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.

Comments

The problem is Ballmer

[Anonymous Coward]

The problem is Ballmer. Always has been.

Re:The problem is Ballmer

[hairyfeet]

Gates was already heading for the exit in 99. He had grown tired of dealing with the press and had more money than God so who could blame him?

No the problem has ALWAYS been Ballmer. Gates was an engineer and thought like one, menu heavy, a little geekier, but that's who he was. Ballmer has been and always will be a marketing exec, that is what he went to school for, that is how he operates, and as we have seen time and time again marketing execs may do fine on Madison Ave but they suck balls at tech.

I mean look at what has happened under purely his watch: Zune, kin, killing playforsure for a half baked Zune market, rushing out the X360 with a 2 billion dollar flaw, the bad purchases, sinking insane amounts of money trying to buy search, pushing out Vista with all of us beta testers screaming about show stopping bugs, getting caught up in the embarrassing "Vista capable" fiasco, the man has been an absolute trainwreck to the company. Hell if the rumors are to be believed the only reason Win 7 didn't end up a disaster is he was too caught up in Bing and WinPhone to give a crap and left the guys working on Win 7 alone.

Lets face it folks, the man has literally flushed billions of dollars right down the crapper, frankly if the final total of the Ballmer flush was less than 30 billion I'd be amazed. You can sum up Ballmer reign in 3 steps: 1.-See what is hot, 2.-Buy or build a half baked poorly thought out copy, 3.-Fail miserably. I bet if you would have took those billions and had a monkey throw poo at the stock page and bought stocks based on which ones got the most shit you'd have had a better ROI than Steve Ballmer has had, and that is with him having a company with not one but TWO monopolies! I swear the man makes the Apple Pepsi guy look like a fricking genius and we haven't even gotten to see how bad "Ballmer's Folly" aka Win 8 does yet.

Re:The problem is Ballmer

[Ruie]

Another similar history lesson: demise of the Westinghouse company

Re:Terrible article

[medcalf]

It did a pretty good job of laying out why MS has failed to keep up with the leading edge of the industry, and why they will need radical cultural change to ever catch up. In particular, the article avoided overblown hystrionics, for example not claiming MS is dead, but pointing out that MS has become like IBM in how it operates.

No MBAs

[shawnhcorey]

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.

Re:No MBAs

[Anonymous Coward]

I'm not sure the degree alone is the problem.

I think it's more likely to be about "Skin in the game" and familiarity with the landscape.

Too many MBA CEOs brought in thinks that they're selling widgets. They can sell computers just like they can sell soda pop, it's all the same to them.

Jobs was on a(n) (un)holy mission to remake the galaxy. Sculley was selling widgets.

Re:No MBAs

[fnj]

I'll buy that familiarity with the technology is a factor, but it's also about the thrill of technology as a motivator. Business types don't have it. Everybody knows what their SOLE motivation in life is, only it's self defeating in this particular sector.

I have a picture of the MBA at bed time. After the obligatory five minutes, he and his wife are lighting up smokes. She is stroking his shoulder, murmuring sweetly. "It's all right, sweetie. You're just wound up." His brow is furrowed in thought and he is thinking silently "How can we leverage sex in the business? How can we rake in the bucks and rip off the people?"

Re:No MBAs

[M1FCJ]

Ah the rosy spectacles of the past. When Bill ran it, everything was not great. They almost completely missed the Internet revolution because Bill Gates never understood it. Also Bill's reign got them investigated and found guilty of corporate shenanigans. He didn't leave because he wanted to, he left because he was the most hated guy in the industry.

New markets

[betterunixthanunix]

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.

Re:lost?

[jedidiah]

XP and 7 exploited the same OEM channels that forced MS-DOS down everyone's throats.

"Continuing to coast" is not quite the standard the author was looking for.

Re:Terrible article

[jgrahn]

Sharepoint? Not much to write home about.

I wouldn't say that. It *does* have that traditional Microsoft "catastrophically bad and yet my boss bought it" feel. Their OS and even things like Exchange kind of work nowadays.

Re:What the hell is "Microsoft's lost decade"?

[fnj]

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.

Re:Terrible article

[jbolden]

Microsoft's server revenue was $4.5b last quarter growing at 14% year over year. Yes sharepoint, SQL Server, Dynamics... are something to write home about.

Re:Terrible article

[Anonymous Coward]

The Xbox lost $4 billion and came in a distant seccond.
The Xbox 360 has lost $3 billion, after a few quarters in the black the division is now in the red again, and the 360 is currently tied for second.

That's not what any rational person would call success.

Re:And do not forget...

[michael_cain]

At the very heart of the DOJ case...M$ was accused of "locking-in" customers for their products. And now, fast forward to 2012... Apple is literally locking in consumers behind their gardened walls with a plethora of their own hardware and software, Google & FB literally collecting private details from its consumers. Playing the devil's advocate here, I wonder how come they are not scrutinised intensely?

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.

No. 1 console maker?

[aNonnyMouseCowered]

According to Wikipedia (http://en.wikipedia.org/wiki/List_of_best-selling_game_consoles), Nintendo Wii sold more units than both Xbox and Xbox 360. While Xbox 360 outsold Sony Playstation 3 by a few million units, combined sales of all Playstation models are several times higher than sales of both Xbox models. So what makes you say that Microsoft is the number one console manufacturer?

Moreover, unlike sales of smartphones and tablets, sales of game consoles are stagnating already. So it's pointless to argue whether Microsoft, Nintendo or Sony is the No. 1 or coolest console manufacturer.

Re:No. 1 console maker?

[sunspot42]

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.

Re:lost?

[Junta]

Its like saying IBM did well selling a mainframe, sure once upon a time they did that and made huge fortunes, today, they don't.

Well, actually, IBM does make a large amount around new mainframe sells. While various pieces of enterprisey software are their meat and potatoes now, While System Z isn't particularly glamorous, it is *solid* and IBM doesn't screw with it. Would some things in a brand-new System Z configuration seem downright *archaic* by many technical people? Of course. Is IBM's dedication to the platform largely as-is incredibly valuable to the market they do retain? You better believe it. Contrast this treatment to MS. If run like MS, mainframe probably would have been changed to be more like competitors that were eating away market share rather than staying the course to retain a very profitable core market. Kind of like what Sun did with the Ultra 5 and Ultra 10 back in the day.

IBM is actually an interesting company in terms of financial success. They are rarely the leader of any particular wide market, yet so incredibly diverse that not a significant IT deal goes down without IBM getting something out of it. You buy HP blades but IBM might make money off their switch modules. You buy software from Oracle but oracle pays some licensing fee of some patents to IBM, and maybe some IBM hardware to run the software. IBM seems to always have *some* disappointing business units and some golden children in any given time period, but that changes over time. IBM used to have hardware as the golden child, software as nothing to write home about, and a fledgling service business. Times changed and suddenly their services business is the only one looking particularly good, software exceeding hardware to the point of the very immediate demise of mainframe a likely bet. Things change again and now software is the star, with Services and hardware both looking not particularly appealing, but within the hardware mainframe has actually made a comeback.

IBM is perhaps the most boring of the massively successful technology companies, but they don't seem to care that much given their understated, but very consistent positive financial results over time.

Re:lost?

[cpu6502]

There seems to be this mythology about Microsoft "used to be innovative". I think back and don't recall ANY time where that was the case.

The first computers to have music-quality sound were Atari (1979) and Commodore (1982) and Apple Lisa (1983). Not Microsoft which didn't get sound blaster ability until years later.

The first computers to have enough GPU power to playback fullscreen videos were Atari and Commodore (1985) and Apple (1988). Not Microsoft.

The first computers to have true preemptive multitasking were Commodore (1985). Not Microsoft which took ten years to get, and it didn't work with the then-standard 16-bit apps. Only new 32-bit programs. (Apple didn't get it until 2001 with OS 10.1.)

The MS business model started by selling software to larger companies (Atari, Apple, Commodore, IBM, and the PC clone makers). Those same large companies did the innovating while Microsoft just followed along and copied what others had already done 5-10 years earlier. They were never innovative. Never.