Cut through the flurry of announcements out of Microsoft’s Mix conference this week and what emerges is the Redmond giant’s three-pronged defense strategy: consumer, enterprise and developer. Only by understanding the battles the company is fighting does it become clear where it’s is headed. We’ve broken it out for you here.

mix08.pngMicrosoft is fighting a war — one in which it’s being attacked on three sides. Cut through the flurry of announcements out of its Mix conference this week and what emerges is the Redmond giant’s three-pronged defense strategy: consumer, enterprise and developer. Only by understanding the battles Microsoft is fighting does it become clear where the company is headed. So we’ve broken it out for you here.

The consumer attack

The front: Desktops, handsets and consoles. Flanked by Apple’s cooler desktops and devices, Google’s insight into users, and the Nintendo/Sony console world, Microsoft is struggling. Windows Mobile isn’t a consumer handset like the iPhone. Live hasn’t really taken off. Vista flopped, with the company embroiled in claims that it overstated the number of machines on which it would run. And the Xbox, despite its success, has an alarmingly high recall rate. Perhaps most frighteningly, it’s becoming clear that when it comes to consumers, advertising is paying for it all (what Chris Anderson calls the “freeconomy”). But Microsoft isn’t plugged into that ad stream.

The defense: One OS to rule them all. Users have dozens of devices, and Ray Ozzie wants them all to work seamlessly together. Expect Danger, Zune, Xbox and Vista to share and synchronize automatically. Carriers and labels will love it. Consumers will settle for it. And once they’ve got a central identity, they’ll be able to carry their desktop applications (with varying degrees of functionality) from their desk, to their car, to their hip, to their sofa.

But how to pay for it? What Microsoft needs is an ad network like Yahoo, and media formats like Silverlight that lure advertisers. Ballmer’s clearly not resistant to the concept of advertising: In an on-stage Mix interview with Guy Kawasaki, he performed a mini-monkeyboy dance, only to demand of the person who had requested the jig: “If your buddy behind you just gave you a buck, I want 50 cents.” He knows where his consumer revenue’s coming from down the road.

The enterprise attack

The front: On-demand apps and a mobile workforce. Salesforce.com has gone from a turnkey contact manager to a full-fledged ecosystem for developing CRM applications. Amazon lets hundreds of upstarts build project planning, accounting, word processing, messaging and more — apps that traditionally filled Microsoft’s coffers. Standards like OpenID give interoperability without buying a suite. As companies realize the inevitability of on-demand computing, Microsoft has to completely change its business model. And on the mobile front, Windows Mobile can’t hold a candle to the BlackBerry.

The defense: Connected productivity and an easy move into the cloud. Expect the firm to retrench on mobility. Exchange still holds the bulk of business users’ internal relationships. More and more, it’s focusing on workflows and business process. Moving those processes between the enterprise server, the mobile device and the web — seamlessly — would be a big win that companies will love. With Danger, Windows Mobile can stop being a tweener and go after Research In Motion. And Microsoft’s asp.net architecture is still the easiest way for its legions of developers to build online applications.

When companies are ready to port their data centers into the cloud, Microsoft will make the transition as painless and transparent as possible using Windows Live Storage, SQL Server Data Center Services, and other services with codenames like CloudDB, Horizon, and Live Core that execs are still tight-lipped about.

The developer attack

The front: Open source, web apps and video. The thing Bill’s always done right is focus on developers. He put in functions. He opened up APIs. He showered them with development resources. And it worked. But today, we have Sourceforge for snippets of code. Eclipse gives ActiveVisual Studio a run for its money. We built Web 2.0 with Flash, AJAX, Ruby, Python — the language of the web isn’t .net, and it hurts. When it comes to video, Microsoft’s Silverlight seduces content providers with tracking and ad support, but we’ve already built those things out of Flash ourselves. And Microsoft’s notoriously long release cycle for Longhorn impacted its ability to react to market changes.

The defense: New Lego. Remember old Lego, which only had a few pieces? You had to carefully build the front of a spaceship from thin rectangles and dozens of identical bricks. But new Lego is different. There’s a single piece for the front of the spaceship. And while old-school Lego types cry foul, now pretty much anyone can build a spaceship.

That’s Microsoft. New features in Internet Explorer 8, working in concert with the company’s web servers, will make it easy to drag-and-drop sex appeal into the application without needing much talent. And enterprise developers will embrace it, as they always do, because it’s easy. Things like Feedsync and Sliverlight will make it that way. Even the Popfly site makes anyone who can drag a mouse a coder, performance be damned. By breaking the software into services, there will be less delay between releases, which should fix the Longhorn drought.

How will the battle go?

Mix08 was an upbeat event.  But read between the lines, and it’s clear that the company is bracing for a fight from several sides at once. Don’t write off Microsoft: We were here once before, when Netscape was going to put the company out of business. But Gates issued an edict, the company turned on a dime, and a few years later IE was the dominant web browser.

But you never want to fight a war on multiple fronts, and that’s what Microsoft faces in battles for consumers, enterprises and developers. If it survives, the Microsoft of tomorrow will be a very different company.

  1. This might just be the worst article I’ve read on GigaOm. You couldn’t even be bothered to research the correct name of MS’ development environment? It’s Visual Studio not ActiveStudio. And you’d have to have your head in the sand to believe .Net is somehow struggling against the technologies you listed.

  2. [...] last night, the GigaOM blog published an article written by Alistair Croll delineating Microsoft’s supposed “defense strategy,” which can sensibly be partitioned into [...]

  3. The company turned on a dime? More like they used monopolistic tactics, got caught, and caught and caught again, and have not been the same company. Why does everyone act like MSFT is this great company when they leave a trail of lawsuits everywhere they go? Are you that quick to forget why Netscape is no longer around? And they are still fudging their attempts at becoming the de facto standard for text documents in Europe, and just got hit with another record fine.

    When are you going to realize that MSFT only wins when there is no competition? When they have to compete, they lose. The Xbox and the Zune will hang on for maybe another year or two. How long can you expect them to take on the losses from these devices? Xbox sales are down 33% in 2007 compared to 2006. The Zune is a joke. Too little, too late. WinCE may have the capabilities but has poor UI and a buggy OS. Eight years and it’s the best they could come up with?

    MSFT has a difficult problem: they can’t find anywhere new to put their time and resources. When you have 90%+ market share on the desktop and the office suite, what’s left? Google has the ad market. Apple has the music market, and slowly will probably end up with the video market. Now they are going to own the smart phone market come June. Until someone in Redmond comes up with new markets, they will flounder. Buying Yahoo! will be the death knell for them. They will no longer have their cash horde and they will spend even more to get something relevant to come out of it. Then they have to make money from it to pay back their investment. Good luck with that.

    MSFT is a typical corporate company. There is nothing special about them, other than they have cornered the desktop and office markets using monopolistic tactics. They can easily pay off the fines from the money they are making from them. Everything else is suspect. The numbers don’t lie.

  4. “Eclipse gives Activestudio a run for its money.”

    I think you meant

    “Eclipse gives Visual Studio a run for its money.”

  5. And btw, thanks for the interesting article.

  6. Excellent write-up. The three front war overview is spot on.

    But I think you should be more explicit in saying that this is MSFT’s proposed response for each of the three “attacks”. That would explain the absurdly optimistic outlook for each. The proposed outcome for the consumer front with Danger/Zune/xbox/Vista is especially laughable. You (or is it Microsoft) says, “carriers and labels will love it, consumers will settle for it”. Isn’t it obvious how flawed that statement is ?

    And then using the Netscape browser case to prove MSFT’s ability to execute. You don’t put that in context that MSFT used their monopoly power to force the adoption. This can not be repeated.

  7. M$ also says its UC software will make the telephone obsolete, in the enterprise anyway.

    It’s true, Microsoft likes to change the world.

  8. Thanks for the comments; there was a lot of noise and news coming out of Mesh and the three-pronged attack idea helped to organize it all. Clearly this is going to be an interesting dialogue.

    I’d like to make it clear that I’m not saying MS will succeed in defending any or all of these three attacks — I’ll leave that one for the history books. And yes, that explains the “absurdly optimistic” outlook. ;-) But I do feel that these are the three defensive postures the company is adopting, for better or worse.

    I will give Redmond credit for turning faster than most big companies. When it became clear that the Internet was a big deal and they’d missed the boat, the company urged its coders to put hyperlinks everywhere, across every application. It resulted in a lot of silly features, but it also made Windows and Office Internet-capable very quickly.

    It’s true that many of Microsoft’s previous tactics may not be re-usable. But it also has new bedfellows (Microsoft and Ford’s Sync partnership for cars; the tight embrace of DRM with Vista’s encrypted video path requirements, and so on.) While these may not be the same as the Netscape fight, they’re places where Microsoft has a significant market share and partners with deep pockets and lobbyists, both of which it can use to its advantage.

    (oh, and mea culpa, it should be Active Studio and not Visual Studio, and we’ll go correct that.)

  9. These are really exciting times. I am really happy for Microsoft, it seems like they are really getting things right this time.

    Microsoft is my team!


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