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Microsoft's Sacred Cash Cow

A former Microsoftie says addiction to Windows revenue, mediocre products, and missed opportunities could doom Seattle's most successful company.

In part due to open-source products, developers now have many choices in building Internet software and services. With .NET, Microsoft hopes again to lock developers into Windows, as it could before so many tools and resources migrated from the PC desktop to the platform- neutral World Wide Web. But much of what Microsoft has promised programmers has been delayed by the lengthy timeline of Longhorn. And a new open-source project called Mono will make it possible for .NET applications to run on Linux or OS X. So the notion that the proprietary .NET programming tool will be a successful answer to open-source development efforts on the Web is mistaken—akin to thinking that winning the browser war with Internet Explorer would achieve control of the Web. Similarly, Microsoft's dominance on the PC desktop, with Windows and Office, could be neutralized as the value of sophisticated networks of Internet-based servers, like Google's, increases. The shift of importance, from control of the desktop to networks of services, levels the playing field and makes Microsoft vulnerable.

Banking on Windows

Illustration by Dean MacAdam

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Jeff Reifman builds Internet tools for nonprofit organizations as director of technology at Groundspring.org. In his spare time, he writes the progressive political journal IDEAlog.us.

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My most memorable moment at Microsoft came during a technical review with Bill Gates. I will never forget the moment when I made an apparently obvious point to him. He responded, "What? Do you think I'm stupid?" Everyone was staring at me, and I felt it best not to answer. Like Gates, there were always people at Microsoft who were much smarter than me and more technically skilled. But he's created a corporate culture that sometimes struggles to see the forest for the trees—and I think this is what has led to some of the challenges that it faces today.

My biggest complaint about Microsoft is how hesitant they are to update Windows in a more modular fashion over time, instead saving innovation for large updates every several years. Apple, in contrast, is updating OS X monthly and sometimes weekly.

While the monolithic development process helps Microsoft plan and deliver long-term innovations like Longhorn, it's harder to test and release these products in a timely manner. The open-source community updates products continually, so customers don't have to wait as long for new features. MSN Messenger, the instant-messaging application, and Windows Media Player, which plays audio and video, have benefited from frequent updates, but Microsoft hasn't updated Internet Explorer since 2001. I'd like to see Microsoft add unified search to Windows XP or support for Internet file sharing, but it won't happen until Longhorn ships.

Keith Rowe, my former manager at MSNBC.com, used to say that the most important skill of a manager is to know when to kill your own project. I don't think new, better ideas that would take business away from Windows or Office really have a chance at Microsoft. The company is addicted to the revenue from these flagship products and is afraid to go in new directions that might initially hurt the bottom line.

Microsoft is flush with $56 billion in cash and short-term investments. Income of $16 billion is expected in fiscal year 2005. It dominates the most profitable segments of the software industry— operating systems and productivity applications. It attracts talented, creative people and gives them the time to innovate. I have no doubt that Microsoft will lead the industry with some incredible advances in the coming years.

But Microsoft's market share in desktop operating systems, servers, and productivity software can go no higher. Its core businesses face gradual erosion to competitive operating systems such as Linux and OS X. It faces challenges from new approaches like services offered by Google and the growth of dedicated consumer devices that make owning a traditional personal computer less necessary.

Meanwhile, Microsoft doesn't evoke passion in me anymore. Its products don't excite me anymore. I remember eagerly looking forward to Outlook 2003, only to be disappointed by how complex, buggy, and unimproved it was. "There's kind of an angst," says Andrews, the Seattle Times columnist and author. "Microsoft ought to matter to us. There ought to be more of an intellectual and emotional connection. There just isn't."

In an age when retailers hire consultants to analyze what hip kids do, you'd think Microsoft would care more about what the hip kids are doing. They're running around with iPods, using Linux and OS X. A Groundspring intern e-mailed me recently about his new Apple PowerBook: "I think I may be smitten by a computer." That's the kind of passion I'm talking about. In its search for market share, dominance, and profits, Microsoft lost the ultimate battle for our hearts and minds. For now, though, it's still laughing all the way to the bank.

info@seattleweekly.com

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