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Microsoft's Lost Decade
Kurt Eichenwald has written a lengthy article about Microsoft's slow decline over the past 10 years, cataloging their missteps and showing how consistent, poor decision-making from management crippled the tech titan in several important industries.
"By the dawn of the millennium, the hallways at Microsoft were no longer home to barefoot programmers in Hawaiian shirts working through nights and weekends toward a common goal of excellence; instead, life behind the thick corporate walls had become staid and brutish. Fiefdoms had taken root, and a mastery of internal politics emerged as key to career success. In those years Microsoft had stepped up its efforts to cripple competitors, but—because of a series of astonishingly foolish management decisions—the competitors being crippled were often co-workers at Microsoft, instead of other companies. Staffers were rewarded not just for doing well but for making sure that their colleagues failed. As a result, the company was consumed by an endless series of internal knife fights. Potential market-busting businesses—such as e-book and smartphone technology—were killed, derailed, or delayed amid bickering and power plays. That is the portrait of Microsoft depicted in interviews with dozens of current and former executives, as well as in thousands of pages of internal documents and legal records."
We discussed a teaser for this piece earlier in the month — the full article has all the unpleasant details.
The problem is Ballmer. Always has been.
Seems like XP and 7 did quite well.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
I stopped reading partway through - it read like a hit piece. Let's go ahead and ignore the success of Windows 7, XBOX 360, Office, SharePoint, Lync, etc just to make an outrageous claim in order to sell magazines. Is the internal culture of Microsoft bad? Maybe..but they're still churning out good software, and with the exception of a one-time write-down from a failed acquisition, they are still one of the most consistently profitable companies in the world. Like all large companies, they have had product failures, but if you're going to ignore the wins, why bother even writing the article?
MBAs can't run businesses. It's that simple. When Bill ran it, everything was great. When Steve took over, everything went downhill. The same happened in Apple: When Steve was in charge, Apple grew. When Steve was fired, downhill. When Steve was brought back, more growth. The same with HP. Moral: don't let MBAs run your company, it'll tank.
Don't stop where the ink does.
In any organization I've ever seen or worked for.
Please do not read this sig. Thank you.
Microsoft failed to conquer a number of new markets over that past decade. Social networking, tablets/smart phones, etc. -- Microsoft is just not winning, and their old strategies of monopoly abuse are not going to help them.
Palm trees and 8
Give any company a decade and billions of dollars and I am sure they will make something usable. This is, and will always be, Ballmer's legacy at MS. He accomplished nothing more than the steady decline of the MS brand. Once the Board gets rid of him and puts some fresh, outside blood in charge they will begin to climb out of the cellar.
This article is a microcosm for what's happening in the entire United States.
Microsoft have always been about coming late to a party someone else started and then trying to steal the limelight. That's not always a bad thing (eg. cheap and nasty workstations and servers that were just good enough made a lot of things possible) and it has worked for them on many occasions, however recently they don't seem to have been able to dominate a niche that they've come into late.
Note that Apple have been doing that as well, mp3 players, smartphones and tablets were mature before they got involved but they managed to get up to speed quickly enough to dominate those markets
To sum up, I don't see the last decade as anything different with Microsoft in that area, and I recall articles about toxic office politics at Microsoft (and moreso Apple) well over a decade ago anyway.
You cant seriously call Xbox a success without using a fair bit of progressive counting. To date XBOX still a bit to go before all the investments are returned. And its still not anywhere near a market leader position. This while it has eaten up much of the PC gaming space, cannibalizing another MS business end.
Windows 7 is by no means a success since total share of Windows has fallen since its introduction, not risen. Only reason its a success is because of the monopoly. Without it, W7 would have failed utterly. Just look at how "well" WP7 is doing for reference of how things work out for MS without their monopoly benefits.
Sharepoint a success? Where? And Lync a success, in what reality? Outside the "Microsoft or nothing" sphere nobody knows about it even. And therein lies the real problem, the "MS or nothing" sphere is shrinking fast.
Microsofts only products they manage to make money off of is Office and Windows thanks to their monopoly. Everything else is complete and utter failure.
Group think has set in such that slowly politics has created an environment where the top management do not hear dissenting voices, so somehow they can do no wrong.
It is natures great recycler.
During the period that Microsoft's market cap got lopped in half, Apple's multiplied by over ONE HUNDRED TIMES. So yes, I'd say that qualifies for a lost decade. Market cap is the world's picture of how much you are worth as a company.
What in that reply goes the SLIGHTEST WAY toward disproving or effectively countering ANY of the article's points? Mindless denial is of course to be expected inside the floundering giant.
They got what they deserved from that asinine move.
Hah, indeed. Microsoft has lots of problems now, but it had a lot of problems before too! It's kind of funny that in 2012 the "old Microsoft" has become some kind of utopia looked back on as if it were driven by technologists in pursuit of technical excellence. In the 1990s, Slashdotters would surely not have thought that. Microsoft in, say, 1997 was not working towards "a common goal of excellence", but some very corporate-strategy driven ideas about where the PC market should go. Arguably that's true of much of what they did in the 1980s, as well.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
On Apple's OS:
'E-mails flew around Microsoft, expressing dismay about the quality of Tiger. To executives’ disbelief, it contained functional equivalents of Avalon and WinFS. “It was fucking amazing,” wrote Lenn Pryor, part of the Longhorn team. “It is like I just got a free pass to Longhorn land today.”'
"“It was a bloated mishmash of folks,” said Johann Garcia, a former Microsoft product manager who worked on the Bing project. “They had two or three times the number of people they needed. There were just so many layers of people.”"
etc etc.
You may not see it, but MS exces can see it, I can see it, WallStreet can see it. Yet you can't see it. Are you Ballmer?
>"Fiefdoms had taken root, and a mastery of internal politics emerged as key to career success. In those years Microsoft had stepped up its efforts to cripple competitors"
Welcome to life at a huge, fat monopoly. At least it seems like they hit an ace with UEFI, further stifling competition and removing consumer freedom and choice.
Looks like Apple is falling into the same trap in their niche markets where they were also a near monopoly (tablets/phones).... instead of opening up, offering product choices, lowering prices, they are spending all their effort trying to sue everyone into submission.
So Xbox is not a success? Look at the state of the competition!
This while it has eaten up much of the PC gaming space, cannibalizing another MS business end.
Aside from the OS a machine runs, MS has precious little at stake when it comes to PC gaming. And I don't know of a single Xbox user who isn't using Windows and every one of them own PCs. MS lost nothing to the gaming crowd with the Xbox.
If, during that time, several companies that didn't effectively didn't exist in your market appear and then exceed your revenue, while your company misses opportunities time and time again... Then yes, it was their decade to lose and they lost it.
Market cap is to company's real worth as photoshopped magazine covers are to original models' beauty: a somewhat good reference but not really that reliable. Otherwise, analysts wouldn't ever care about reading the company balance to make their decisions... and they do (HFT aside, of course).
Windows 98-Windows XPSP2 were horrible
Pardon me, but are you proposing that windows was horrible from 98 through XPSP2? 98 was a major improvement over 95 in every way including stability. ME was crap. 2k was fantastic. XP was fine for me from SP1, dunno what terrible things you were doing to it.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
In times past Microsoft would find a nice add-in product for their software and then bundle a cloned version of it for free. Remember Stac Electronics? The disk compression Microsoft put in the next version of MSDOS was not better than Stac's, but it was free. Stac only won some money in a lawsuit, but was essentially destroyed. I think to this day developers are still mindful of this predilection. Now this same thing is happening to the cash cows of Microsoft: Windows and Office. Linux and LibreOffice are the nemesis of Microsoft's flagship products. Another product for the server world is Exchange. Exchange virtually forces the use of Outlook. No other Windows or Linux client can properly work with it. This is a strategy MS uses to delay the inevitable. Don't you think /. is read by MS employees? They can read the signs of the times. They just can't show their strategy to carry them through this. This lost decade is the decade of dealing with free alternatives. Microsoft is reaping what they have sown. You can't perpetuate the monopoly on Windows and Office alone anymore. I'll say it again:
It's hard to argue with free.
Oh, yeah! Wise guy, huh? Woob woob woob woob! Nyuk! Nyuk!
Until you look at how much Microsoft has spent.
The world's burning. Moped Jesus spotted on I50. Details at 11.
While xbox is a household name, profit wise it isn't stellar. It also has had an interesting effect of moving the attention of Windows game developers onto consoles. The problem being this actually seems to weaken MS lockin, migrating userbase from a mindset where microsoft unquestionably dominates the market to one where MS is just one of three big names. While this in the short term has boosted MS offering in the market, it also has made these studios get over their desktop fixation and get accustomed to supporting Sony and to some extent nintendo.
So far, not critical, but it does potentially pave the way for the big game companies to completely torpedo the desktop and xbox gaming market. At the same time as getting developers in the mindset of multi-platform support, it starts pushing it's first-party app store as well as a bizarre model for desktop usage. Between the improved view on multiplatform development and threatening digital distribution channels that particularly valve has become accustomed to it, they are paving the way for a company like Valve to completely undermine MS' desktop and console gaming market.
There are a large number of factors external to MS facilitating this scenario, but MS strategy has done it's part to explicitly fuel thisto some extent.
A very real scenario seems to be:
MS effectively forfeits the desktop market due to lack of interest on their part. It's a boring market where they cannot grow and today's business philosophy seems to dismiss sustainability without exponential growth (growth is always indicated as a percentage, the raw dollar values are de-emphasized). Companies are still using XP by and large, which might have been ok except MS is simultaneously pushing the market to develop software that doesn't work with XP, so XP usage might be characeterized as 'limping along' with increased difficulty over time. Between OSX and Linux (though the 'front and center' Linux DEs have also lost their way), some enterprises are seeing viable MS alternatives. On the homefront, erosion comes more easily, mostly at the hands of IOS, Android, and to a lesser extent OSX and Linux, share-wise (consumer desktop/laptop market is increasingly driven by 'enthusiasts' as the casual user base moves on to tablets and phones).
Casual game development on Android paves the way to support Ouya on the low end (XBLA competitor) and on the high end, Valve makes a go of it with a game console, a stronger, diverse name in gaming and digital distribution of games than MS. I see this as highly disruptive to Sony, Nintendo, and MS, but I don't think Valve would've had such an easy time of it if MS hadn't paved the way with xBox.
Phone/tablet is easy enough to see. MS has no appreciable share. To those saying 'but WP7 users always rave about it', that would be a natural consequence of a small user base. The only people there are naturally going to be fanboys. Just like WebOS had exceedingly high satisfaction among its very small userbase (I liked WebOS, but it really lacked a lot). IOS and Android seem to be carving up the market handily.
Basically, MS is screwed. They are trying to compete with google using Bing to dubious result. They are pushing Azure to comete with EC2 and are diluting their vision because it just isn't working. They are throwing their desktop market (the only market they securely held) under the bus to try to prop up metro which has been a market failure on phones today.
XML is like violence. If it doesn't solve the problem, use more.
The article's author seems to think that Microsoft should have conquered those new markets. But what about the opposite approach: don't even try to enter those markets. Why should a company always try to become bigger even in areas that are not its strength?
In particular, why should Microsoft be in the smart phone business? It's not like smart phones will replace PCs. They are behind Apple and Google in terms of features, mind share and available 3rd party applications; to succeed they must either do the same thing much better (like Apple with the iPod) or do something different to make their platform stand out. If they don't have the ideas for that, it's better in my opinion to stay out of the market altogether rather than make a "me too" product.
Such behavior is illegal only if you have a sufficiently large share of a properly defined product market. MS apparently got terrible legal advice in the 1990s (or ignored good advice); someone should have been telling them that they were dominant enough in their principle market space (personal computer operating systems) that the rules were different. Apple holds less than 20% of the global market for smartphones, a distant second behind Samsung for the most recently finished quarter. That's not enough market share to get you in trouble. Google appears ready to settle their antitrust case in the EU, and the FTC announced several months ago an investigation of Google's business practices in the US. And it's difficult to define an applicable "market" where Facebook dominates, since they don't charge their users.
I believe the main reason for the popularity of X-Box is the insanity at Sony. Once Sega dropped out of the market it's like Sony forgot how to compete.
Xbox is clearly winning on PLAY VALUE right now. While everybody HAS a Wii and it made Nintendo bank because they positioned it to be per-unit profitable, many homes have multiple Xbox 360s and have replaced them how many times? From profitability, it's abject failure because MS is having to sell homes MULTIPLE loss leader units. But from mindshare, Xbox 360 is what all the kids have and share with their friends, at least in the high school college group it's the default (if mommy and daddy aren't paying)
It's worse than that - Microsoft dumped something like $30 billion over the course of a decade into their home entertainment division, the vast majority of it spent on the Xbox and Xbox 360. They only started showing quarterly profits a couple of years ago - mostly from software, not hardware sales - and last I checked at the rate they're going it'll take them over a decade just to recoup their initial investment assuming software sales and prices hold up (which they haven't and won't on now-obsolete hardware). In other words, their investment in the console business will never even manage to break even.
Compare and contrast with Apple, which spent far, far less developing and launching both the iPhone and iPad, products which turned a profit almost immediately.
The console business has been a disaster for Microsoft since the beginning, and it's been a world of hurt for Sony since the launch of the PS3. The problem is, both Microsoft and Sony spent massive fortunes developing and subsidizing the "bleeding edge" hardware for their latest generation of consoles. By the time manufacturing costs came down to the point where they could realize hefty profits on both hardware and software sales for their platforms, Nintendo had stolen a good chunk of the market away with the cheaper Wii. Worse, all three consoles are now effectively obsolete, and they (and their software vendors) are competing with mobile devices from Apple and the Android vendors for consumers' dollars. And the mobile devices are crushing the consoles in the race for consumer dollars.
The Xbox 360 was supposed to last Microsoft until 2015, but if the Wii U is a success later this year, it'll likely decimate both hardware and software sales of Microsoft's outdated console. While Microsoft could unload another $20 billion designing, manufacturing and subsidizing a next-gen console, I just don't see how they can hope to ever turn a profit on that business. It's a lose-lose situation for Microsoft in the console business. If they don't shell out another $20 billion, they effectively drop out and never make their investment back. If they shell out $20 billion, they'll probably still end up an also-ran and never make their money back.
Of course, they could do something less elaborate with their next gen console, but they'll have already lost prime mover advantage to Nintendo, and lackluster hardware will rapidly be eclipsed by ever-cheaper PCs and increasingly capable mobile devices. In other words, their "next gen" system would have a shelf life of about 3 years. They'd have to produce something really cheap to make those numbers pan out, and it's hard to see developers expending a lot of effort on a platform they know is gonna be dead in under 5 years.
And of course Apple could completely wreck Microsoft's console business by using the firehose of cash they're getting from their mobile business to produce their own console. Subsidize a halfway decent box and follow the iPhone's cheap software strategy - keep the price of most titles under $20 - and you'd cripple Microsoft. They'd hemorrhage billions before being forced out of the market with their tail between their legs.
I think Microsoft's even more screwed than the conventional wisdom thinks they are. Their mobile strategy is a shambles, their console business will never turn a profit (and could end up costing them another $10-$20 billion), they're an also-ran in the cloud, and their OS and office applications monopolies are increasingly threatened by Apple in the home, and by Linux and cloud-based applications in the workplace.
Their patent portfolio is formidable, but then, so was Kodak's.
I think they have about 5 years left to turn it around before they begin a rapid slide into irrelevance, and I don't think there's a snowball's chance in hell that Ballmer could lead such a turnaround.