Saturday, February 12, 2005

Microsoft rot?

ABC News: Silicon Insider: R.I.P. Microsoft?

A Silicon Valley guy prophesies hard times for Microsoft:
Great, healthy companies not only dominate the market, but share of mind. Look at Apple these days. But when was the last time you thought about Microsoft, except in frustration or anger? The company just announced a powerful new search engine, designed to take on Google -- but did anybody notice? Meanwhile, open systems world -- created largely in response to Microsoft's heavy-handed hegemony -- is slowly carving away market share from Gates & Co.: Linux and Firefox hold the world's imagination these days, not Windows and Explorer. The only thing Microsoft seems busy at these days is patching and plugging holes...

... Microsoft has always had trouble with stand-alone applications, but in its core business it has been as relentless as the Borg. Now the company seems to have trouble executing even the one task that should take precedence over everything else: getting "Longhorn," its Windows replacement, to market. Longhorn is now two years late. That would be disastrous for a beloved product like the Macintosh, but for a product that is universally reviled as a necessary, but foul-tasting, medicine, this verges on criminal insanity. Or, more likely, organizational paralysis.

... And do college kids still dream of going to work at MS? Five years ago it was a source of pride to go to work for the Evil Empire -- now, who cares? It's just Motorola with wetter winters.
Of course, you say, he would say that. The death of Microsoft is dear to the heart of the Valley. This guy gets a bit of credibility though; he claims he also rang the bell for Carly/HP and for Silicon Graphics. (He doesn't mention the other 55 companies he said were going down ... :-)

On the other hand, the usual rules of capitalism don't apply to monopolies. And then there's the patent weapon. Microsoft hasn't even begun their scorched earth patent attack. They can't "go nuclear" until the EU accepts software patents, but that will probably happen within a month or so. Yet even then Microsoft must worry that India and China might rebel. Microsoft has an incredible weapon at hand, but like all doomsday weapons it can also destroy its master.

And even the monopoly isn't a perfect weapon. Microsoft bought the Bush administration, but the Bushies prize loyalty above all else -- and they suspect that deep down Gates despises them. The Bushies won't stay bought, and the EU is an even tougher case.

Beyond monopoly and patents, what does Microsoft have? Incredible numbers of brilliant people yes, but many of their best innovations are likely disruptive threats to Microsoft's cash stream (Office, XP). Their "nasty" innovations can further the monopoly; but that risks the delicate game Microsoft pays with corrupt governments. (Ok, so they also have more wealth than most nations and they can specify cash flow on demand -- but they're addicted to that cash flow.)

The fear of cash flow disruption, or of losing control of key governments, mean Microsoft's biggest innovations rarely get to market. Meanwhile Longhorn, a festering mass of complexity, recedes into the future, while historic legacies and worldwide dislike breed an endless horde of software attacks.

Years ago a judge who wouldn't be bought decided to split up Microsoft. He was overruled. Gates decided the empire must stay whole, and he made his Faustian deal with the Bushies. That might have been the right decision for a company that can mint money, but I suspect if Microsoft had been broken up its component parts wouldn't be in any way paralyzed today. Instead Microsoft is turning into the pre-breakup AT&T of the 21st century.

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