Monday, October 10, 2005

Microsoft Turns 30

Wired News ran an interesting Associated Press report entitled "Growing Up: Microsoft Turns 30". The unedited excerpt below embodies the first three paragraphs of the article:
SEATTLE -- Microsoft promises its software will make people better workers -- more productive, more profitable, more able, as the company likes to say, to achieve their potential. Yet some wonder why the software behemoth isn't taking more of its own medicine.

As Microsoft hits 30, critics reel off a list of complaints that sounds like, well, a Microsoft commercial: stifling bureaucracy, frustrating miscommunication, different units working on overlapping technology without adequate cooperation. In short, the very ills Microsoft promises to cure with its software.

Growing pains have delayed products, leaving the door open for Microsoft to be beaten to market by younger, more nimble competitors led by Google and Yahoo. Meanwhile, Microsoft shares have been trading at about the same level for several years.
The anemic performance of Microsoft's stock must be wreaking havoc on the company's culture. How many Microsoft employees became millionaires over the years as the company's stock rose and split, and rose and split, again and again? But, now, the stock price has stagnated and employees are no longer getting rich based on options.

I wonder if it's time to start worrying about Microsoft following in the footsteps of Digital Equipment Corp., one of my former employers. I remember when DEC was known for employing the best and the brightest. Similarly, I remember hearing all kinds of stories about the phenomenal brain power exhibited by Microsoft's workers.

There are many parallels between DEC and Microsoft. Both companies were founded and led by truly amazing entrepreneurs -- Ken Olsen and Bill Gates. Both companies were known for superlative products -- VAX & VMS for Digital, and Windows & Office for Microsoft. Both companies were renowned for incredibly strong balance sheets. Both companies provided employees with fabulous benefits that demonstrated how much they respected and cared for their people.

Sadly, though, DEC is no more. It's really a shame, too, because DEC could have had it all. But, as most everyone might remember, Ken Olsen never believed anyone needed a personal computer.

Back in 1981, even before IBM introduced its original PC (running Microsoft's DOS), DEC could have stormed the PC market with UNIX-based personal computers (running on F-11 and J-11 chips). Back then, DEC PDP-11's were almost like Ivory Soap in that 99 and 44/100% of all people who had ever run UNIX had probably run it on a DEC PDP-11. I remember too that almost every commercial customer of the earliest PCs, like the Apple II or Radio Shack TRS-80, was previously a DEC minicomputer customer.

DEC was, first and foremost, always a hardware company. Software simply helped to sell hardware. DEC was extremely afraid of Japan, Inc., the term used to characterize Japanese electronic manufacturers who, back in the early 1980s, were killing the American competition for TV's, VCR's, stereos, and microwave ovens. DEC was petrified they could never successfully compete in a commodity market. Instead, the company tried to morph itself into a mainframe-like company along the lines of IBM. A huge mistake that ultimately led to the firm's demise.

Microsoft, on the other hand, succeeded largely because of its total, interminable, laser-like commitment to personal computing coupled with its GUI-based personal productivity software products, namely Word and Excel, which pummelled its character-based competition, namely WordPerfect and Lotus 1-2-3.

In the beginning, Microsoft epitomized the industry's movement toward commodity-based computing and away from proprietary-based hardware platforms. Today, however, Open Source is perceived as the opposite of Microsoft. In the end, Microsoft finds itself locked in what amounts to virtually the same exact struggle that IBM and DEC were in oh so many years ago. When you're the market leader, the name of the game always winds up revolving around account control.

Account control is what killed DEC. It almost wiped out IBM, but for the miraculous job of transformation pulled off by Lou Gerstener.

In my opinion, Microsoft ought to step back and reevaluate its strategy. Personally, I think Microsoft should carefully study what happened to DEC and IBM. It might then consider doing what's best for the industry as a whole and its customers in particular, rather than focusing primarily on account control.


Blogger Vinnie Mirchandani said...

I agree with much you say. For $ 6 b in R&D they really do not show much in the way of innovation (see my blog "The Innovation Dividend" I would argue part of their problem is insufficient account corporate control especially compared to SAP and Oracle (at elast in terms of high powered sales). The disease they all have is they have gotten used to economics based on lock in (mostly maintenance and services revenues) not innovation

4:06 PM  

Post a Comment

<< Home