Will Microsoft Let Mobile Eat the Desktop?

11 Comments

Microsoft, increasingly the underdog in a range of markets, had a glimpse of good news over the weekend. New data from Net Applications shows the Redmond giant made Lilliputian gains against Firefox in the browser wars. Bravo.

Even so, it must be hard to get excited in Redmond these days, what with Google (s goog) and Apple (s aapl) tag-teaming to hobble Microsoft’s (s msft) frustratingly feeble attempts to become relevant in the world’s most important market: mobile.

Just as the desktop market defined technology’s winners and losers of the past 20 years so, too, will mobile establish “the next Microsoft.” Unfortunately, Microsoft doesn’t appear to be in the running to succeed itself at the top of the technology heap.

Why? Because the company has no answer for a market in which the operating system (OS) is free, and the dominant application isn’t Office. Much as it might want to, Microsoft can’t change these facts about the mobile ecosystem. Apple and Google have decreed that OSes will be subsidized by revenues from hardware, advertising, and/or third-party applications. And the market has decreed that social applications like Twitter and Facebook are the way we communicate ideas, rather than through Word documents or PowerPoint presentations.

But this doesn’t mean Microsoft is doomed. Far from it. It just means that Microsoft is going to need to learn to cannibalize itself in much the same way that Apple has. Apple, after all, also has a legacy desktop business to protect and grow. And yet this hasn’t stopped Apple from continuing to put its Mac sales in jeopardy by improving the iPhone and then releasing the iPad. Importantly, it also hasn’t stopped Apple customers from buying Macs. It’s not an either/or choice, apparently. It’s an “and” decision: Macs and iPhones/iPads.

As Apple COO Tim Cook said in the company’s last earnings call:

If you look at the iPod historically, all of the people here felt that the iPod created a halo for the Mac, and in fact as the iPod volumes kick off you will see a dramatic change in the Mac sales back in time that we experienced.

And so could that happen on iPhone and iPad….[T]he Mac has outgrown the market 17 straight quarters. However, the Mac share is still low and so there is still an enormous opportunity for the Mac to grow and certainly the more customers we can introduce to Apple through iPads and through iPhones and through iPods, you would think that there would might be some synergy with the Mac there, and there may be synergy between the iPad and the iPhones….

[I]f it turns out that the iPad cannibalizes PCs [then] it’s fantastic for us because there [are] a lot of PCs to cannibalize.

Yes, Apple is the underdog in the personal computing market, with lots of room to grow, but that’s not really his point. His point is that Apple foresees growth in all of its products as the synergy between them grows.

Why can’t Microsoft do something similar? Why can’t it risk self-cannibalization in order to grow into new markets? It’s not as if Microsoft hasn’t thought of doing so. It clearly has. It even creates pretty slideware that declares it. But its actions largely belie its words, at least in mobile.

I’m not suggesting Microsoft get (further) into hardware. Nor am I advocating a throw-back to its illegal tying arrangements that got it into trouble with the U.S. Department of Justice and the European Commission.

Instead I’m suggesting that Microsoft needs to start rewriting desktop productivity for the mobile age, starting from its enterprise and consumer desktop perch, rather than letting others write its eulogy. Microsoft already has some exceptional mobile technology: just ask Apple, which licenses Microsoft’s ActiveSync technology for its iPhone.

Now Microsoft needs to build on that. How? Release a mobile, tablet OS that comes with cool XBox games, as John Biggs suggests, but also a web-friendly spin on Office, one that involves more cut-and-paste assembly of content, rather than keyboard-based data entry of content.

And simplify. Release one, not many, mobile OSes. Not Windows 7 dressed up as a mobile OS. A truly mobile OS. One that can take on a variety of guises, from family room entertainment-savvy tablet to multipurpose smartphone to next-generation business “PC” (i.e., tablet).

Like Android. Like iOS4.

An OS that need not start with mobile phones, but could grow down into smartphones from the more familiar territory of business computers. Apple moved from the iPhone to the iPad, but Microsoft could easily go in the reverse direction.

The company also needs to go a step further, however, and learn to monetize its technology in a different way. The world doesn’t pay for an OS anymore. Not directly, anyway. Microsoft should either give Windows away, or latch onto an existing, leading mobile OS, like Linux (perhaps Intel’s and Nokia’s MeeGo?).

This is easier said than done, of course, particularly for those of us outside Redmond who don’t have to navigate Microsoft’s calcified bureaucracy.

But there are signs that the company is willing to make some tough decisions in order to remain relevant in the next generation of computing. For example, Microsoft is challenging its enterprise server and applications businesses with its Azure cloud strategy, and seems to be doing so with serious intent.

Is Microsoft irretrievably addicted to its old-fashioned, fat client and fat license view of the world? Perhaps. But things like Azure suggest signs that Microsoft can break the habit.

It must. I’ve been hearing from more CIOs that they’re looking to dump desktops in favor of the mobile devices their employees already carry. They’re the start of a trend that Microsoft needs to guide, not one from which it can hide.

Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. In addition to Canonical, Matt is an advisor to or holds (minor) equity interests in the following companies: Alfresco, Jaspersoft, Jumpbox, LoopFuse, Lucid Imagination, MindTouch, Openbravo, rSmart, SugarCRM, and Volantis. Outside of mutual funds, he has no financial positions in any public companies he covers.

11 Comments

Hugh

@Jeff Putz,

“The reality is that there are a lot of excited people here in Redmond […]”

Those of us who work in I.T. understand how critical “excitement” is; it’s far more important than producing quality software, obeying laws, behaving morally, adhering to standards, or generally behaving as a good corporate citizen. So don’t worry about Matt’s views, just chill out and have another glass of Kool-Aid.

Jeff Putz

So CNet got tired of your nonsense Microsoft bashing, and now you’ve taken it here. Nice. I’m disappointed that Om hired you.

The reality is that there are a lot of excited people here in Redmond, and starting with the release of Windows 7 late last year, we’re having a pretty awesome year of product releases. Since then we’ve had Office 2010, Visual Studio 2010, lots of new developer releases (.NET 4, Silverlight, MVC, etc.) and we’ve still got Kinect and Windows Phone 7 before the holidays. There are, in fact, a lot of things to be excited about here.

I’d like to know how our attempt in mobile is “feeble” when it hasn’t even been released yet. This is link bait, and it is lame.

pieter

@don burnett: as you state correctly, MS doesn’t have a technological problem!

But what @Rich is saying can be very well correct and is a tell tale that MS has a kind of psychological problem. It is the answer at the question : will I (MS) use my assets to eventually eat my cash cow?

Will I open up MS Weboffice like Google docs? No because it will eat my office cash cow. So you have to buy office and then you are entitled to MS Weboffice. But Googledocs will always be the choice: you can not compete with a free (gratis) product.

It is the same question: will I open up my document formats? Answer is “No” because MS competitors will make eventually a product that will eat MS’s marketshare because MS is overshooting nearly all consumers of MS Office.

So yes, MS is technically able to compete, but does it want to fight a competitor that looks very differently at the market or has lower margins? Does it dare to slaughter it’s Windows and MS Office cows?

Rich

My guess is that the Windows and Office crowd within Microsoft can point to themselves as being the primary revenue generator, and therefore can force the company to keep most of its focus on them, and not on mobile.

Don Burnett

I really hate when you guys when you write this stuff.. If you were a Windows Application developer you’d know that Microsoft made huge changes with WPF and Silverlight, and Silverlight apps run out of browser, on Windows Phone 7 as the basis for apps, and if the app was a game it would run on windows phone, windows 7 desktop and xbox 360.

You aren’t getting their 3 screens and a cloud or connected experiences idea of writing once running everywhere..

Microsoft can compete.. Read my blog article if you want to know why..

You guys just aren’t getting the strategy and it leverages everything good Microsoft has already built into their technology and infrastructure..

gonehiking

Windows Azure is a huge effort by Microsoft that takes from its profitable Windows Server business but places an appropriate bet on cloud computing (or the idea of needing to purchase servers to run powerful web services). Getting office web apps online and bringing a polish to Windows Live services recently have been important as well to move users towards Bing and search revenue.

Facebook and Twitter are ways of promoting ideas, but the most relevant link to content elsewhere rather than providing the details of an idea themselves. And when was the last time internal company documentation and presentations were done via twitter? Office docs may not be the way to share information on a social level, but they are still useful in businesses and corporations.

pieter

As you read this carefully and have read the “Innovator’s dilema” of Clayton Christensen you see that MS is having this trouble of the innovator. And as long as MS is willing to sacrifice it’s monopoly it will be struggling with the innovations of Apple, Google, et all.

It is taking the right decisions . . . for it’s current customers / market share and ironically these are the wrong decisions for tomorrows customers / marketshare.

Eg. it has been ignoring the iPhone (not interesting) until the iPhone took over a large marketshare and it was too late and they now want to recapture. Now they struggle.

Paul

Microsoft’s increased promotion of hosted Exchange, and the Office Live site, suggest that they share some of your views. A web/mobile-savvy version of OneNote could help.

Everything I hear indicates that Microsoft is still a factional place, where the Office and Windows teams thwart the company’s evolution toward web and mobile worlds.

9thpoint

Matt’s solutions are far too simplistic (and always seem to turn to Open Source somehow). I interact with a lot of Microsofties mostly senior and mid level folks and usually come away feeling – with people as smart as these, why is this company having such issues? Its largely cultural in my humble opinion. Several issues count towards this:

“by the numbers” mgmt: Fastest way to stifle bringing innovation to market is to disallow people to take chances simply because the numbers aren’t there. There weren’t any forecasts predicting touch based mobile devices were high on customers’ wishlists. It has gotten so bad that often good, even great ideas are lost because mgmt is too scared to bring something to the market without a proper P&L. Consequently, only safe bets are made – low risk, low return. MS needs to learn to fail fast.
Lack of a visionary technologist: Ray Ozzie is not Bill Gates. It took a memo from Bill G to move the company on to the Internet. Ozzie may be able to articulate a technical vision but lacks the power to move the company quickly.
Get marketing out of the box or out of the way: Too many process templates, positioning statements, market research initiatives. Simplify. Forget corporate branding guidelines. The only branding guidelines that count are the ones that relate to the customer.
Starve the Beast: At a startup you learn one valuable lesson – how to make do with less. Problems are solved creatively. When a startup product group (beyond basic incubation) is given a 200-300 person headcount, the result is it takes 3-4 years to release a V1 product. A smaller group would think strategically and release products faster because they are hungry for market success

AK

Microsoft also tries to be a different company by innovating. Not just Apple. Cupertino has been doing it better than Redmond for the past 10 years. True, but Redmond is working at it. Personally, I would wait several months after the realease of Windows 7 Series phones before making judgement on Microsoft’s strategy in the mobile world. Who knows, maybe they’re gonna eat Android’s market share like crazy. The preview was awesome. For the first time we saw something very different from the iPhone. If it’s working as presented, Apple may have a serious contender. I would not bet against Microsoft. It’s just to soon to talk.

Tahir C.

First at The Register, now here.
Problem : Microsoft not making as much money as investors think.
Solution : Give away products that are actually bringing revenue, cling on to those which dont. Sure, go ahead. Investors will be very happy with that. Just think about how well it worked with Sun.

Microsoft might be dead in the future, but they are not stupid to commit suicide now. Just what is staying relevant anyway?

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