Monday, September 19, 2005

Mon - What, Microsoft struggling?

The last week or so has seen a great deal of media coverage on Microsoft's woes. Most recently we have even seen Steve Balmer publically state that Microsoft's development processes are inefficient. Is Microsoft really stumbling?

Well, at first glance they do seem to be suffering from a series of self induced shots in the foot. Last year they were one of the first technology companies to retreat from lucrative options packages after Sarbanes-Oxley changed the way enterprises treat options, so that they now represent a major cost item for any company. Most tech companies are having to deal with the aftermath of this new ruling, but Microsoft went further and seemed to even embrace the ruling.

And this year Microsoft is seeing high profile defections of some senior employees to fast growing earlier stage innovators where the opportunity to make serious money from options is still real. Microsoft even went to court with Google over Google's now successful attempt to hire away one of their most senior guys in Asia.

Last year also saw Microsoft look rarely humbled by an onslought of free software (the open source movement)eating at their market as well as an onslought of hackers trying to take advantage of every crack in Microsoft's source code. The latter forced Microsoft to shift large amounts of developers over to plug security gaps in Windows and as a result delayed the development of the next version of Windows, now called Vista. This long delay in Vista has forced Microsoft into their most recent humiliation; that of admitting that their software development process and even strategy needs to change! Wow, Bill got it wrong?

The untouchable Bill Gates now looks well, human. He can make mistakes and he can get it wrong. He has apparently been preaching the benefits of their product development processes for a while. He believes in an integrated product development strategy, which basically means that Microsoft do one big release every few years and upgrade all parts of the product all at once. So, new releases of Windows also include major new releases of plug-ins etc as well. This helps keep Windows unique, mainly just because it is so all encompassing, so keeping competition at bay and keep the regulators away. After all, one of the ways that Microsoft stopped from getting split up or their business practices greatly altered was by stating that all their products and plug-ins relied on eachother. This almost forces them to do these massive all at once launches.

The problem with such all encompassing releases is that they're almost bound to end up getting delayed, as they are just too gargantuan, or they're likely to disappiont customers because they're not innovative enough. Well, Vista, due out at the end of next year looks like it may do both. So, Microsoft have to admit to being inadequate and now have to look at more regular, and less earth shaking releases as well as separate release cycles for different parts of Windows, including plug-ins.

The industry has therefore been scratching their heads wondering how Microsoft got into this mess in the first place, particularly over Vista. The same Microsoft that never publically admitted to such corporate failings, and after all, haven't their products always been late? Well, one thing has changed for Microsoft that people seem to be ignoring: Microsoft finally have real competition. The ever innovative world leader is now facing their own disruptive competition from Silicon Valley's latest darling - Google.

Google is proving that their model for software services over the internet is the way forwards and as a result Microsoft has to adapt. And for once Microsoft face a challenge that cannot be shoved to one side, even if solely beacuse Google is now worth nearly $100bn. And Google seem fearless. Finally the industry has a company that is willing to take Microsoft on and change the rules of the game. Ultimately that will prove to be good for everyone, particularly us concumers. Hey, it may even prove good for Microsoft too.

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