June 25, 2010

I've long argued that Microsoft are a company built around a profound and fundamental belief : that it was possible to be a pure software company and allow someone else to produce commodity hardware.

Microsoft's DNA is to be a maker and seller of software qua product but not of hardware and not a provider of services.

This was an idea that served them well during the 80s and the explosion of the microcomputer, but served them badly in the 90s during the rise of the internet and its twin correlates : free software and software as a service.

Apple, by contrast, have always been a hardware / software company; which put them at a disadvantage in the 80s and 90s, but proved to be surprisingly fit when they adapted their "full stack" philosophy to become a hardware / software / service company in the last decade (starting with the ipod / itunes / itunes store ecology and moving on to the iphone / ipad etc.)

Anyway, I always thought that, due to free software, and software-as-a-service, the vision of a pure software company was on the wrong side of history.

Today I just had an intriguing thought. What if I was wrong? What if Microsoft's big vision wasn't out-of-date as I supposed? What if it were possible to thrive as a pure software company?

What if the only problem was Microsoft's bad execution? Or if, from their dominant position, Microsoft had come to believe that their role was to capture and dominate platforms, and to extract rent from them? That it was their birthright to own platforms?

That belief has proven to be spectacularly wrong. What if M$ did try to live according to their DNA? And did try to be a pure software company in 2010?

What would they look like?

Well, they would support all important platforms. They wouldn't worry about *owning* platforms, just selling software to take advantage of them. The important platforms today are the web, Apple's iOS, Google's Android, Linux, Facebook, Twitter etc. So if M$ were true to their DNA they'd start producing apps. for these platforms.

When did you last see M$ producing a popular iPhone or iPad app? Or a killer game on Facebook? Or a great Twitter client? Or making sure that Office and Sharepoint and IE and IIS ran on Linux?

If you do start seeing this, then you might start to have some hope for them. That maybe they have started to rediscover their true nature.


Simit Patel said...

i think your assumption that msft wants to be a pure software company is false. the company invests in lots of hardware. zune is just one example.

they don't do a good enough job of leveraging the edge, which is why they have many of the problems they do, IMHO. though i think that is largely a function of the environment in which they started and grew to dominance, which is very different than the environment of something like facebook or even google. basically, pre-internet, leveraging the edge was a very different game, and not as easy or lucrative.

phil jones said...

Hi Simit,

thanks for the comment.

I'm not saying, exactly, that msft *want* to be a pure software company. I'm saying that it's more like their metaphorical "DNA". It's the big idea that drove them when they were founded and still, unconsciously, permeates thinking there.

That may be closer to what you mean by "function of the environment in which they started and grew to dominance".

The interesting comparison is Apple who also grew up at the same time, but never thought they should focus on dominating in software and leave hardware to commodity suppliers. Even when everyone was telling them that this is what they *ought* to be doing, there was always a stubborn resistance within Apple (both with and without Jobs) that they should control the full stack. (Hardware, operating system, applications.)

That DNA turned out really well for them once they started seeing internet services as one more piece that should be integrated into the whole.

M$ do spend a lot on hardware. (And services.) But you always get the feeling that this isn't driven by philosophical conviction but a rather naive, badly understood emulation of others success.

If ipods make money for Apple, then M$ must have a media player. If search-engine + targeted ads make Google a success, then M$ must have the same. If Sony make money with the Playstation then M$ should be in video-games. etc.

But it doesn't unfold from a consistent philosophy.

Oli said...

I actually think M$ are doing just fine. They are not really in the 'software' business - but in the 'herding users' business.

They consistently try to make the easiest choice for the user to be to choose Microsoft. They even try to hide the cost of choosing Microsoft.

So, they won't write great apps for Android because they want you to choose a Windows phone and they want the Windows phone experience to be the best. They want to herd the users onto Windows phones (as tough as that may be!).

The XBox is as much about making sure that a huge particular herd of users doesn't wonder off to Sony without any competition. If gaming / home TV is the future they want that herd of users to be able to choose Microsoft.

It is all about platforms and corralling the users. Software products are just ways of making particular platforms more attractive or tempting particular user groups to come over to the platform.

In terms of hardware vs software, Microsoft just realised that it's the software that really makes the platform.

The iPhone could in theory run on Android - and the iPhone OS is the platform for the iPad too. So the real battle is between the phone operating systems: software platforms. Indeed this is why Apple is being so hardcore about what you can do on their software platform.

Indeed, in general, given that the real battle is between software platforms, that's why each main player puts all of their effort into their own platform and only tactical, cursory effort into cross platform software of any kind.

phil jones said...

I suspect that's where M$ *think* they are, and would like to be.

Not sure it's working out for them though. It's not clear they've taken control of any new platforms lately.

[Possibly they've bought themselves into video-games, but video-game platforms have a fast turnover and dominance tends to be short-lived. (Remember Sega?)]

The rest of the platforms that M$ dominates, are ones it's held since the early 90s.

Oli said...

Two recent experiences for me is why I think they're still doing just fine in their core domains:

1. In the last two months I've acquired two new computers - a desktop and a netbook - and both came with Windows 7 as part of the deal.

This will still be true for most people buying computers.

2. A local authority I work with is tempted to move from open source Alfresco to Microsoft SharePoint - because Microsoft's offering is very good and completely integrated with their Office 2010 solutions - which are still the default Office tools for most businesses.

While both 1 and 2 are not 'sexy' news stories like the new launch of an iPhone, the reality is that (especially for businesses) Microsoft is still an almost inevitable part of the stack for most people.

That's worth a huge amount of money and even if it's declining in some quarters they've still got huge momentum that will last for many years to come even if they didn't work at it.

But they are working hard to keep their position. Windows 7 is pretty good and by all accounts better than Vista. SharePoint 2010 looks good compared to it's competitors and is an improvement on previous versions.

They're continuing to make MS the 'easy' choice for consumers buying a netbook or businesses working with documents.

As for new platforms, I think they've done pretty well with their XBox - thus remaining one of the key platforms for gaming (note that Windows PCs were always a gaming platform)

The areas where they're not doing so well (yet) include mobile, search, on-line advertising and social networking.

So, it's true that over the next 5 to 10 years there are some big threats for M$, but I think they're doing OK at this stage. Indeed, I bet it's quite healthy for them as a company to be the underdog in some areas.

But I still think it's all about platforms - not just software. So they wont do a 'Facebook app' unless that app allows the user to connect to one of their platforms (e.g. MSN) or until they have a social networking site and the app allows users to easily switch to their platform.

Also note that at this point Microsoft's Bing is probably doing about as well as Google's Chrome at stealing each other's users. And IMHO Chrome OS will be a complete flop.

Also, as mobiles become more powerful M$'s dominance of office tools will make an M$ mobile platform ever more attractive to high end business users. The convergence of netbooks and mobiles into things like iPads is really in Microsoft's favour. Indeed IMHO the iPad fails completely as a serious device in so many ways it's quite remarkable that people are buying them at all.

M$ are still the incumbent to beat - but they're doing well pretending not to be.

Oli said...

Actually, I think the biggest threat to M$ over the next 10 years comes from the possible rise of 'cloud' computing as a new platform on which most people write their applications.

At the moment this area is obviously wide open and still evolving as a concept.

So, at this stage Microsoft have potentially as much chance as anyone else of becoming the de facto 'operating system' for the cloud (with their Azure offering) as anyone else. Again their plan will be to leverage their dominance of office tools to make Azure just the easiest place to write business applications - and thereby M$ become a key platform in the cloud.

However, it's also much less likely that any one approach will dominate in the cloud.

John Powers said...

This comment was spurred by your question Why the he don't Microsoft have an app-store? but I'm so naive about tech issues I thought to hide it here.

Microsoft DNA is all about the money. They'll pay people to search and developers to develop.

Rushkoff makes the point that money is like an operating system. Microsoft's really big play would be the corollary: an OS is like money. Creating new markets is good, creating new money might be very good for Microsoft.

I think that eBay's reputation system was essentially an alternative currency, but I seem to get arguments against that. Be that as it may M$ money needn't be particularly ambitious.

When I was a kid grocery stores handed out stamps based on the amount spent which could be collected to be redeemed for merchandise. There are many examples of similar schemes to keep brand loyalty.

Money is software M$ would benefit by creating some sort of alternative currency. That's a bigger play than creating new markets. M$ software is so ubiquitous such money would be significant.

John Powers said...

Gad, there is a little bit of "It's on your record" when posting on blogs. I am incredibly naive, and I know it shows, but I am amazed that MS with its market penetration doesn't seem to imagine ways to make peer production valuable.

IE 9 is out in Beta. It won't work in XP nor apparently will officelive.com work in it.

Dan Gillmor tweeted "IE9 is so incredibly... Chrome-ish. It's accurate to say Google is an advertising company, yet as a company Google does focus on what people make.

MS for years has had as its mission to enable people to achieve potential. But all MS talks about with IE9 is how good certain Web sites look on it. Nothing about how IE9 enables people, only people as consumers.

Being compatible with officelive.com and XP ought to have been priorities, as if users mattered.

Gates's vision was seeing value in software without a machine, that software itself could be valued. I'm flummoxed that Microsoft does not see that software enables value creation among the network of software users and that might be disentangled just as the value of software was extracted from software + the machine.

Very long rehash of what you said better. The IE9 beta announcement just drove your message home.