Mood:
d'ohTopic: Microsoft and VCSY
The most interesting views here are in the comments:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1698
The Man Who Would Change Microsoft: Ray Ozzie's Vision for Connected Software
Published: April 04, 2007 in Knowledge@WhartonThis article has been read 23,358 Times
blah blah blah yada yada yada
Here's what you think...
Total Comments: 3#2 Ray Ozzie is brilliant, but is he spread too thin?
Excellent interview, as usual. Ozzie is extraordinarily smart and has thought deeply about the right formula to balance the workload of the PC with that of the cloud. Microsoft will certainly see some success here.
But I also wonder if his title as Software Architect requires him to do too much. He has to coordinate all the different groups in Microsoft, get them to think about this new paradigm, and spearhead Microsoft's new online strategy. Google, on the other hand, is focused only on the online strategy. With all due respect, it is the smaller, focused company that tends to win out.
The difference is that Microsoft is thinking carefully about the needs of corporations that use software, and Microsoft will likely see a substantial part of its future there. Google is focused on the consumer experience. The danger is that, once again, consumer technologies are creeping into corporations through the back door. That's how Microsoft moved into corporate computing.
Ozzie has a really big challenge.
But I also wonder if his title as Software Architect requires him to do too much. He has to coordinate all the different groups in Microsoft, get them to think about this new paradigm, and spearhead Microsoft's new online strategy. Google, on the other hand, is focused only on the online strategy. With all due respect, it is the smaller, focused company that tends to win out.
The difference is that Microsoft is thinking carefully about the needs of corporations that use software, and Microsoft will likely see a substantial part of its future there. Google is focused on the consumer experience. The danger is that, once again, consumer technologies are creeping into corporations through the back door. That's how Microsoft moved into corporate computing.
Ozzie has a really big challenge.
#3 A long history of innovation...
Hakeem, I think you're reacting from a far too typically "fashionable" "bash Microsoft" public perception, vs. what's really going on there -- and in the world...
As Ray points out, the right model for software is never going to be entirely on the web or entirely on local devices, but rather a combination of both. There are many situations I can imagine as a user, never mind those I can imagine as a businessman, where I simply will not trust *my* information to some cloud in the sky managed by someone else. Period. I don't care if the technology supports it or not…
From a business perspective, as Ray correctly points out, as a mobile professional, I cannot depend on broadband access as the answer to all my prayers. Hell, I can't keep a cellular connection for all ten miles of my commute from home to work...how can I possibly expect to work without a local cache of information on my device? And when I’m traveling on an airplane for 20 hours from the US to Asia, for example, how do I work then? Yes, there *was* Connexions by Boeing, but that’s gone now. I’m sure that at some point, they’ll figure out how to enable access in a cost-effective manner on airplanes, but that’s not available now.
I won't spend the time to respond to all of your salvos at Microsoft...they've all been hashed through a thousand times before by many people on both sides of the issues. The road of high tech is littered with predictions of the demise of Windows and Office. They are the dominant players for one simple (though, I’ll grant you, not unassailable) reason -- nobody has come up with a way to deliver all the functionality in those products that users want in cheaper or "free" products. Linux is NOT Windows in a bunch of really important ways, and that's why it hasn't overtaken Windows as has been ceaselessly predicted over the last ten years. Ten years, Hakeem. Notes went from nothing to the defining product in the space of collaborative software in ten years' time. Microsoft Exchange went from introduction to the number one corporate email product in ten years' time. Ten years is a lifetime in the high tech industry, and the greatest inroads Linux has made in that time have been at the expense of Unix. It is what it is -- a "free" replacement for Unix. It's not a replacement for Windows, or the market would have chosen it by now. That's not to say that it still won't happen, but there's still a very long road for Linux to travel before that will happen.
As for computing shifting to the web, it's probably more accurate to say that it will shift in the direction of web-based technologies, and it is already doing that. But, once again, particularly in a highly regulated world, there's a limit to what a business is going to entrust to a SaaS provider, vs. keeping internal. With all the potential liability due to lost or stolen data, I'm going to keep my most important corporate data in-house. Period. Now, how I deliver that to people who need it and are authorized to have it is an entirely different beast, and that will clearly evolve to a mix of "in the cloud" (where "in the cloud" probably means "in the data center" for the most sensitive corporate data, perhaps managed for me by a trusted third party) and locally cached, not because fully hosted isn't possible, but because it's not practical for a plethora of non-technology-related reasons, as well as some which are decidedly technology-related. Again, I offer that, as a simple consumer, there is no way in hell I’m going to let my family pictures, my Quicken or Microsoft Money information, and so on live *primarily* on somebody else’s servers somewhere. Yes, I’ll grant you, most of that information *does* live in public servers, but the aggregation of that information – how much I make every two weeks, how much of that gets allocated to my house payment, my car payment, groceries, nights out with my wife, kids’ after-school activities, etc., and what’s left for spending money when all is said and done – that lives on my local hard drive(s), and that’s where I want it to stay, forever. In fact, I’ll go so far as to say that I will actively seek to remove as much of that information as I possibly can from other peoples’ servers.
So, I think it’s a bit simple-minded to say it’s either the way Microsoft does it or the “right” way. Microsoft hasn’t become the number one software company in the world by doing stupid things, nor has it become number one by holding a gun to the world’s head. When someone innovates a better way of doing things, you’ll know it because the momentum will shift there. Again, as Ray points out, Microsoft’s size and breadth is both an advantage and a challenge in this arena. The tricky part of his job is (and will continue to be) balancing that. Not every innovation will come from Microsoft. Not every innovation will come from outside Microsoft, either. Microsoft will not always be the first to see a potential market and enter and grab it. But I’d place my money on Microsoft ultimately succeeding, not failing, in those places where it chooses to play.
One other thing…Microsoft in 2007 and beyond will not ever be, and cannot be, the Microsoft of the eighties and nineties…the world has changed, the company has changed, and the expectations of the company by its customers have changed. Microsoft has gone from being viewed by its corporate customers as a shrink-wrapped software vendor to being viewed as an enterprise supplier, and the expectations of an enterprise supplier are vastly different from those of a shrink-wrapped software provider. So to expect Microsoft to act like Google or Rightnow or Salesforce.com or Netsuite is to expect the wrong things, and to set yourself up for disappointment, or to set the stage for yet more unfounded Microsoft bashing. Try seeing beyond your emotions; try thinking like Microsoft, however unpleasant an experience that may be. Think about all the businesses, all the different kinds of customers that the company serves, and then think about your criticisms, and whether they make sense in that context…
As Ray points out, the right model for software is never going to be entirely on the web or entirely on local devices, but rather a combination of both. There are many situations I can imagine as a user, never mind those I can imagine as a businessman, where I simply will not trust *my* information to some cloud in the sky managed by someone else. Period. I don't care if the technology supports it or not…
From a business perspective, as Ray correctly points out, as a mobile professional, I cannot depend on broadband access as the answer to all my prayers. Hell, I can't keep a cellular connection for all ten miles of my commute from home to work...how can I possibly expect to work without a local cache of information on my device? And when I’m traveling on an airplane for 20 hours from the US to Asia, for example, how do I work then? Yes, there *was* Connexions by Boeing, but that’s gone now. I’m sure that at some point, they’ll figure out how to enable access in a cost-effective manner on airplanes, but that’s not available now.
I won't spend the time to respond to all of your salvos at Microsoft...they've all been hashed through a thousand times before by many people on both sides of the issues. The road of high tech is littered with predictions of the demise of Windows and Office. They are the dominant players for one simple (though, I’ll grant you, not unassailable) reason -- nobody has come up with a way to deliver all the functionality in those products that users want in cheaper or "free" products. Linux is NOT Windows in a bunch of really important ways, and that's why it hasn't overtaken Windows as has been ceaselessly predicted over the last ten years. Ten years, Hakeem. Notes went from nothing to the defining product in the space of collaborative software in ten years' time. Microsoft Exchange went from introduction to the number one corporate email product in ten years' time. Ten years is a lifetime in the high tech industry, and the greatest inroads Linux has made in that time have been at the expense of Unix. It is what it is -- a "free" replacement for Unix. It's not a replacement for Windows, or the market would have chosen it by now. That's not to say that it still won't happen, but there's still a very long road for Linux to travel before that will happen.
As for computing shifting to the web, it's probably more accurate to say that it will shift in the direction of web-based technologies, and it is already doing that. But, once again, particularly in a highly regulated world, there's a limit to what a business is going to entrust to a SaaS provider, vs. keeping internal. With all the potential liability due to lost or stolen data, I'm going to keep my most important corporate data in-house. Period. Now, how I deliver that to people who need it and are authorized to have it is an entirely different beast, and that will clearly evolve to a mix of "in the cloud" (where "in the cloud" probably means "in the data center" for the most sensitive corporate data, perhaps managed for me by a trusted third party) and locally cached, not because fully hosted isn't possible, but because it's not practical for a plethora of non-technology-related reasons, as well as some which are decidedly technology-related. Again, I offer that, as a simple consumer, there is no way in hell I’m going to let my family pictures, my Quicken or Microsoft Money information, and so on live *primarily* on somebody else’s servers somewhere. Yes, I’ll grant you, most of that information *does* live in public servers, but the aggregation of that information – how much I make every two weeks, how much of that gets allocated to my house payment, my car payment, groceries, nights out with my wife, kids’ after-school activities, etc., and what’s left for spending money when all is said and done – that lives on my local hard drive(s), and that’s where I want it to stay, forever. In fact, I’ll go so far as to say that I will actively seek to remove as much of that information as I possibly can from other peoples’ servers.
So, I think it’s a bit simple-minded to say it’s either the way Microsoft does it or the “right” way. Microsoft hasn’t become the number one software company in the world by doing stupid things, nor has it become number one by holding a gun to the world’s head. When someone innovates a better way of doing things, you’ll know it because the momentum will shift there. Again, as Ray points out, Microsoft’s size and breadth is both an advantage and a challenge in this arena. The tricky part of his job is (and will continue to be) balancing that. Not every innovation will come from Microsoft. Not every innovation will come from outside Microsoft, either. Microsoft will not always be the first to see a potential market and enter and grab it. But I’d place my money on Microsoft ultimately succeeding, not failing, in those places where it chooses to play.
One other thing…Microsoft in 2007 and beyond will not ever be, and cannot be, the Microsoft of the eighties and nineties…the world has changed, the company has changed, and the expectations of the company by its customers have changed. Microsoft has gone from being viewed by its corporate customers as a shrink-wrapped software vendor to being viewed as an enterprise supplier, and the expectations of an enterprise supplier are vastly different from those of a shrink-wrapped software provider. So to expect Microsoft to act like Google or Rightnow or Salesforce.com or Netsuite is to expect the wrong things, and to set yourself up for disappointment, or to set the stage for yet more unfounded Microsoft bashing. Try seeing beyond your emotions; try thinking like Microsoft, however unpleasant an experience that may be. Think about all the businesses, all the different kinds of customers that the company serves, and then think about your criticisms, and whether they make sense in that context…
Posted by Portuno Diamo
at 3:21 PM EDT
Updated: Wednesday, 11 April 2007 3:26 PM EDT
#1 Change is Imperative
That quote epitomises Microsoft's problem: An unfocused, strategic timidity that follows rather than drives trends.
Web-based productivity is not in the 'early days'. It is already a reality, as Netsuite, Google Apps, RightNow or Salesforce would attest. Once again, Microsoft will enter the market five years behind rivals, and somehow believe throwing money at the problem will result in market leadership.
Microsoft's dangerous dependence on Windows (62% of operating profits) and Office (50%) is the result of a history of missed opportunities to
diversify:
1) Microsoft missed the boat on creative software and allowed Adobe and Corel to dominate the market with overpriced, bulky products like Photoshop, Illustrator, Pagemaker and later Flash and Dreamweaver. Adobe's 2006 revenues were $2.6bn. A decade or more later, Microsoft now belatedly launches Expressions.
2) Microsoft missed the boat on ERP software, allowing SAP, Intuit, Oracle, etc to dominate this billion dollar market. SAP's operating profits are 16% of Microsoft's. After failed merger initiatives with SAP and Intuit, Microsoft belatedly now offers Dynamics.
3) Microsoft missed the boat on gaming. It seemed to do well as the (belated) Xbox siezed market share, but the blue ribbon for innovation goes to Nintendo and the Wii. The Xbox loses money ($1.26bn loss in 2006 or 8% of operating profits), because instead on focusing on games as software and online services, Microsoft bumbled into low-margin consumer electronics. If a division that loses $1.6bn is considered a success, the bar is very low indeed.
4) In the 1980s and 1990s, Microsoft missed the boat on the burgeoning market for IT consulting services, preferring to rest on Windows laurels and instead actually certify individuals and partners to support Microsoft networks and thereby cash in on the massive demand for technical services. Today, IBM's profits are 73% and Accenture's 11% of Microsoft's.
5) Obviously, as Mr Ozzie laments, Microsoft missed the boat on web advertising. Google's service is atrocious: rates paid to publishers are criminally low compared to offline rates, all ads look the same, there's no option to customise ads or choose where they will be placed, and the 'smart'software often places irrelevant ads on websites. They are ripe for leapfrogging by innovative competitors. Alas, the smaller companies innovating in this space- like Chikita- lack the resources of Microsoft.
In addition to missing out on these billion dollar nascent markets, Microsoft launched a series of strategically misaligned ventures. Speaking of low margin electronics, the Zune is an ill-advised, doomed project driven by Apple envy. Consumer electronics industry margins are paltry compared to software. Mere pennies are made from songs or movies sold. What is Microsoft doing in this business? In strategic desperation, the product is now being virtually given away. The superfluous Microsoft Network lost $77m in 2006.
Also, spoiled by decades of being able to dictate to customers (and thus being outflanked by Linux and Apache), Microsoft launched the ludicrous Home Media Center. Presumably, people don't suffer enough frustration maintaining servers in the office: they need to do so at home as well. The future multimedia home WILL be networked- but to the internet, not to a home server.
The real reason Microsoft is hesitant to embrace software over the web is strategic inertia and dependence on the Windows/Office cash cow. One wonders what Microsoft spent $20bn on R&D on over the last 3 years, when profits are still being earned by 20 year-old products, and all Microsoft's new products are copycat me-too entries. However, the SaaS revolution offers Microsoft's last great chance to rectify previous oversights and dominate a new industry. To do this, I would humbly recommend the following to Mr Ozzie:
1) Accept that Windows is doomed. Computing will shift to the web. Storage, service and maintenance will always be cheaper and more convenient on a network than on a single owned device. Broadband will obliterate PC-based software.
2) Redefine Microsoft as a software services company. Sell off anything unrelated to this definition. Start with the Zune. It was a tragic mistake. Sell off the Microsoft Network. Microsoft is not a media company, and never will be. Yahoo lags Google precisely because despite earning most of its profits from advertising, it distracts itself with content management. Eyeballs are not dollars. Offer a complete suite of web-based software via single logins to individual and business accounts. This means Office, web-based ERP, web-based Outlook, Expressions, etc by online subscription. Now. Login boxes should be via the Microsoft homepage to pull together the new vision of a software services company.
3) Regain the ERP market by building the first 100% web-based ERP solution for large enterprises using AJAX. In the absence of a merger with SAP, this is the only way to own the ERP market of the future. Salesforce and Netsuite did it. While SAP and Oracle dawdle, this is your chance to sieze the ERP SaaS up market. When slow-moving Fortune 500 enterprises finally decide to switch to SaaS,have the product ready for them.
4) Regain the creative software market by raising the profile of the Expressions suite and offering it over the web, at a large discount to Adobe's overpriced offerings. This is the only chance of gaining share from Adobe.
5) Defeat Google in web advertising by first putting the Windows Live search box on the Microsoft homepage (the world's 2nd most visited website, see point 2). You might find then that you won't actually have to bribe companies to use your search engine. Offer web publishers higher CPMs than Google, and publish these rates. Enable ads to be easily customised.
6) Change the gaming strategy. Sell the loss-making Xbox, merge with Electronic Arts ($2.9bn 2006 revenue), and reposition as the world's premier game developer and online gaming service via X-box live. The gaming division might actually turn a profit that way. Make Sony, Nintendo and the Xbox buyer your customers, not competitors (and who knows, Media Center might then follow their devices into the living room). Consumer electronics is no place for a software company. Xbox is not the route into the living room.
The future of Windows (if it is lucky) is on mobile phones and in living room devices connected directly to the internet. It's not a bright future, as its primary purpose will be to launch the browser so users can access web applications, on-demand movies, music and user-generated content over the internet in their living rooms. The future, however, is extremely bright for Internet Explorer, if it is radically enhanced for web-based multimedia and made ubiquitous on mobile and living room devices. Please talk- very humbly- to Nokia and Sony.
The shift to web-based computing is a seismic revolution that Microsoft could dominate - if it could only, for once, shrug off big company risk-aversion and sieze the day first, as it did many glorious years ago.
Sent: 12:03 PM Thu Apr.05.2007 - BN