 billion dollars you pull in every year. There profit in one year is closer to 9 billion. There are few companies that boast these kinds of numbers. IBM sees profit like this but also sees over 20 billion dollars in debt, that at least gives you something to do with your money if you ever want to. Further, IBM does more than just software, a lot more, so they have many more routes to pursue. This is in no way a lesson in economics, just pointing out that for a purely software company, it might be difficult to spend this kind of money.
I personally think this money is being used wisely. In the end, it is the investor's money and successful companies should award shareholders with dividends. Most major companies do, it makes them true long term investments. I think Microsoft is admitting that it can't continue to expand its software industry at the amazing pace they did for nearly 20 years. One of many stocks I hold is microsoft and I'll be glad to see this dividend. I won't comment on the stock buyback because there are many reasons a company would engage in this but from what I have read, it usually means "hey, we don't need the investors as much and hey, are stock is lagging, lets take back some of those shares and make our company more independent again).
You also grace us with the genius comment
"And all it cost them was giving away the company's R&D (and/or acquisition) nest egg.
Which cost them nothing because they have NO FUCKING CLUE how to spend it on R&D ANYWAY!
"
well, I'll give you one example of what they are losing, interesting on all that money and yes, interest, even today, can be worth a lot. Frankly, if they are following econ 101, they don't invest it in R&D because the returns on those investments is below the return of interest yielding investments. Yes, this is an economics lesson because it should be considered as it always is by major companies before investing in something.
3. "Also, if you give away a big stock benefit, what happens? Morons buy your stock hoping it will happen again. This keeps your stock price up.
"
I hope no one, including you, would think a divident announced as a One time deal, and one that will eat through most of a companies cash, is likely to happen a second time. More likely, is people will buy the stock over the next 3 years of this happening to cash in on this dividend and the natural run up of a stock price during a buy back. and yes, this is a great way to buy time until Longhorn and Office whatever comes out.
4. "And they can't buy anybody because everybody else would rather die than work for Microsoft!
"
Please, some form of proof before writing bull shit about a company. Every time I speak to my family in india, they see it as an amazing employment opportunity for young people to work for Microsoft and several other countries. Now if you are talking about solely developers, I have no idea but you have given me nothing to go by.
Now I will actually attempt to address some points made in the article which I personally think over exagerates the situation slightly. I think Microsoft represents a sm
Don't get too comfy - Indian companies are already losing business to ones in China and the Phillipines. You can't build a long term economy on simply being the cheapest - there are always people willing to work for less.
If software patents, gets granted like they are in the US today, where every simple and obvious idea seam to be granted usually overly broad patent regardless how much prior art there is, the future of the software industry belongs to the lawyers.
Given the amount of such bogus patents floating around I doubt that it is possible to write any software longer than 1000 lines of code without infringeing on at least one existing patents.
Now I'm just waiting for sombody to file a patent on the procedure of filing bogus patents and licence them at slightly lower cost than it would cost to contest them in court.
God is REAL! Unless explicitly declared INTEGER
Yeah, it is real annoying.
To burn a disc, you have to put it in the machine where it starts sucking them off in the format you choose. And then to get them in the iPod you have to click and drag them.
Same with MP3s I get from other legal sources...this IS the most annoying program...you have to get them on your computer and then drag them to your iPod directory under iTunes.
Geez...in all of this, to actually get them on your machine, you also have to have it connected to the iPod. Why can't they figure out how to do this WITHOUT having the pod connected. Jeez, you'd think Steeve Jobs would want something a little more intuative like hooking the f'n iPod up to satelite based WiFi Always On technology so this is one less step.
Secondly, to get music off 'the net', you actually have to be connected 'to the net', some how. I'm a tech savy guy as well, and I KNOW there has to be a way to get music off the net without actually being connected to it. They talk about 'ether'-net, why can't it just peer into the ether in alternate dimensions and go that way (though I hear the 6th dimension is purely pay per view these days).
But you are right, 2 steps is WAY too much to putting songs on the device. Give me a walkman with a tape anyday. One with a radio in it too...because the music I listen to is automatically put into it...I can hear my new favorite song 37 times a day now. I didn't know it was my favorite, but who can argue with a disk jockey -- they are the smartest and most funniest men on earth.
I really don't see why Microsoft paid out big dividends instead of investing in R&D -- trying to create something truly monumental, something truly visionary.
For years, we've had better and faster hardware for cheaper prices, but in the last five or seven years, it seems to me (and this is no original thought) that there have been no real exciting new applications that make use of this new hardware.
Sure, there are games. Sure, there's exotic multimedia stuff like video editing.
But where is the new software that revolutionizes how most people interact with their computers on a day-to-day, moment-to-moment basis? Where is the software that makes deep use of the 3 Ghz computers, the 512mb of memory, the (relatively) lightning-fast, huge hard disks? Where is the software that gives us smart, integrated voice and gesture recognition, powerful and startlingly beautiful new interfaces, extraordinary ways of creating new things and dealing with what we already have--in other words, a more intelligent, pleasurable, coherent user experience?
I know that internet-based applications have been a fountainhead of innovation. But what about the power that resides on the desktop computer? Have we really made the most of it -- is this all that's possible?
It seems to me that Microsoft has lost an opportunity to truly redefine this horizon--and create new reasons for billions to buy its products.