The Bentonville Mafia
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As promised, here’s part three of my series on fixing Microsoft for the 21st century. This assumes we’ve already spun-off the Internet properties to Yahoo as I suggested a few days ago and a Bank of America/Merrill-Lynch analyst quickly copied. Does that copying qualify me for a Federal bailout?
The big Microsoft news this week, at least from the press it has received, is Redmond’s decision to open a chain of stores. Nearly all the pundits think this is stupid, while I think it was merely inevitable, given the nature of current Microsoft management, which seems to be more and more from Bentonville, Arkansas, home of Wal-Mart.
See that guy in the picture? That’s Microsoft Chief Operating Officer Kevin Turner, who spent his entire pre-Microsoft career rising through the ranks at Wal-Mart. I’ve interviewed the guy and he’s smart and a lot tougher than he looks.
Microsoft has drawn heavily from Bentonville and for good reason: those Wal-Mart folks sure know how to make and manage money. Wal-Mart and Microsoft make about the same amount of profit each year, though Wal-Mart has over four times the sales of Microsoft. This makes them more similar than they are different, because each exists in a rarified financial atmosphere where the amounts of money involved dwarf the budgets of most nations. When these companies hiccough, the world economy sneezes.
So it seems inevitable to me that as Microsoft is operated more and more by executives from a giant retailer, that Microsoft will try doing some giant retailing of its own. And sure enough they are doing just that through this new plan to open Microsoft stores – a plan that could equally be laid at the feet of Apple as yet another Microsoft tactic copied from Cupertino.
Only Microsoft stores are different from Apple, stories, we’re told, and that’s true: Apple needed distribution while Microsoft HAS distribution, in spades. In fact Microsoft has so much distribution that this chain of stores could be viewed very negatively by Microsoft resellers but probably won’t be because I doubt that Microsoft will be actually trying to sell much stuff, and what they do sell will be at full retail unlike everyone else. It’s like buying wine at the winery: you never get a deal, but the samples are free.
So you can try out that cool game computer at Microsoft but actually BUY it at Best Buy, just as you would have before.
Why even do it, then? Why have these stores?
Propaganda.
Phil Schiller of Apple made the point back in January when he explained that Apple stores had 400,000 visitors per day or the equivalent of 20 Macworld shows EVERY DAY. Microsoft wants the same thing. They want to bypass the press machine that they feel has tainted users against Windows Vista, making sure the same thing doesn’t happen to Windows 7.
If Microsoft can achieve that one goal – just that one – then the Microsoft stores will have been worth doing even if they never have a dollar of retail sales.
So Microsoft will build those darned stores and they’ll build them fast because they’ll want 100 or more to be open for business by the time Windows 7 officially launches, which we’re told is this year.
In this economy finding retail space is easy, Microsoft has lots of money, so of course this retail build-out will be simple. AND I predict that Microsoft will achieve its goal of disintermediating pundits like me.
In my case I have long made it clear that for the right price I’ll simply go away, but Microsoft never takes me seriously.
There was a time in the late 1990s when I had an interview scheduled with Bill Gates. His net worth back then was growing at a calculated $34 million per day or more than $1 million per hour on a 24/7 basis. So I offered to give the hour back to Bill for half price — $500,000 – but for some reason he didn’t see it as such a bargain. Nor will they this time.
So look for the Windows 7 roll-out to go a lot smoother than any other Windows release, ever, simply because in every major media market there will be real people down at the mall in Microsoft shirts ready to explain how to do all the arcane crap required to keep running Windows – even Windows 7.
The Microsoft stores are a brilliant move.
But the impact on Microsoft of the Bentonville Mafia hasn’t been entirely positive. They ran out of town Jeff Raikes, for example – one of the best Microsoft executives. The Bentonville crowd, you see is brutal even in Microsoft eyes and Raikes just couldn’t take it any longer, which is why he “retired” and then un-retired a minute later to run the Bill and Melinda Gates Foundation.
Enough about the stores, already — now should be done with the rest of Microsoft?
Break it up.
This is not, by the way, a prescription for justice or vengeance or an attempt to get really good service the next time I visit Paris. It’s a 1980’s “greed is good” style prescription for giving current Microsoft shareholders better value for their money. Simply put, the parts of Microsoft are worth separately more than the whole, mainly because of all those anti-trust shenanigans but also just because Microsoft forced itself to get too fat simply to keep its earnings growth in line. Well it is time to release some of those excess divisions and let them find their own values, which I guarantee will be uniformly higher,
Here are my quite specific – AMAZINGLY SPECIFIC – recommendations, then, for the restructuring of Microsoft.
1) Cut by job category.
Don’t simply cut products. Cut by job function. There are too many testers and Project Managers across the company. Probably too many developers, too, but it’s hard to imagine Microsoft ever conducting a mass layoff of developers, since they form the core of Microsoft’s corporate culture, and most are valuable employees.
There are scores of new job functions at Microsoft, many of dubious importance. For example, one of the latest buzzwords at Microsoft is “business intelligence.” As in, “We need to look at the BI for this project.” There are many new “BI analysts” who look at spreadsheets and analyze all sorts of business and customer data, looking for trends. There’s nothing wrong with this, but a lot of these people could be cut with little impact on the company, since they’ve clearly had little to no impact and left all this crap for me to clean up.
Total cuts by job function — 5,000 Project Managers, testers, business intelligence analysts, and other job categories with more people than Microsoft needs for its surviving products.
Microsoft should balance this with 1,000 new hires in the areas of usability, design, and Project Managers who actually want to create more usable software.
2) Microsoft Research
This has long been a favorite pet area of Bill Gates, but Gates is gone now and Microsoft Research has ballooned during years of fat profits to thousands of PhDs scattered around the world. Hundreds of these highly paid people could go, and many others could be transferred to product teams.
3) Product lines
Here’s where the bulk of the cuts should be – 15,000 to 30,000 jobs. When deciding what products to cut and keep, the devil is in the details.
Products to cut:
MSN – We’ve dealt with this already – MSN should go to Yahoo as I described recently, or absent Yahoo it should go somewhere else, just not in Redmond. Why is Microsoft in this online business that keeps losing money year after year? Microsoft is not a content company. The cuts should include:
MSN Home Page – persuade MSN users to create a Windows Live home page instead.
MSN’s many individual websites – MSN Money, MSN Music, MSN Entertainment, MSN Video, MSN Celebrities, etc. Why is Microsoft creating a big new website for celebrity news? Is there anything more ridiculous for a software company to be focusing on?
Microsoft adCenter (online advertising system) and Display Ads Platform – Microsoft is not an advertising company. They should hire advertising companies to do this work, and sell this business to Yahoo.
MSNBC – Microsoft is not a news organization – sell to Yahoo or GE.
MSN Games
Tools
Microsoft Expression – Does anyone actually use Expression? This is a weak attempt to compete with Adobe in the graphics market.
Windows Live – This is a major future push for Microsoft, and Microsoft is doing a lot of experimenting by tossing out dozens of Windows Live programs and services to see which stick and people actually use. Microsoft could definitely do some cutting here, and focus on a core group of popular Windows Live services, such as Windows Live Mail, HotMail, Messenger, and Photo Gallery.
It is probably cheaper for Microsoft to ACQUIRE future Windows Live services than to create them. That’s how Cisco does it.
Don’t know if Microsoft should keep or cut:
Live Search – This is a tough call. I don’t know if Microsoft should give up on search or keep trying to compete head-on with Google. But I think it’s sunk too much money hiring the right people to give up now before giving these smart new hires more time to try. And they have a big new launch planned this spring, with a new name, so what the heck.
Windows Embedded and Windows CE – I don’t know how successful these are. They seem like niche products.
Keep some, cut some:
Office – Obviously, Microsoft should not get rid of its most profitable Office products. But the product line has ballooned in recent years and could use trimming. SharePoint is successful, but Microsoft could cut:
MapPoint
Office Live Meeting
Office for Mac (does Microsoft really need to sell Mac software?)
Office Accounting (sell it – there are buyers)
Probably some other small Office products
Microsoft Dynamics – I don’t know much about Microsoft’s business solutions division. But they sell a whole line of products (Dynamics AX, CRM, Enterprise Reporting, GP, NAV, Retail Management, SL). Some should probably be cut. Or better still just sell the whole darned group to some private equity firm.
Server products – Microsoft’s line of enterprise server software is huge and constantly growing. Many of the products are undoubtedly successful and Microsoft should keep them. But the product line appears to have ballooned out of control to more than 40 products.
Figuring out exactly what to cut and keep here would take some work. I’m no expert on this, but Microsoft should keep Exchange Server, SQL Server, and its other big server products.
But a lot of small products like these should probably go:
Forms Server
Groove Server (sorry, Ray)
Identity Lifecycle Manager
Keep and grow:
Windows client = Cash cow. ‘
Internet Explorer – Microsoft needs to offer a free web browser, despite the antitrust headaches this causes for the company in Europe.
Windows Server – Another big cash cow, and the basis of its server product line.
Office – Keep most Office products, but cut some (see above). Another cash cow.
Office Live – Microsoft needs to start pushing its successful Office apps onto the web.
Hardware – Microsoft has sold millions of mice and keyboards over the years. This seems like a successful and profitable business, but Microsoft should be careful not to let the product line grow out of control. It’s already expanding into presentation pointers and other dubious new hardware peripherals.
Microsoft Auto – Ford Sync seems to be successful, and other auto companies reportedly want Microsoft to create similar software for them. Although the auto industry has tanked recently, it should recover when the economy recovers.
Microsoft Surface – A small product with promise.
Xbox – Although Xbox lost a lot of money for years, it reportedly is profitable now. It seems too successful now to cut. But Microsoft should be careful how much it invests in Xbox and give up on casual games. Stop trying to compete against the Wii and position Xbox as a great family gaming system. It’s not and never will be. The Xbox is all about Halo and other violent shooting games and racing games played by teens and young men.
It would help, too, if Microsoft would respect its customers and support the Xbox better. Look for a sad story about this from me soon.
Zune — Many people say Microsoft should give up on Zune, but I think Microsoft should keep its Zune software and hardware and work to merge Zune with Windows Mobile, perhaps forcing Apple toward a music subscription model.
Windows Mobile – I think Windows Mobile is too promising to cut, even though Microsoft has screwed it up by being extremely late with its long-promised Windows Mobile 7 touch-screen update, now not due out until mid-2010. A lot of carriers still sell Windows Mobile phones, which are popular with business people. Heck, the future of personal computing IS mobile.
Have you noticed I didn’t mention any of Microsoft’s languages? I have long felt that these should be spun-off as a group. This is controversial, I know, but if Microsoft was forced to use third-party languages we’d see a lot fewer undocumented APIs and other nasty surprises. And I think it would get the Europeans off Microsoft’s back entirely.
And there you go – 30,000-50,000 heads later Microsoft would be smaller but stronger, more focused, agile, and better able to compete on a level playing field. Call it the Cringely Plan. Ballmer can implement it, drive Microsoft stock to $150 and then retire a gazillionaire, leaving the Bentonville Mafia to spend the next decade doing what they do best, optimizing processes.
Interesting story. But you’re completely wrong on the Zune. With DRM free songs on both Amazon and iTunes, there is no reason to ever, ever sign up for a subscription music service, which by default would require a way to stop you from playing the music if you stop paying your subscription fees.
I will NEVER, EVER sign on to a subscription music service!!! I have no idea why pundits like you are so stuck on this stupid stupid idea.
The Zune will never catch on, subscription or not. Microsoft loves DRM and screwing their customers with their DRM schemes. They should dump the Zune because most people know better than to ever buy one.
Bob, why would keeping Live Search(or whatever it is it’ll be called next, Kumo?) be a good idea but not keeping adCenter and DAP? Those are exactly how they get any revenue from Search. You suggest they should hire other companies to do this work for them? They did, and then they decided to buy them before Google or Yahoo could get a chance to(Aquantive/Atlas), primarily for the ad network technology and management and analysis tools that Atlas has. If Microsoft doesn’t have its own ads infrastructure it makes no sense to have a search engine anymore since they wouldn’t have any way to get revenue from it. Besides, the long term goal for them is to utilize the same ISV approach they have successfully for years with packaged software in the online advertising business. Microsoft has always been good at leveraging other people’s sales forces and their only hope is to be a technology platform for advertising and not an Agency. This is why within the next year they’ll probably sell Razorfish to WPP or Omnicom, they could probably get upwards of $1billion. Microsoft creates the platform, runs the infrastructure, but the ISVs/advertising agencies actually provide the campaign design, management and analysis services and the customer hand holding, much like Dell or HP might do for server products. Just like Azure will emerge as a platform with APIs for developers of grid based software and service offerings Microsoft’s advertising platform will be just a development and infrastructure platform for agencies to market their customers products in the most effective manner online(and in many other emerging advertising media that will be digitized) and large publishers to monetize their content, whether it’s websites, television, in-game advertising, etc.
The shortened version is Microsoft will ditch the content business and turn online advertising into a technology business that they can sell like any other server and tools product. At least that’s the only way I can see this being successful(in a profit perspective) long term.
Bob,
I think Microsoft is just too old and CAN NOT change. Recently I started exploring various Linux distros (run them from DVDs from ISOs I had downloaded) and one thing that really surprises me there is Linux distribution just for everyone. Linux Mint and especially Dreamlinux are just perfect windows alternative. There is also scientific linux, artist linux etc. so just everyone can find right distro and everything is free. With this stage of technology Microsoft as consumer company is already obsolete. Macs and Linux will grow in market share. Linux has new version every 6 months. I do not know if that will come in 10, 15 or more years but I just can’t see how you can compete with something that is free and really good and to compete with someone who has such loyal customers and innovative as Apple. Microsoft can not afford to wait 2-3 years for new version of software and those are all minor updates. I mean windows engine is still NT and Microsoft’s products are overpriced.
I think real interesting question for yr next article can be
IF MICROSOFT DIES TODAY WILL ANY ONE TALK ABOUT IT YEAR FROM NOW
Didn’t Gates say (or intimate) that Microsoft made more money with Office on each Mac platform that it did with Windows on each Windows platform? Office for Mac is probably the single most purchased software on Mac computers.
Besides, if Microsoft discontinued Office for Mac, wouldn’t that mean that Apple would have to expand iWork, and possibly compete on Windows platforms as well? How does that help Microsoft?
[...] I, Cringely » The Bentonville Mafia – Cringely speculates that Microsoft’s retail plans are a way of disintermediating the media through experiential marketing. It may help the company’s share price as well, since a better understood Microsoft would help armchair investors realise the intrinsic value in the business [...]
oooh,
“Office for Mac (does Microsoft really need to sell Mac software?)”
they don’t have the balls.
would that limit Mac sales or set them (iWork, openoffice) free ?
I think they should ditch Windows Mobile. It doesn’t have the lockin that MS has on the desktop, and whatever they are charging for it, it’s too much compared to Android or Qt4.
In addition, as you say, they “..screwed it up by being extremely late…”. Too late.
Bob, one of Microsoft’s big push from an advertising standpoint right now is Office Communications Server. This server in conjunction with the Office Communicator client is Microsoft’s big push into Unified Communications. With a good foothold in enterprise instant messaging, the OCS product together with SIP phones is putting them head to head with Cisco.
At the same time, Cisco is rapidly moving their server products from running on top of the Windows server/SQL/IIS stack to linux/Informix/Apache, and making their applications operating system agnostic with the ability to run on windows, mac, and linux.
If they keep at it, Microsoft has the ability to compete effectively in the Unified Communications space, including email, presence, IM, voice, and video. This should be a keeper on your list.
Brilliant post.
I do think I agree with the majority of words you spoke.
Surface–a small tool with promise? Seriously?
You alluded to a future post that would include sad story about Microsoft not respecting its customers and not supporting its customers. I too have had a very sad and frustrating experience with Microsoft, specifically their Xbox Live technical support line. I ranted about it in full on my blog (http://universityway.blogspot.com/), but to be concise they are specifically trained to be anything but helpful and also to not fix their mistakes, i.e. refund you after receiving a defective product.
Instead of the “Microsoft store” it should be the “Microsoft Cafe” and it should not sell anything. Just a place to showcase products. Maybe buy up the old Starbucks and sell coffee cheap while you’re test driving Windows 7.
I thought the mice etc. sell because they enable you to buy Windows at OEM prices. They are decent products, but an anomaly in the company and an artefact of windows pricing policy.
Office for Macs is pretty big with college kids because of .doc compatibility issues. But to compete effectively, Microsoft needs to totally revamp Office and IE in a USEFUL way. Forget Macs – with cloud computing on the horizon, Google will overrun Microsot very shortly if Microsoft doesn’t get a leg up on them with Word and IE, especially since Google’s now looking to compete with Firefox for web browsing. Additionally, while Windows 7 is nice, it’s still too bloated. Ubuntu is getting more and more plug-and-play, and Windows 7 isn’t too improved from Vista wrt: graphical interface and hardware requirements.
Bob:
One reason that MS wont kill the Groove Server product is the test environment it offers. Many of the features incorporated into it can easily be subsumed by Sharepoint and Exchange. The one area though that Groove excels at is SarBox auditing. It has very tight document tracking that seems to beat anything else and that’s an advantage they simply can’t give up.
You’re joking about downsizing Microsoft Research, right? If not for the work that they’ve done, .Net would be nowhere near as attractive a development platform as it is.
Bob, what has happened…. quality waning… but we do enjoy the odd rant.
Microsoft Research is not a pet project – it is how companies stay relevant and clued; want a software company that means anything in 2012, 2014, 2016, 2018; big-line budgets are needed to get Research to Development to Product, simple as that. It looks like fat, ’cause it’s where the work happens to get new “bits” into new products.
It looks like your channeling, and those your channeling such as Montgomery should spend seven seconds reading the shareholder report and then they would realize the R&D budget includes the cost of coders for turning Research, through Development, into Product.
Want IPv6 – check the budget that paid for the work
Want “Ribbon” – well maybe not but it’s in the product – check the budget that paid for the work to put it there
Want funky-new wireless support – check the budget it came from
and so on; this goes for any R->D->P
On another one: Cutting testers – plenty of us out here in user land would like to see that budget line doubled; and then reinforced with some overturning of the shrink-wrap get-out-clause… Software engineering is a discipline, many practice, time to take your medicine and realize a discipline needs discipline; even if that means wielding a legal clue bat.
Sad part is this stuff is repeated and repeated by industry commentators that should both know better and do some investigation before they repeat each others claims ad-naeseum.
Bob,
As usual, you hit on some really great ideas. I particularly like the idea about dropping Office for the Mac. Microsoft could then offer Office over the web for Mac users who had to have access to the file formats. This would kickstart “Office Live” since Mac users are more likely to try something new. However, Microsoft should then recreate IE for the Mac and allow Mac clients to now participate in those parts of the web that require IE only browsers. It would also make it easier to bring Mac’s onto Corporate Networks with very little support from the IT department. If possible, I would like to get your thoughts about this on another post in the future.
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Bob, why would keeping Live Search(or whatever it is it’ll be called next, Kumo?) be a good idea but not keeping adCenter and DAP? Those are exactly how they get any revenue from Search. You suggest they should hire other companies to do this work for them? They did, and then they decided to buy them before Google or Yahoo could get a chance to(Aquantive/Atlas), primarily for the ad network technology and management and analysis tools that Atlas has. If Microsoft doesn’t have its own ads infrastructure it makes no sense to have a search engine anymore since they wouldn’t have any way to get revenue from it. Besides, the long term goal for them is to utilize the same ISV approach they have successfully for years with packaged software in the online advertising business. Microsoft has always been good at leveraging other people’s sales forces and their only hope is to be a technology platform for advertising and not an Agency. This is why within the next year they’ll probably sell Razorfish to WPP or Omnicom, they could probably get upwards of $1billion. Microsoft creates the platform, runs the infrastructure, but the ISVs/advertising agencies actually provide the campaign design, management and analysis services and the customer hand holding, much like Dell or HP might do for server products. Just like Azure will emerge as a platform with APIs for developers of grid based software and service offerings Microsoft’s advertising platform will be just a development and infrastructure platform for agencies to market their customers products in the most effective manner online(and in many other emerging advertising media that will be digitized) and large publishers to monetize their content, whether it’s websites, television, in-game advertising, etc.
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The shortened version is Microsoft will ditch the content business and turn online advertising into a technology business that they can sell like any other server and tools product. At least that’s the only way I can see this being successful(in a profit perspective) long term.
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I think they should ditch Windows Mobile. It doesn’t have the locking that MS has on the desktop, and whatever they are charging for it, it’s too much compared to Android or Qt4.
In addition, as you say, they “..screwed it up by being extremely late…”. Too late.
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