Ephraim Again: Microsoft is Toast

Ephraim Schwartz at InfoWorld appears to be positively cantankerous. First he was calling, like his InfoWorld colleague Tom Yager, the Microsoft-Novell agreement an exercise in creating FUD about the business viability of Linux (timed of course to coincide with the intro of Vista which is threatened by Linux as its much more cost effective alternative). So once again, we have a dramatic example of Microsoft trying to gain yards while out of ethical bounds (the consensus in the IT community is that like SCO, Microsoft a)has its own IP liabilities to Open Source and b) there is not too much IT sympathy for Microsofts FUD).

Now Ephraim has turned absolutely pugilistic:
“I awakened to the truth that Microsoft is toast.

It happened while I was watching Bill Gates on the Charlie Rose interview show. I suddenly got the distinct feeling Microsoft is on its way out. Oh, not right away, at least not immediately; they have a great deal of cash reserves and a great many very talented people, after all, but in five or ten years certainly.

Rose asked him about Google and the iPod and other competitors that are doing quite well. In Gates half-hearted response and admission that Microsoft had been outsmarted, I saw almost a psychological or perhaps spiritual admission that Microsoft will never be what it once was.”

Now Ephraims conclusion is based on the fact that despite repeated drubbings in the Internet innovations marketplace:
1)Microsoft attempted with the launch of Windows 95 to establish its own rival Internet – MSN;
2)Microsoft missed the importance of the Web Browser and Server and had to play desperation catchup and “cut off the oxygen” to Netscape and other rivals – for a cost of $2B in fines, an antitrust trial, and loss of the “awshucks were just developers” image;
3)Microsoft missed the move to small and connected devices like Palm and Blackberry and mobile phones;
4)Microsoft thought it could tilt the playing field towards its Smart PC Desktop by stopping all updates to IE from the year 2000 onwards including falling well short of 1997 promises of meeting W3C HTML/CSS/JavaScript standards while generally rejecting all new Web Standards such as SVG, CSS2, XForms, E4X, JPEG2000, DOM rationalization, removal of its proprietary extensions in HTML, JavaScript and the DOM, etc, etc.

Redmond has yet to show that it has a vision beyond the Windows PC and Server as being primary. So true to form, Microsofts top executives have just allowed the notion that it is flirting with broader visions to leak out in a Business Week Special Report on Microsoft in its December 4th 2006 issue featuring wunderkind J Allard as the soul of the new orientation. But not Bill nor Steve; but the underlings are dispatched to say:
BusinessWeek: But doesnt the growing importance of the Web and all sorts of devices require Microsoft to take a different approach ?
Microsoft VP Jeff Raikes: You might think the core of our business is the PC. That is the misconception. The core of our business is software. And the software can be applied to the PC, the software can be applied to the Server.”

And Jeff might as well have added “and the software will only runs best if it is in the Windows family because we have tightly coupled the Windows stack such that only our apps can get its full benefits. Ohh and it can run on other devices with Windows embedded, or CES, or whatever – but for serious work it will gravitate to the PC and/or Server.” Sound like IBMs old “runs best on mainframes” message?

In fact it is this narrowness of vision that IBM with its old “mainframe uber alles” found to be its come uppance in the early 1990s and had to adopt an open, we -work-with-anybodies- software/hardware approach. Despite protestations like the Business Week article, Microsoft is repeating the IBM blunder – just in Client-server mode. So it is not a wonder that Ephraim comes to the conclusion:
“The truth is Microsoft carries within itself its own seeds of destruction. Built into to the very DNA of the company and its products is the need to feed off the computer to survive. But if Scott McNealys original statement, the network is the computer is true as it appears to be then computer is not the computer and Microsoft with all of its money will not be able to feed off its current revenue stream and it will starve to death.”

I would agree with everything up to “starve to death”. Microsoft has too much cash and revenues, enough good people, and too many customers like you and I that have acquiesced to its monopolistic prices and Machiavellian practices to go so completely awry as a corporate entity. However, the companys management may yet do itself in if it sticks with a “Clean-up role” in IT innovation and “you have to be able to gain yards while running ethically out of bounds” tactics.

The Clean-up role says that Microsoft does not have to take the risks of innovation because it has a cash horde, monopoly powers, and staffers which are watching everybody elses innovations. Microsoft will not pioneer but stays just close enough so that its monopoly power allows it to play “Clean up”. Clean up means let the innovator falter and take the financial hit in the market and then buy them at their nadir. Or buy them before anybody else spots them – and the market potential. Or if they refuse like Netscape to carve up the market according to Redmonds dictates, then “cut of their oxygen” by depleting all or their major revenue streams. Or resort to FUD and standards corruption as in the case now of Linux and “IP indemnification” saber rattling or earlier with the deliberate sabotage of Java by distributing an obsolete JVM on IE.

All of the latter methods are just a few of the much “admired” embrace and extend tactics of Microsoft. I prefer to call them tilt the playing field by using our monopoly powers to dictate Microsoft first(not customer) standards . The whole idea is to win ethically out of bounds when and where you competitors least expect it. The idea is to hamstring and eventually liquidate(“and you know what happened to Netscape” as Ray Ozzie noted – I lost all faith in Ray Ozzie being able to produce a Microsoft turnaround with those words) with a whole series of unethical practices. It is this penchant to sabotage that is alive and well as the recent Microsoft FUD campaign against Linux (reviving IP indemnification fears) confirms. Microsoft has, despite claiming Enterprise caliber products and management methods, not abandoned underhanded practices nor the market following mop up position.

Microsoft wont starve to death; more likely it will fall on grievously hubristic mis-steps. It will miscalculate in George Bush fashion on its customers, employees, partners, or 3rd party developers willingness to go along with yet another “ploy”. This may be a blunder or a series of mis-steps that puts users with only EULA protections up the creek at their not Microsofts EULA protected expense or at least sharing of costs. Or 3rd party developers who are always at the mercy of Microsoft if they ever develop a really big market, will see one too many of their colleagues shafted yet again. Or Microsoft employees suffer financially because many of them have grabbed the brass ring of a Ponzi stock options scheme that just can no longer work except if the company breaks itself up and then only some will reap the rewards. More likely it will be a conjunction of oversteps that invoke many of these causes => consequences.

In sum, despite all the philanthropy, market monopolies, and blustery bravado – to expose your company to such potentially disastrous risks is hardly the model of a enterprise caliber company. And so Microsoft may very well incur so much antipathy and/or miss-the-boat risks that it will it do itself in – which is really the point that I think Ephraim is making.

(c)JBSurveyer 2006
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