This should be my 2010 predictions column and it is, sort of, but if you’ve noticed I’m writing shorter columns these days but posting more frequently. There’s no way I can do a comprehensive predictions column in less than 3000 words. So what I propose to do instead is to write several prediction columns today, tomorrow, and maybe even the next day, covering in some depth what I think is happening and where we are going in the coming year as a technological culture. This first 2010 prediction column deals with Microsoft.
In the simplest terms what we’ll see from Microsoft in 2010 is more of the same. The company will continue to push its strengths, which are Office, with a new release, Windows 7, with an upcoming service pack and tablet support, the Bing “decision engine,” xBox, which has become a clear winner, Sync, the automobile technology that should expand beyond Ford, and a number of other products and technologies that are less visible but just as important to Microsoft. All these developments follow a theme that I think has been generally missed in the press and that is the continued maturing of Microsoft into its ideal — IBM.
IBM doesn’t even make PCs, remember? They sold that business to Lenovo for not very much money because it hadn’t made any profit for Big Blue in many years. Yet IBM continues to thrive by offering a broad menu of products and services for its core customers. Microsoft does, too.
At this point I wouldn’t say Microsoft has many serious business vulnerabilities. Their efforts to diversify their business seem to be going in the right direction.
For every corporate desktop, Microsoft gets:
$50 for Windows, give or take
$200 per PC for Office per year
$2200 per Windows server
$30 per user Client Access License (CAL) to access the Windows server
$3700 per Exchange server
$65 per user CAL to access their Exchange server.
For any company with lots of employees, these numbers — which don’t even include any client or workstation apps other than Office — quickly add up to a lot of money.
For a company with 10,000 employees, setting them up to use Microsoft technology will cost you $3,360,000. Over half of that will be for Office and you’ll pay that Office tax every year.
These are enterprise sales — a market that Apple, for the most part, doesn’t even address. So in the popular scheme of Apple nuking Microsoft, no Apple nukes yet exist in this space so they can hardly be a threat… yet.
Yes, there is strong motivation for corporations to cut costs and if good alternatives to Microsoft products existed, they’d jump all over them. The problem is there are few good alternatives and no comprehensive ones. The quality of Microsoft software is now pretty good. It works for the most part. Microsoft is supporting its products pretty well, too. For corporations to switch there needs to be a cost savings, a quality alternative, and low risk.
Open Office is getting progressively better, but it is not there yet. Red Hat and its Linux competitors do not offer a comprehensive alternative for enterprises. Understand, however, that Linux already dominates industrial-strength Internet applications and is likely to continue to do so. In that space Microsoft is the little guy and unlikely to get bigger.
Apple has too many holes in their product line to adequately replace Microsoft at this time, nor do they appear to be making any serious attempts to address the enterprise market.
Microsoft CEO Steve Ballmer knows his first obligation is to these enterprise customers. That doesn’t mean, however, that Microsoft lacks ambition in the client and consumer spaces. Look at Bing for example. It is nice to see some creativity and innovation coming from Redmond. Even if you never use Bing, it will still help you, giving Google an incentive to try even harder.
Where Microsoft appears most vulnerable is in the mobile space as I wrote a few days ago. Windows 7 Phone (Windows Phone 7?) may not be enough. A Microsoft purchase of Palm would be interesting, especially if they let WebOS live and grow. Or they could buy Palm to kill it, too. We know all about that Microsoft technique. A more aggressive move would be Microsoft buying Research In Motion (RIM). I see this as unlikely but not impossible and I’d frankly love to see it happen, not just to shake up the smart phone market, but also to throw some Waterloo DNA into Redmond.
As far as standalone and client applications are concerned, it is a whole new ballgame thanks to Apple’s App Store archetype. If the new platforms will be smart phones and netbooks, then they will need new applications. It will be hard to use the old applications on these new platforms. The iPhone gives us a good view of the future of applications, what works and what doesn’t.
Another area where Microsoft has been quiet of late is communication services. This begs an interesting question — when do the telcos become irrelevant? As Google and Microsoft (and Yahoo?) bulk up their ability to support smart devices, what value add does an AT&T or Verizon really offer? What if Microsoft (or Google) bought, say, Sprint and converted their network to purely data? They could use VoIP with QoS for all voice calls. They could hook their giant information and application infrastructure directly to the data network. It could change the game.
In one sense such a bold move is more likely from Google or even Apple than Microsoft except for one thing — its likely negative effect on earnings and stock price. Neither Google nor Apple can afford the hit of absorbing Sprint’s lousy profit margins. But Microsoft, whose stock has trailed the market for much of a decade, probably wouldn’t be hurt as much by such an acquisition. Heck, it might even be viewed as a bold move despite the earnings hit and drive Microsoft shares up.
These latter ideas require scale and financial muscle and I think that fairly characterizes where Microsoft is headed. Bill Gates is gone and Redmond is settling into a comfortable middle age. While this may not be good it was probably inevitable as Steve Ballmer rebuilds the company in his own image. What’s sad is it probably means an end to changing Microsoft strategy over a weekend and sending the company into a tizzy as Gates liked to do. Recent layoffs at Microsoft, for example, have much more to do with remaking the internals of the company in a new, more pinstriped model, than with cost savings.
Mature companies don’t have tizzies and Microsoft is becoming just that — a mature company — but they’ll remain a significant player for another decade at least.
Next Topic — Homeland Security.