Has Microsoft Gone Nuts?

The rumors floating out of Microsoft these days are remarkable:

—Microsoft’s Nokia business is working on an Android phone, and Microsoft might let them sell it (link).

—Contrary to its entire business history, Microsoft may give away Windows phone and Windows RT for free (link)

—The Start menu will be restored in at least some versions of Windows 8.1, and it will be possible to run Metro apps in floating windows inside the traditional Windows interface (link)

Those are just rumors, of course, but they’re coming from multiple reporters who have strong ties to Microsoft, which means they’re probably genuine plans or at least serious trial balloons. Taken together, the reports give a picture of a company that’s laudably willing to revisit its assumptions, but that also seems to have lost track of what it’s trying to accomplish. Specifically:

—Making Windows Phone free is a nice idea and would have been a clever response to Android six years ago. Back then, the idea of a free mobile OS was appealing to handset companies, which are at heart surpassingly cheap. Faced with rampant iPhone sales and no good alternative, the phone companies were very willing at that time to give a try to the low-cost Google-backed approach.

But today, Android has huge market momentum, so a phone vendor switching off it would be abandoning most of the available customers, something they are extremely reluctant to do. Besides, getting a free OS is not currently the main concern for most handset companies – the big worry is finding a way not to be crushed by the dominant Android vendor, Samsung. Windows Phone has its own dominant vendor, Nokia, so it has all the negative aspects of Android without the customer base.

Nice idea, Microsoft, but you’re closing the barn door not only after the horses left, but after the barn burned down.

—I think a more interesting licensing strategy for Microsoft would be forking Android: Take an open source version of it and add your own services on top. That’s apparently the idea behind Nokia’s OS plan, in which Nokia would supposedly replace its low-end phone OS, Series 40, with a modified version of Android. Those phones could then tap into the Android app base, making them more attractive to low-end customers. (Heck, they might even be more attractive to high-end customers as well.)

But if that’s the right strategy for the Nokia business unit, it’s also the right strategy for Microsoft’s OS licensing. If you’re giving away Windows Phone for free, the only way you’ll make money from it is through bundled services. You could just as easily bundle those services on a forked version of Android, save the expense of creating and maintaining all the low-level OS plumbing, and get access to the Android customer and app base. That sounds like a much more appealing licensed OS than Windows Phone, even though you still have the problem of Nokia competing with your other licensees.

But that’s not the roadmap we’re hearing from the Microsoft OS team. Instead, they’re talking about creating a single Windows code base that runs across all types of devices, something that’s technically appealing if you’re a Microsoft engineer but thoroughly uninteresting to customers.

So the various parts of Microsoft appear to be working at cross-purposes. The Nokia unit has a nicer mobile OS plan but no intent to license it, and the OS group has a licensed mobile OS with almost no customers. Something’s got to give.

Meanwhile, the rumored changes to Windows 8 are, to me, a mix of sensible ideas and bizarre improvisation. The word is that Microsoft’s going to offer three versions of Windows (link):

A phone/tablet version that runs Metro-style apps. Although I’m sure Microsoft will save money by unifying development, customers don’t care about that. They care about features. Unless there’s some dramatic change in functionality that we haven’t been told about, I think this new product will have as much appeal to licensees and customers as the current version of Windows Phone. So you can think of this as the version of Windows that no one wants.

A “consumer PC” version, which may or may not be able to run existing Windows 32 applications. If it can’t, I think it will sell as well as Windows RT did.

An “enterprise PC” version, which would run today’s Windows 32 applications in addition to “modern” (Metro-style) touch apps. The Start menu would apparently be restored in Win32 compatibility mode, and you’d be able to run Metro-style touch apps in windows inside the Win32 interface.

The only configurations likely to sell in volume are the ones that let customers run their familiar Win32 apps. I think reviving the Start menu in these configurations is smart; it makes it easier for current Windows users to move up to the new OS. That’s such a no-brainer that Microsoft should have done it in the first version of Windows 8. The question is not why they’re doing it but what took them so long.

On the other hand, running Metro apps in a traditional Windows frame is...I don’t even know what word to use. Bizarre? Crazy? I’d even say frightening, because it implies that Microsoft has lost track of why it did Windows 8 in the first place. The idea behind Windows 8 was to build a full-function PC that could also switch to work as a no-compromises tablet. I don’t think a lot of customers actually want that, but at least it’s a clear direction.

Mixing the two metaphors on the same screen completely undercuts Microsoft’s basic idea. Instead of switching between tablet and PC mode, you’re mixing two totally different usage paradigms on the same screen. How does the user know when to touch and when to click? It’s like driving a car that has both a steering wheel and a joystick. Instead of giving users a tablet and a PC that you can jump between, Microsoft is at risk of giving users an awkward combination of the worst of both worlds.

It feels like the people who were responsible for the original Windows 8 vision and strategy have left the scene, replaced by folks who are tactically tweaking the products they inherited, with no sense of where they’re going long term. 

The focus on rationalizing code bases feels symptomatic of this. It’s a sensible thing to do and will cut Microsoft’s costs, but it does nothing to increase demand. In the tech industry we overuse the phrase “rearranging deck chairs on the Titanic,” but in this case it really seems to fit.


What it means

New CEO needed. It’s important to remember that Microsoft is in the middle of its biggest business transition ever. It’s simultaneously getting ready to merge with an enormous Finnish phone company, and hiring its first CEO who wasn’t a cofounder. That sort of situation typically encourages bizarre behavior. For example, groups will try to lobby for their favorite projects by leaking information about them, trying to build up public support that will influence the new CEO.

Think about it, why would Nokia possibly want to leak the news that it’s replacing the OS in its low-end phones? That’s very likely to stall sales of the current phones, driving down revenues. Nokia just made that mistake with Symbian, and now it’s repeating it? Somebody in the Nokia business apparently feels it’s more important to lobby for its OS vision than to protect current sales. It’s a triumph of business politics over short-term business sense.

Another behavior we should expect to see is business managers pushing forward aggressively with their plans, looking to prove that they’re dynamic leaders who don’t need to be replaced. It doesn’t matter if those plans contradict company strategy; the point is to look dynamic. The strategy’s going to change anyway. And what’s Ballmer going to do, fire you?

We should expect to see more odd behavior until MS picks a new CEO. Then it’ll be several months of strategic reviews, followed by ritual bloodletting and reorganization. So Microsoft is likely to continue to be confused for at least the first half of 2014, and that’s assuming they can choose a new CEO quickly, something they may not be able to do to do (link).

Windows Metro = OS/2. The big bet in Windows 8 was that Microsoft could re-ignite sales growth for Windows by tapping into the tablet market. A PC that could also work as a tablet, Microsoft reasoned, would be more attractive to customers than either product alone. I think it’s pretty clear that the Windows 8 bet is failing. Windows 8 is being pre-installed on a lot of PCs, but that’s because Microsoft is pushing it through the OEMs. Microsoft could ship a hamster wrapped in duct tape, label it Windows, and a lot of OEMs would bundle it. What hasn’t happened is Microsoft’s promised explosion in user demand for convertible Windows computers, followed by an explosion in developer activity that might drive future demand.

I think it’s increasingly likely that the tablet interface formerly known as Metro will be more or less stillborn as a development platform. It will linger for a long time as Microsoft’s software for touchscreen devices, but I don’t see it being embraced by the leading-edge developers who can drive new demand to a platform. Instead, it’s kind of the third option for developers who have already built for iOS and Android.

I think most PC users will stick with the traditional Windows interface, most Windows developers will follow them, and most people who want tablets will get iPad or Android or Kindle.

So the challenge for Microsoft’s new CEO is the same one Steve Ballmer has tried and failed to answer for years: Demand for Windows is declining because the platform hasn’t done anything new for a decade, while Microsoft doesn’t control the fast-growing segments in tablets and smartphones. Microsoft tried to use Windows 8 to take over tablets. That failed. What do you do now?

The traditional answer would be to break up the company and try to salvage parts of the business that can grow on their own. It’s the kind of big deal that consulting companies love to recommend and investment firms love to broker. Besides, it looks bold, even though it’s actually the path of least resistance. So I wouldn’t be at all surprised if the new CEO chose that path.

The alternative to a breakup is to actually fix the product problem: to offer new functionality for Windows that’s more attractive than the competition. That would mean new mobile software that’s substantially better than iOS and Android, and/or new PC features that will give people a compelling reason to recommit to personal computing. There are plenty of opportunities to create that sort of innovation (link), but Microsoft doesn’t have a great record as that kind of product leader.

So if Microsoft is to stay together, the new CEO needs to be either a product visionary or know where to find one. I wish them luck.

53 comments:

tatilsever said...

>"You could just as easily bundle those services on a forked version of Android, save the expense of creating and maintaining all the low-level OS plumbing, and get access to the Android customer and app base."

Not really. All these apps will have to be modified to use MS services instead of Google, recompiled and resubmitted for MS version of the app store. This may be easier for developers than porting their apps to WP through more radical modifications, but I would not call that having access to the same app base. I understand this is what handsets sold in China have to go through, but they have the luxury of competing against each other's "substandard" Android, as none of them can carry the real Google endorsed version. MS can look towards Amazon in gauging the potential size of a forked Android business in western markets.

Of course, there is the problem of MS losing money on online services at the moment. Without profitable services or licensing fees, how will MS make money off the forked Android?

tatilsever said...

Hah… You missed the rumors about getting out of Xbox business and spinning off Bing.

I agree with your assessment, it seems every group is airing out their half baked plans. It is crazy that the board is letting Balmer launch a radical reorg, announce a very large acquisition, redefine the business in a way that is sure to scare off many of its partners, phasing out stack ranking, all the while he is an official a lame duck. What is next, Skype write-off?

If the board is not going to let the next CEO make any major decisions, I hope it will have the sanity to pick an internal candidate, so that he or she will be an arriving with an implied buy-in for the current strategy. Otherwise, all these decisions will be revisited and divisions will be reshuffled.

Adrian said...

Microsoft have already unified the code-base with Windows 8. Windows RT and Windows Phone 8 run the same core system libraries as desktop, and those metro style apps are programmed in exactly the same way on phone/RT as they are on desktop. And the product line-up you're talking about pretty much exists exactly like that today - their is already Windows 8 Enterprise, for instance. I'm not an insider, so I could be wrong on the details, but I am a programmer and I follow this stuff quite closely.

Metro apps in a frame could be a good idea. It's the only way it'll work on a desktop with a mouse, and that's still a massive market for Microsoft (like 70BN units per year massive. It might not be so big in a decade's time, but right now it's worth a lot of money). Doing this could help build momentum for metro style apps, which would help build out the app store with quality apps. It'll also encourage businesses to build custom line-of-business stuff using the metro style APIs, which'll help build developer/ecosystem buy-in (or lock-in, however you want to see it). It'd actually be a really nice interface for a large number of business apps (data display and entry works well on metro, I suspect), but being full screen is less useful.

And, finally, Microsoft releasing a version of Android with Microsoft services on top would be insane. They can't compete that way against OEMs. That move would be like a whole bunch of dead canaries down a mine...

Danack said...

I'm not sure this is true:

"The big bet in Windows 8 was that Microsoft could re-ignite sales growth for Windows by tapping into the tablet market."

It may be more accurate to say, "Microsoft thought they could ignite their tablet sales, without sacrificing desktop sales with Windows 8".

Unfortunately Microsoft now have both anaemic tablet sales, as well as anaemic desktop sales, as well as having soured relationships with every hardware manufacturer.

"That would mean new mobile software that’s substantially better than iOS and Android,"

Again, that's possibly not quite right. I'm sure that Microsoft could introduce a new tablet that works well, but that would eat into Office sales. They could also introduce new desktop tech which boosts Office sales, but that wouldn't combat iPad/android sales.

Fighting on two fronts, with massively different aims is likely to be an impossible task.


AngryAnt said...

A third option after iOS / android? It might be keeling over, but I'd still target the spending-happy Blackberry market as third port. Possibly even second, depending on how the app is monetized.

Otherwise very nice overview. Thanks :)

Anonymous said...

A simpler alternative to a breakup is weld a kickstand onto each desktop, laptop and phone.

Michael Mace said...

Thanks for the interesting comments, folks! Keep it up.

tatilsever wrote:

>>All these apps will have to be modified to use MS services instead of Google, recompiled and resubmitted for MS version of the app store.

Good point.


>>MS can look towards Amazon in gauging the potential size of a forked Android business in western markets.

I’d rather have the Kindle market than the Surface market.


>>Of course, there is the problem of MS losing money on online services at the moment. Without profitable services or licensing fees, how will MS make money off the forked Android?

If, as the report said, they’re going to give away the Windows phone and tablet OS, they’ll have the same problem on a higher expense base.


>> It is crazy that the board is letting Balmer launch a radical reorg, announce a very large acquisition, redefine the business in a way that is sure to scare off many of its partners, phasing out stack ranking, all the while he is an official a lame duck. What is next, Skype write-off?

I think he started the re-org before they forced him out, and the Board felt it had to take Nokia or lose it forever. But yeah it’s crazy, and the longer the CEO search takes, the worse the situation becomes.

Contrast this to the length of football coach searches in the US. Teams generally plan ahead, have a list of possibilities, and pick one of them within two weeks of the announcement of the vacancy. So there’s an issue here about succession planning.


>>I hope it will have the sanity to pick an internal candidate, so that he or she will be an arriving with an implied buy-in for the current strategy. Otherwise, all these decisions will be revisited and divisions will be reshuffled.

I can’t imagine any CEO worth his/her pay leaving the current strategy intact. But it would be wise for the new CEO not to say that until they’re sure what to change it to.

In other words, don’t run the strategy review the way the board has run the search.

Michael Mace said...

Adrian wrote:

>>Microsoft have already unified the code-base with Windows 8. Windows RT and Windows Phone 8 run the same core system libraries as desktop, and those metro style apps are programmed in exactly the same way on phone/RT as they are on desktop. And the product line-up you're talking about pretty much exists exactly like that today

So then what exactly are these new plans that Microsoft is leaking? I’m not asking that rhetorically; I’d seriously like to understand. MJ Foley seems to think it’s a big deal.


>>Doing this could help build momentum for metro style apps, which would help build out the app store with quality apps. It'll also encourage businesses to build custom line-of-business stuff using the metro style APIs

I hope you’re right. I’d like to see Metro succeed. That’s why I’ve been so frustrated by some of the decisions Microsoft made about it.


>>data display and entry works well on metro, I suspect

Better than in Win32? There’s nothing about Win32 that forces it to have bad graphics, and I think data entry is easier with a keyboard and pointing device, especially if you’re doing something tabular and need to jump between cells.


>>And, finally, Microsoft releasing a version of Android with Microsoft services on top would be insane. They can't compete that way against OEMs.

And Surface doesn’t compete with OEMs?


Danack wrote:

>>It may be more accurate to say, "Microsoft thought they could ignite their tablet sales, without sacrificing desktop sales with Windows 8".

I guess it depends on whether you think Microsoft believed the optimistic things it said about Windows 8 sales before it was released.

But if the Windows 8 strategy were working, do you think Steve Ballmer would have been forced out?


>>I'm sure that Microsoft could introduce a new tablet that works well, but that would eat into Office sales.

I don’t understand why a successful tablet would eat Office.


>>They could also introduce new desktop tech which boosts Office sales, but that wouldn't combat iPad/android sales.

At this point I think they’d be glad to have growth anywhere.


>>Fighting on two fronts, with massively different aims is likely to be an impossible task.

Agreed.


AngryAnt wrote:

>>A third option after iOS / android? It might be keeling over, but I'd still target the spending-happy Blackberry market as third port.

Wow, very interesting perspective.

I don’t think many developers share your view, but that does not mean you are wrong. If you have a minute, please say a bit more about app revenue on BlackBerry. Which segments are doing well, and what sort of monetization works best? If we can help a developer or two make more money, I’m all for it.

Lun Esex said...

Aren't Android OEMs already paying something like $10-$15 fees per handset to Microsoft for patent licensing?

If Microsoft created a forked version of Android that strips out Google's services and replaces them with Microsoft's, they could offer this version to OEMs with lower or no fees. That's better for the OEMs than the not-really-free existing Android OS.

For Microsoft this would be a familiar "embrace and extend" strategy, which has served them well in the past.

Their goal would be twofold: 1. Choke off Google from it's lifeblood, which is data collection on end users to sell to its advertisers, and 2. Try to build traction for their struggling services division. Going beyond this, Microsoft could offer developer tools that are better and/or more integrated with the rest of Microsoft's products. eg. Skype integration for messaging and VoIP, Xbox Live integration for games with leaderboards/player matching/etc., SkyDrive integration for cloud file storage, easy MS Office document support across apps, Windows Azure services for developers to host their backend server code, and so on. They could even offer OEMs a Metro tile-style skin, if the OEMs were interested in distinguishing their phones that way.

Chan said...

Nice to hear you back Mace!

"Aren't Android OEMs already paying something like $10-$15 fees per handset to Microsoft for patent licensing?"

This I have heard this but needs to know for sure. Does Android OEMs pay MS?

Android fork seems interesting though since Google seem to turn more towards Chromium I wonder what are stakes there

Still an Android fork with optimised MS APIs sounds terrific to me. They can really give a run for Google services

Sorry MS waited for too long to grab Palm and Black Berry. If added with those storing hold APIs or features MS phone would have had a home run than Andies

Still prospect seems sexy to me even if they licence BlackBerry services and bit of Palm and Nokia touch to and so called Metro theme suppllment Android fork for OEMs it will heat up the mobile market somewhat

But this again puts Nokia merger in trouble. I seriously think since they had money, if I were Ballmer I would have brought Palm, Dell and BlackBerry at the first place and think of Nokia then

I was so pissed off how Bill missed out on Palm, when Steve revealed iPhone and let go of BB, if he were market aware. At least 2009 would have been not too late

Both had more muscle than Nokia at that point

And now as you clearly portray MS is in real shit hole that may jaorodise they other remaining strongholds sections too I if they don't get their act together soon

I heard on Twitter they already picked up a CEO

Mean while mace I would like to have a piece on Apple lately from you, with bit of 64 bit muscle, will they be in a cross roads with Intel for the desktop and OS X future?

Chan said...

And what the hell has happened to Twitter lately ? Isn't it they are pushing little too harsh to be reinvented? Trying to merge vine Instagram features all at once?

Avi Greengart said...

Microsoft's real danger with Surface isn't billion dollar write-downs for price cuts to move inventory, or the fact that Surface sales haven't covered slowing PC OS sales. The real danger is that by bringing Office to Surface rather than iOS, there's a real chance Microsoft could lose the Office franchise itself (or lose all potential growth, as consumers ignore it and enterprises stop upgrading/actively cut back). The numbers don't suggest that this has happened yet. (What I truly don't understand is why there isn't a touch-centric version of Office FOR SURFACE.)

I thought that the Android effort at Nokia was a pre-Microsoft-buyout hedge or an Asha alternative, not a post-Microsoft plan for replacing Windows Phone. The whole point of buying Nokia was to ensure that Windows Phone momentum grows rather than halts; I'd be shocked if today's Microsoft hits the reset button again. (Of course, tomorrow's new-CEO-Microsoft could do anything).

Free Windows Phone is certainly a trial balloon - something I'm sure Microsoft has batted around internally for years. Microsoft does collect significant IP royalties from Android vendors, so a truly free OS could be economically attractive to mobile vendors who aren't making any money in Android - i.e., everyone other than Samsung* - and an olive branch to those scared to license an OS from a vendor who competes with them on hardware**.

*Ironically, Samsung would be one of the first to run with it, as they bet on every mobile OS they can.
**Which includes Google post-Motorola.

GjB said...

MS has painted itself into a series of very challenging positions.

Touchscreen desktops have not and will not take off (gorilla arms, smudges).

Consumers (as opposed to businesses) are getting weaned off Office necessity through iCloud/iWork and Google Apps (plus others). Business will follow once there is enough critical mass not needing pixel perfect reproduction of .DOC and .XLS.

Any "opportunity" to license mobile OS counterbalanced by parties not wishing to play against Microkia in either phone or tablet space.

Any EEE strategy towards Android likely to prove terminal to WinPhone, especially if it allows Android/Windows app-bridge.

Even server / corporate world under threat from virtualisation and Amazon+Google+other clouds.

Going to be fun for the next guy at the top.

Mark Onyschuk said...

The real danger is that by bringing Office to Surface rather than iOS, there's a real chance Microsoft could lose the Office franchise itself (or lose all potential growth, as consumers ignore it and enterprises stop upgrading/actively cut back).

That's going to happen. Mark my words....

Hans Gerwitz said...

What is this magical "market momentum" that will keep OEMs from implementing anything other than Android?

Mikko said...

As I understand it, Android OEMs are licensing MS patents, chiefly to use FAT filesystems. MS doesn't gain any advantage here by becoming an Android vendor itself. It would have free access to the patents, but no revenue from them.

Anonymous said...

Microsoft's attempt to unify the tablet and PC OS is like someone who meticulously arranges the pantry contents in alphabetic order. Conceptually, it sounds like a very neat and orderly approach but in practice, totally impractical.

Anonymous said...

"...a phone vendor switching off [Android] would be abandoning most of the available customers..."
Nah. Only if you assume they they are *Android* customers. A dubious assumption. If people were primarily Android customers Sammy wouldn't have a basis to dominate (they aren't the cheapest). It's also not right to compare Nokia's "dominance" of the Windows handset market to Sammy's dominance of the Android handset market. Sure they dominate it, but the Windows handset market is tiny. There's lots of market to grow into.
Handset makers will take a serious look at Windows phone as a way to get out from under Sammy's thumb: "We could be the Samsung of Windows phone."

Aaron said...

"On the other hand, running Metro apps in a traditional Windows frame is...I don’t even know what word to use. Bizarre? Crazy?"

I'd use "totally logical," actually.

By now Microsoft has plenty of telemetry showing them that legacy Windows desktop users do not use Metro apps. Full stop.

There's just no point to Metro on a large windowed desktop. The information density is way too low, and you lose the convenience of a true multitasking/windowing system.

You've been able to run Metro apps in a window using third party utilities since day one. It's baffling that Microsoft didn't realize this was a genuinely useful scenario for people with a mouse/keyboard and large monitor.

GeniusIQ179 said...

Microsoft has turned into a retail clerk, for every nickel and dime store product. Sad to see such nonsense.

They have no answer to handling
their manufacturing problems.

Instead they charge, charge, charge their customer base, like Amazon does. Just to answer customer complaints concerning bad product issues.

Limited Liability Laws protect and keep their CEO out of jail right now. That may soon change. As it should.

Internet Commerce needs to plow in a different direction. Right now they want to be a Cable TV advertising platforms.

Such a waste of technology.

MikeTeeVee said...

I agree with Aaron. On traditional Windows 7 devices, Metro should have been just another window, akin to a web browser, with a fullscreen option. It never should have been the replacement for the Start menu.

That way, regular Windows users can be introduced to Metro apps without a whole paradigm shift being forced on them. Windows 8 would look and work just like Windows 7, but with this optional new thing that's just another desktop app (for now).

At the opposite end, there would be phones and tablets that are Metro-only.

And in the middle, there'd be the tablets/convertibles (like Surface Pro) that can work as a Metro tablet or a Windows desktop, but with desktop mode having a traditional Start menu, so you're consistently in one mode or the other, not swapping back and forth willy-nilly.

So if you have a Metro app you like on your Windows phone or tablet, you can run it in a little window on your PC desktop. Or if you find some Metro apps you like on your desktop, maybe you'll want a phone or tablet that can run the same app. Or a convertible that can do both.

Instead, MS came up with a marriage of Metro and Windows that's non-optimal for nearly every device.

Walt French said...

Yet another in a long series of insightful posts, but distinguished by having a clear voice among the cacophony of advice.

“Microsoft has lost track of why it did Windows 8.” I think you give them too much credit for aiming to meet customer needs with the OS cluster.

Win8 was always intended to extend the legacy PC business into the mobile space for Microsoft's, and its Enterprise IT intermediaries' benefit. How appropriate the hardware & software interface was to a given set of mobile tasks — yes, that tired, old “Job to be Done” stuff — seems to have been WAAAY down the list.

So I never actually saw a customer-facing reason for Win8. Microsoft never looked from scratch, along the lines of what Benedict Evans posted today about mobile eating the world, about what people actually DO with mobile devices; they tried to bolt mobile onto their desktops, which are highly valuable to millions (me, too) as IMMOBILE devices.

Looks like classic low-end disruption to me: Microsoft, paying close attention to its best customers (the IT shops, not its end users), looked to add a new feature, one that would make their products better yet. “Apps” seems to have been the only notion they had that mobile usage was so much different. A different customer clientele, different support networks, different networking needs (Facebook becoming passé with new apps burgeoning daily), none were anticipated. Instead, a fine set of 2008 products were offered for sale in 2012, absent the ecosystem that they require.

“Microsoft is likely to continue to be confused for at least the first half of 2014, and that’s assuming they can choose a new CEO quickly…” I suppose the Board was briefed on the original Win8 and WP strategies back in 2008 or so, when they would've had to have been formulated to have had a chance at success in 2012. I've followed a smidge of Apple's Long March into retail electronics that included baby steps in stores within Japanese retailers, then Circuit City, bringing the GAP CEO on board and finally its own stores; there are similar well-orchestrated strategies for the mobile OS, the other parts of the iOS ecosystem, etc.

Microsoft has dashed off me-too copycats and seemingly not learned how to put the pieces together for genuine retail. Allowing Ballmer to kick off a major acquisition, a major re-org and now a major re-direction of product strategy, months or weeks before somebody else will have to confirm/tweak/reverse/implement them, belies a Board that has assumed things were going great and they didn't need to get their hands dirty. If the latest rumors of an emphasis on a tech visionary are correct, the likely impedance mismatch to the current Board can only increase and we could well see a repeat of the debacle that BlackBerry brought upon itself by elevating the very technically-skilled proponent of the handset business to CEO, rather than realizing how that business was already lost before Heins took the job.

Matt said...

What they should have done, rather than creating two distinct and ill-fitting environments, is to enable applications to contain both the Modern Metro and the standard desktop UI. A bit like Apple's universal binaries which contained both 32 and 64bit versions of the application.

Touchscreen? You get the metro interface. Plug in a keyboard and mouse and it flips to the desktop interface. Maybe on a laptop with both a touchscreen and a trackpad you could choose the interface suitable to the task at hand.

Make it fairly easy for developers to add the metro interface to their existing apps and it becomes a compelling reason to upgrade. Users could have the same apps and files on their fancy new Surface as they do with their home PC.

Enterprise users who will only use the desktop will never see the metro interface and tablet users won't get dumped suddenly into the desktop.

Michael Mace said...

Lun Esex wrote:

>>Aren't Android OEMs already paying something like $10-$15 fees per handset to Microsoft for patent licensing? If Microsoft created a forked version of Android that strips out Google's services and replaces them with Microsoft's, they could offer this version to OEMs with lower or no fees.

True. But I don’t think that is enough of an incentive to most handset companies to overcome Android’s lead in user adoption.


Chan wrote:

>>This I have heard this but needs to know for sure. Does Android OEMs pay MS?

Yes indeed, unless they have enough patents of their own to threaten Microsoft.


>>And what the hell has happened to Twitter lately ? Isn't it they are pushing little too harsh to be reinvented? Trying to merge vine Instagram features all at once?

An interesting question. The dividing lines between social networks and communication products are steadily blurring. It’s a challenge not just to Twitter but also to Facebook and others.


Avi Greengart wrote:

>>What I truly don't understand is why there isn't a touch-centric version of Office FOR SURFACE.

Good points, Avi, as usual. As you know, the problem is that Microsoft has different business units that don’t work together. Microsoft said Windows 8 was a bet the company thing, but didn’t execute that way.


>> I thought that the Android effort at Nokia was a pre-Microsoft-buyout hedge or an Asha alternative, not a post-Microsoft plan for replacing Windows Phone.

I think it was a pre-buyout Asha alternative that the low-end Nokia team wants to keep alive. But I think it could be more if Microsoft were thinking clearly.


Mark Onyschuk wrote:

>>The real danger is that by bringing Office to Surface rather than iOS, there's a real chance Microsoft could lose the Office franchise itself (or lose all potential growth, as consumers ignore it and enterprises stop upgrading/actively cut back).

This is one of the big challenges for the next CEO -- do you let the Office team run like an independent business or make it part of the larger whole? Right now it’s in between and not optimizing well for either. Luckily for Microsoft, Google Drive has a lot of flaws compared to Office.


Hans Gerwitz wrote:

>>What is this magical "market momentum" that will keep OEMs from implementing anything other than Android?

The desire of handset vendors to sell to a large number of available customers without having to explain the OS you’re running.


Mikko wrote:

>>As I understand it, Android OEMs are licensing MS patents, chiefly to use FAT filesystems. MS doesn't gain any advantage here by becoming an Android vendor itself. It would have free access to the patents, but no revenue from them.

Would Microsoft be required to license back its patents for free in order to use a forked version of Android?

Michael Mace said...

Anonymous wrote:

>>"...a phone vendor switching off [Android] would be abandoning most of the available customers..." Nah. Only if you assume they they are *Android* customers. A dubious assumption. If people were primarily Android customers Sammy wouldn't have a basis to dominate (they aren't the cheapest).

I think there’s a middle ground in which compatibility with a broadly-accepted OS is a checkoff item and then the customers choose the brand they like best.


>>It's also not right to compare Nokia's "dominance" of the Windows handset market to Sammy's dominance of the Android handset market. Sure they dominate it, but the Windows handset market is tiny. There's lots of market to grow into.

You’re kidding, right? The problem is that there’s very little market for Windows Phone and Nokia soaks up most of the available demand. Would you rather wrestle a gorilla in a boxing ring or in a broom closet?


>>Handset makers will take a serious look at Windows phone as a way to get out from under Sammy's thumb: "We could be the Samsung of Windows phone."

If they thought that way they’d be adopting Windows Phone already.


Aaron wrote:

>>"On the other hand, running Metro apps in a traditional Windows frame is...I don’t even know what word to use. Bizarre? Crazy?" I'd use "totally logical," actually.

Fair enough. We just disagree on this one. When Microsoft ships the feature we’ll see how customers react.


>>There's just no point to Metro on a large windowed desktop. The information density is way too low, and you lose the convenience of a true multitasking/windowing system.

More to the point, people using desktops and mice don’t touch the screen, and Metro is way awkward when used with a mouse. That won’t change if you put a Metro app in a Win32 window.

Michael Mace said...

MikeTeeVee wrote:

>>And in the middle, there'd be the tablets/convertibles (like Surface Pro) that can work as a Metro tablet or a Windows desktop, but with desktop mode having a traditional Start menu, so you're consistently in one mode or the other, not swapping back and forth willy-nilly.

I’m with you on that part. I think Microsoft believed that if it forced people to use Metro they’d gradually fall in love with it. Instead, all it did was piss off a lot of otherwise loyal customers. Apple is missing a huge opportunity to convert those people to Mac. Oh well.


Walt French wrote:

>>I never actually saw a customer-facing reason for Win8. Microsoft never looked from scratch...about what people actually DO with mobile devices; they tried to bolt mobile onto their desktops, which are highly valuable to millions (me, too) as IMMOBILE devices.

Very well put.


>>Microsoft, paying close attention to its best customers (the IT shops, not its end users), looked to add a new feature, one that would make their products better yet.

Not sure I’m with you on that one. I suspect the thinking was more like “tablets selling well, must co-opt / merged PC and tablet would leverage Windows / this is a no-brainer.”


>>a Board that has assumed things were going great and they didn't need to get their hands dirty.

Or that knows things are off track but doesn’t know what to do about it. I think JLG made the point that any CEO with sense wouldn’t want to run the company with Bill and Steve still on the board looming over every decision.


Matt wrote:

>>What they should have done, rather than creating two distinct and ill-fitting environments, is to enable applications to contain both the Modern Metro and the standard desktop UI.

Wow, that’s an interesting idea, and one I had never thought of. I want to think about it some more, but my first reaction is that it feels like it would be a lot of work for a developer to support the two interfaces in one app -- I think you’d need to rethink task flow, not just UI. Also, we’re assuming that people will do the same tasks with tablets and PCs, and I don’t buy that.

Anonymous said...

Actually I think it is more about activesync protocol licensing... so they can connect to all the spiffy corporate email systems.

JoeS54 said...

I try to be objective when looking at any situation. I must be in the minority. This article is not analysis, it's an anti-Microsoft rant.

I held off on buying a tablet for a long time. Having owned and heavily used both an iPhone and a Samsung Galaxy S4, I saw no point in spending hundreds of dollars on a large device running a phone OS. Microsoft got me to finally buy a tablet with the Surface Pro 2.

Best device I've ever owned. More importantly with respect to the article, the "Metro" interface is the best touch interface on the market, by a mile. iOS and Android are modeled on the old Windows desktop, while Windows has come up with something completely new.

It seems to me that a lot of people are following shiny objects rather than looking at things as a whole. Smartphone sales have been astronomical. There has been a lot of money made there, so it's understandable that it would get a lot of attention. The problem is that tablet sales have not been anywhere near as huge, and indeed have still not eclipsed desktop and laptop PC sales. A lot of people are claiming they will, but it isn't happening yet. And the Surface line has apparently had a very strong Holiday shopping season (my own purchase included).

"Traditional" PCs running Windows are absolutely ubiquitous. Their market saturation is almost universal, after 20 years of explosive growth. It is now a mature market.

Smartphones are the big new thing, and they are indispensable. But the intersection between mobile devices and existing computers is still in flux. For me, it didn't make sense to buy a tablet until I had something that could do much of what my PC could do. That meant waiting for a Windows version that was legitimate. In my opinion, they've achieved it, and done so with a lot of style and substance. That's what made me buy one.

My opinion of Apple is that it was very much a one man show, and the death of Steve Jobs has left them directionless, hanging on to past success. Android is an OS that feels cheap and buggy, and more importantly feels like nothing but a scheme to get your personal information into the hands of Google and its advertisers. Google's services likewise are junk. An advertising-driven business is never going to be focused on quality.

Having experienced all sides of the mobile market, I've chosen a Surface Pro 2, SkyDrive and Office365 as my personal "ecosystem". There is something almost comforting about getting back to Microsoft after experiencing all the downsides of iOS and Android. More importantly, their services in each of these areas is far superior to the other two, and their devices are rivaling Apple for build quality.

I must be a fool though, because according to the article Microsoft is going bankrupt, and should be broken up and sold off for parts. Wall Street must be missing the boat, too. But obviously this author has the real scoop.

sachi griffin said...

I am one of the Window desktop users that is pissed at Microsoft. The reason a tablet has a touch screen instead of a mouse is because people were not going to drag a mouse with them wherever they went. A desktop machine with a mouse is 10 times more productive than a touch screen. The new interface insults my intelligence. The touch screen is a downgrade not an upgrade. I also am pissed that they said they would put the start button back in. The teased us and then gave us a button that did almost nothing. Whoever decided to downgrade the desktop to low performance level of a tablet was nuts. I see tablet fan boys that probably only play games all day saying how wonderful win8 is but if you have real work to do the new win8 sucks. I want my OS to improve not to devolve. The Win8 rollout really reminds me of OBAMACARE. I want what I had before because I do not want to embrace the SUCK!

Michael Mace said...

JoeS54 wrote:

>>This article is not analysis, it's an anti-Microsoft rant.

I’m sorry you see it that way, Joe. As I’ve said in several other articles, I want Microsoft to succeed in mobile; we need more diversity in the market, and I think there is room for multiple standards. But I think they’re on the wrong track (or several wrong tracks in this case).


>>the "Metro" interface is the best touch interface on the market, by a mile.

If used as a pure tablet OS, I think there’s a lot to be said for it. I was incredibly excited when Microsoft previewed it (and said so in this blog). That made me even more disappointed when I got the beta and saw how awkwardly Microsoft had married it with Win32.

I don't know what Microsoft's thinking was, but it seemed as if Microsoft lacked the confidence that users would adopt Metro voluntarily, and so they deliberately crippled or removed parts of Win32 in order to force users to interact with Metro. That forced touch-ification of desktop users made them feel like second-class citizens and penalized adoption of Windows 8.

It was a huge, fundamental error on Microsoft's part. If you want to see the result, read Sachi's comment above.


>>iOS and Android are modeled on the old Windows desktop

Joe, you’re making some legitimate points; there’s no need to spoil it by engaging in spin. If iOS was modeled on any desktop, it’d be the Mac desktop, not the Windows one. And I don’t think the fact that iOS has app icons makes it a copy of any desktop. Give Apple credit for the substantial originality in their work, especially the way they thought through how a finger-driven interface should work.

Acknowledging the success of a competitor doesn’t take anything away from the substantial coolness and originality in Metro.

As for Android, yeah they’ve kind of admitted modeling much of its look after iOS.


>>the Surface line has apparently had a very strong Holiday shopping season

If so, I’ll be happy for Microsoft. But I don’t think anyone could argue that Surface, and Windows 8, have achieved the very high expectations that Microsoft set for them at launch.


>>I must be a fool though, because according to the article Microsoft is going bankrupt

I did not say that. Microsoft is not going broke. Its challenge is that the stock price hasn’t been increasing, and investors are becoming more and more impatient with that. Ten years or so ago, a huge chunk of the company’s stock was still controlled by insiders, so it didn’t matter what anyone outside thought. But the situation has changed, and I think the forced departure of Steve Ballmer is a sign that investor pressures are coming into play.


>>and should be broken up and sold off for parts.

I didn’t say that either. I think there’s a strong risk that’s going to happen, because it’s the obvious biz school thing to do. But it’s not what I recommend, or what I want.

To survive investor pressure and not get broken up, Microsoft needs to start growing again. And I think the best chance they have to do that is through fundamental innovation in functionality, not just messing with the underlying code bases.

JoeS54 said...

@MichaelMace:

The way I see it, Microsoft has done what they had to do with Windows and its other products and services, but it was never going to happen without bumps in the road. They still need to refine the approach, but they're on the right track. And in my opinion, they're actually ahead of the game.

As an observer and consumer, the only thing I've seen happen in the past few years is explosive sales of cheap smartphones running Android, and Apple stagnating and beginning to drift without Steve Jobs. In a bad economy with wary consumers, I think Microsoft has positioned itself well for the future, even if it hasn't paid off yet.

There are many reasons why Windows 8 has seen a slow adoption rate, all of them reasonable. People installing it on a system without a touch screen are not going to experience most of the benefits. PC hardware has improved over time, and software complexity has slowed, to the point where the upgrade cycle for PCs has slowed. With consumer dollars tight, cheaper tablets and phones are more appealing. But I still think they had to do what they did, and I think the quality of what they've produced is significantly superior to the competition.

I don't know how they crack the nut of phones, or even if they can. I think phones are a very different device from full PCs and even tablets. But standardizing their interface and code base as much as possible across all form factors is the best route to get there. I will consider a Windows Phones next time around, especially if Apple continues to stagnate.

Michael Mace said...

Very well put, Joe. Thanks for posting.

Anonymous said...

Why WinRT has that strange limited "classic" desktop?

I think the reason is, that Microsoft themselves still have no idea how to express their own Microsoft Office using their new Metro UX language.

And this is the big fundamental problem not only for the Microsoft themselves but also for every software vendor out there building something more complex as just an "simple" phone app with (figuratively speaking) three options and five buttons.

So, I think they will need to rethink their unified UX strategy. Or they will remain stuck with something what falls between two stools.

in my opinion, Metro as it is right now is too dogmatic (no compromise) for a real world.

Chan said...

Gosh... You are Joes 54

Sure enough people do in need of post pc productivity tool that is the argument of the article

And you are in a dream world dating tablets are extension of a smartphone mobile is.
Even Android tablet market is booming and you probably have not used iPad and have not seen some professionals have completely revolutionised their workflow with iPad optimised touch apps

I personally know few of music producers, doctors, field officers, photographers who have revolutionised their workflow with iPad.

Yours truly MS with surface pro doesn't being in that to pros and doesn't sell is the point here

JoeS54 said...

@Chan: To the extent that I understand what you're saying, my response is this: iPad are far too expensive for what they do. Android tablets do the same things for much less, and Windows 8 tablets do much more for the same price.

I'm aware that some people are trying to use iPads in professional settings, but that is not what they're made for, and they're not cost-effective for it. The arts and media have always been the one area where Apple has seen widespread professional use. That goes back long before the existence of the iPad, or even the iPod. But even there, the iPad is still a novelty item.

In the long run, if tablets see widespread adoption for productivity (which remains to be seen), it's going to be Windows tablets. There is no other player even in the same ballpark.

Microsoft is a big ship that turns slowly, and Apple and Google have gotten a headstart. But tablet sales as a whole are still below desktop and laptop PC sales, even though the market saturation of desktops and laptops is complete. Everybody who could conceivably want one already has one, and it's a question of getting them to upgrade. And they're still outselling tablets, which most people don't yet own.

Smartphones have seen truly massive sales, far beyond PCs. But tablets have not. The two should not be confused just because they often run the same OS. The weakness of Android and Apple tablets is that they run phone OSes. In the long run I do not believe they will be dominant.

Joe Blow said...

Best thing for Micro$oft to do? Forget phones, its not their thing. Focus on business, PC, and laptop users by revisiting Windows 7, improving on it, and get back to offering what their traditional customer base likes.

Chan said...

@JoeS54

I would like to be wrong on this, but buy and large paradigm shift in computing is rapidly taking place.

The desktop, MS main business is no longer relevant.

Desktops have saturated to a point all the PC makers from Dell to China is having a ever shrinking PC sales and not going o be recovered as it seems now. Making it Metro makes matters worse.

Meanwhile even though you tend to disagree with us most of the none productive computing work is "already" shifted to smartphones and tablets on the consumer/household market whether you accepted it or not.

Only remaining piece is the office productivity and the enterprise. And I see more and more people now do their presentation meeting stuff on tablets. Next wave will be mission critical app wave.

Education and sales almost all going to tablets now.

Only renaming part is back office functions, special tasks, and professional and content creation is largely done on desktop.

Even there are some journalists now don't go much to the back office just post them from tablets, get back the art department work back to their iPads and approve it right away. Easy world.

PC are more and more going to the back office and could systems giving the front face to the tablets and smartphones. It is more and more becoming virtual and VPN stuff that you no longer need a PC to do the real thing.

I think this is the problem you don't see and what MS has to counter with.

There are very few productivity areas that are yet to be taken over by the could. Like specific creative work, labs, pre-press, production, music like

The freaking thing I don't understand is why the hell MS did all the wonderful Metro thing (making windows touch friendly) but did not do that to the MS Office.

For the recode I can pretty well run full MS Office (Windows/ MAc OS) from my iPad without a hitch either as VPN, Remote desktop, or by a cloud service like CloudOn.The nightmare is that MS Office is NOT touch friendly enough people start using Google Colud and iWork more and more.

And soon I am sure even the desktop destined Adobe Creative suite, XCode like developer IDEs, specific desktop applications, tools will all get touch friendly interfaces and pushed out from a cloud that you no longer needs the desktop.

It's happening already for most of the part.

MS has to accept desktop matters less and less and should try to leverage their other core strengths (MS Office/ Services) untethered from Windows and give a run for Goggle and Apple services.

That is the biggest opportunity they are missing. I hope they will push Office 360 more.

There is virtually no space for MS to grow the Windows business. Google and Apple (Mac OS) has commoditized and ended the OS sales for good.

And also not to be taken lightly that Apple just made their iOS 64bit that all the heavy stuff can easily be brought in to iPad by the developers.

On the other hand Google making Chrome desktop, Acer likes making Android desktops, iPad is rumored to be getting a Pro upgrade that everything puts the last nails to the MS desktop business.

MS has huge business no question, but it can't grow no more. So the legacy desktop application eco-system can no longer grow even if you have high hopes for Surface Pro. And when the Android and iOS so much appealing MS can't push their developers enough to re-write their legacy windows apps touch friendly (or Metro)

Nokia and BB was huge in 2007, now where are they?

Apple won because they were willing to risk all their iPod business to iPhone, Mac business to iPad.

MS should do the same to stay in the business. Period.

Chan said...

Also I see another interesting thing happening that I have run Android and iOS emulators on the Mac

Surprisingly mobile apps people love so much on their phones and tablets runs pretty much the same on the desktop environment with mouse and keyboard so may be Android desktop will find more success among commons than Linux.

On contrast none of the legacy Windows apps are usable on touch devices unless re engineered.

This interestingly taking us another direction that mobile apps taking over the desktop scenario for most of the consumer apps

We have seen this iOSification of Mac OS X apps of Reeder/ email clients

JoeS54 said...

@Chan: I already told you the numbers, you can look them up your self if you don't believe me. Desktop and laptop PC sales have been declining, but they are still outselling tablets. There are projections that tablets will surpass them, but that hasn't materialized yet.

For personal, recreational computing tasks, phones and tablets are obviously seeing a lot of adoption. For business and productivity, Microsoft still has a strong advantage, and they are moving in the right direction to capitalize on it. They have been slow to get there, without a doubt. The big explosion in phones was something they were ill-prepared for, and Apple and Google got a headstart on tablets as a result. But if you think 'mission critical' apps are going to some other OS when Windows has a viable option, I think you're dreaming.

And as I said above, their offerings in touch and cloud ecosystem are now significantly superior to Apple and Google.

Curtis Gray said...

Hard to imagine what the leadership at Microsoft is thinking. They are blowing an enormous opportunity. They were once the smartest company in the industry (and the most ruthlessly competitive). The company's roots are in cross-platform applications that are tightly integrated with one another. Tight integration is what makes Office so popular. For example, drag a document into a spreadsheet and vice-versa; easy-peasy. The Exchange and Server products are nearly flawless when combined with the desktop applications. This is still true today.

Somewhere along the way Microsoft lost their mojo and put all of their chips on Windows: a sensible move when Windows is dominant and there is no real competitor in sight.

But not now.

Android and iOS share the end-user computing platform landscape with Windows. Worst of all, people (and competitors) are actively looking for a way to eliminate the Windows desktop from their lives. Microsoft is responding to this with panicky organizational moves, shrill press announcements and flailing product launches.

None of this makes any sense. The solution to their problems is to go back to what made them great in the first place.

Microsoft should be offering the very best (and lightweight) native email, calendar, and contact management app in the industry. It should be tightly integrated with everything from Exchange to Gmail. It should run on absolutely everything you use: Windows, iOS, Android, Web, Blackberry, Windows RT, Xbox, everything. And not just the latest, but the most dominant versions of these platforms.

That app should be like Netflix: everywhere, on everything, all the time. Switch phones, carriers, OS's, platforms and keep all of your contacts, email settings, and calendaring in sync using a single username/password. Google does this now, but only on Android and web.

The experience should be absolutely flawless and distinctively Microsoft. This is a no brainer.

I repeat the original question: what are they thinking?

JoeS54 said...

@Curtis Gray: There are a lot of very fanatical anti-Microsoft people on the internet - Apple worshipers, Linux dead-enders, and so forth who have been harping on their personal obsessions for decades. I don't know if you're one of them.

What I do know is that most of us only care what works best want the best possible products and services. Windows 8.1 is now the best mobile operating system on the market.

Suggesting that Microsoft should abandon Windows and focus on providing apps for iOS and Android users is lunacy. Every time I see that kind of comment, I interpret it this way: there are things that you can only realistically get from Microsoft, and you want this things on your non-Windows platform so you can continue being the anti-Microsoft guy while admitting that there are certain things (many things in fact) for which Apple and Android completely suck, and have no solution.

If you want to get away from the Windows desktop, guess what? They've got a new touch interface, and they've got mobile devices. That's partly what the article is about, and you'd have be living under a rock to not know it.

Their current approach is absolutely the correct one, and they're carrying it out with a level of quality that is unmatched by the alternatives. The problem is that they've been slow to market. Which is reportedly the primary reason Ballmer stepped down. The board liked the direction the company was going, but wanted a faster timetable. Ballmer apparently concluded he was out of gas and decided to let somebody else handle it.

They are on the right track. They just need to not screw it up.

Naveen said...

Great analysis! This is something that has been bothering me as well. I really don't know what to make out of all the news that is coming out on Microsoft. Back when WP7 came out I wanted to buy it, but wasn't sure if the platform had a future. And my fears were right when it was announced that existing WP7 devices wouldn't upgrade to WP8 and I ended up with Android which I am happy with.

And now when Windows Phone has matured and stabilized Microsoft seems to be in a disarray again making me think twice on whether I should go for it or not. What if the new CEO has different plans? All these news is simply making buyers (at least like me) go back on their plans to switch to Windows Phone.

Anonymous said...

I think Microsoft's concept of a single user interface across all devices is a good one and the fact that RT doesn't run win32 progs is not a big deal, afterall no one expects an ipad to run OSX progs. The real issue is that Microsoft's marketing department can't seem to communicate the concept without confusing the consumer.

ps lose the capcha, it's unreadable!

Chan said...

If these are any reliable sources.. plus Android and iOS device sales sure signals troubles for MS

http://www.computerworld.com/s/article/print/9245050/Chromebooks_success_punches_Microsoft_in_the_gut

Unknown said...

I'm not going to get into the relative merits of Windows, IOS or Android, on whatever computing device. I think Microsoft's problem is something different...

Back in the day, if you were a car maker, you competed for customers in the market for cars. All your competitors had the same basic business model (sell car, make profit), the same sort of costs (components, running assembly lines, distribution, advertising etc), and the same routes to market (dealer networks with showrooms, test drives etc) usually located in close proximity.

That used to be the case in the telco sector, the software sector, the consumer electronics sector and the rest as well.

There is no well-defined, bounded "telco” sector, “software sector" or “CE Sector” any more.

Microsoft's problem is that their traditional business model was to sell expensive Office software to end consumers, via OEM or direct sales, license OS software to vendors, and sell volume licenses and bundles of "high value" software suites to corporate clients. The company was engineered around that model. And it used to compete with, say Lotus, Oracle and those kinds of guys. Very successfully.

Today, though, who are Microsoft's "competitors" that we are all discussing? Apple, a highly profitable maker of high-margin consumer electronic devices that are selling by the shedload, which uses software and services to "sweeten" the perceived value of these nice objects still further. Apple doesn't really care about software revenues: they're prepared to "defer" $1bn. of iWork revenue by making it free, to turn into increased iPad sales down the line. Apple's main interest is in creating "switchers" to the Apple ecosystem, starting with one "gateway" device (as in "drug", not "router"), like an iPhone or iPad, which is then shortly followed by an Apple TV, Time Capsule, a couple of Airports and eventually a Macbook Air, 'cos it's all so much EASIER when you drink the Kool-Aid.

And the second competitor is Google, whose revenue comes from advertising, and which depends on simply getting as many people in front of as many of their services as they can. It's all about the Adwords, friends. For them, the population engaging with their service ecosystem is the key, and making the services free, and giving away Android to embed those services on a range of devices outside the traditional desktop/browser, like phones, tablets, set-top boxes and smart TVs makes complete sense. And you could probably argue that in Google's case, even the actual revenue is a "second-order" goal -- the primary one being to drive shareholder value based on market cap, which is driven not only (or even mainly) by proven revenues, but by sentiment that Google is so innovative that one day in the future the revenues will come because they own sectors we can only dream of today, which explains the "shoot for the moon" projects in robotics and self-driving cars... They may look like crazy, blue-skies pie in the sky futurology, but actually they are driving real shareholder value TODAY (and probably more so than they will if they ever actually deliver a nuts and bolts business).

So where does that leave Microsoft? It's competitors, annoyingly, are on the same playing field, but they're both playing different games, trying to score in different goals, and using different playing equipment. Microsoft's trying to score an end run while Apple is blocking the field with a bobsled track, and Google has filled the defensive half with the world's largest Scrabble tournament.

[TBC]

Unknown said...

[...continued]

Microsoft faces multiple challenges. The first, which has been around for a while but is really biting now, is that its competitors, although they're playing different games, have destroyed MS's traditional software sales business model as collateral damage. Apple's basic business model is secure -- someone is always going be able to make a profit on selling hardware; for Google, the basic business model of advertising has survived a century or so already, even if their specific "valuing eyeballs" approach feels a bit dot-com boom at times, and their veiled "real" model of inflating the share price with "if you build it they will come" innovation is even more smoke and mirrors (but not, at least, as bad as Facebook's…)

In this context, perhaps some of what Microsoft has done looks less nuts. Maybe, with Nokia, they are trying to grab a piece of the "high margin consumer electronics" revenues that Apple don't get (Nokia, after all, is probably the only company from the "old" mobile sector that really built strong brand equity in quality, reliability and performance and invented the "premium" mobile segment). Market segment by market segment, with most consumers Nokia can still command a premium over Samsung devices, especially when customers actually pay for their devices rather than getting them free and subsidised.

And maybe giving away the operating system and bundling free services might be a way to take the fight more directly to Google, getting eyeballs into the MS ecosystem instead.

If they're really lucky, they might even get synergy between the two, and use gateway devices (eg XBox) to create switchers to the Microsoft ecosystem who then buy Lumia smartphones, Nokia phones for their kids and Surface tablets.

So, I don't think Microsoft has gone nuts. They're trying to address the fundamental problem that the business model that the company was built on has been blasted apart by two guys who are trying to do something completely different. To my mind, they seem to be doing it by trying to at least start playing the same games as those guys. The alternative would be to try to find a third, innovative "different game" that has a viable business model, which Microsoft is well-qualified to play and win at, and that its team can pick up the rules of very quickly -- and which won't be crushed underfoot in its infancy in another collateral damage incident spawned by the Apple-Google main event.

The task for the new CEO is to try to make sense of all this, and get the whole company to execute. I don't think that "war on two fronts" approach is unwinnable, but it's surely pretty hard. Nokia has to outfight Apple on the premium, innovative, beautifully designed, high-margin product front, and the MS-ecosystem behemoth has to adapt to a give it away free and count the eyeballs business model. But Nokia makes good hardware, Winphone is a nice OS, and if nothing else, the MS ecosystem has reach and eyeballs already across the home, desktops and corporates -- and the phones are even starting to sell.

[TBC...]

Unknown said...

[continued -- last bit, I promise]

If I'm right in this interpretation, then the CEO's job is to streamline the organisation behind those two big tasks, ensure that execution of each is *perfection* (and it'll need to be to come from behind in both areas), and make sure that all the potential synergies between the two are delivered.

The alternative is that the new CEO needs to be someone who has identified that currently empty playing field of opportunity, that virgin industry sector or market that no one else has spotted yet, and also knows why Microsoft has the people and IPR assets to make it their own. Then they'll just have to reorganise the company to deliver it fast enough tht they can still do it earlier and better than any of their current competitors or insurgents who aren't even on the radar yet.

Either of the above is a tall order, and asks big questions of the executive search process, to say the least. And in the end, maybe I'm way off beam here and Microsoft is actually just nuts. In which case, their future is in histories of business and technology in the closing decades of the 20th and early years of the 21st century. One day I might write one...

best regards,
Matt

Chan said...

@Matt,

Whoever you are, bravo!
You should actually talk to next MS CEO :-D

Rob said...

I was really excited by the new design language in windows phone, and assumed that MS with Nokia were committed to making it work as a 'do or die' project.
As a result, I ported one of my apps to windows phone on the assumption that the developer rewards would pick up.

My experience has been tiny sales and a system that seems to have been more or less abandoned. It is as if getting WP released was the huge high-priority project, but that 90% of the developers were moved elsewhere after launch day.

In fact, the launch was no more than an start in the marathon event of trying to catch up to android & iOS. Microsoft seem to have given up shortly after belatedly joining the race.

Andrew Joyce said...

I've been a cheerleader for Windows 8 since it launched. Like other comments, I saw a lot of promise in the converged future that Windows 8 was promising -- if executed properly. Windows 8 was solid, 8.1 even better (though it made some worrying concessions), and since then made terrifying changes with the Threshold update.

What I've championed since the beginning of Windows 8 is the strengthening and improving of Metro. Instead of wasting valuable time making concessions for win32, Microsoft should have been charging ahead with Metro so that it is strong enough to replace win32. At the moment, it still isn't. We have no Explorer for Metro, no Office for Metro, nor any of the first-party applications that Windows has on win32.

I think the Metro environment shows a lot of promise on desktops/laptops. Some of the recent apps like NextGen reader (which toggles between two 'touch' and 'desktop' views, but both fully in Metro mode), and even Microsoft's own xBox Music (which, while still very limiting in function, manages to at least arrange its interface clearly and understandably for both touch and desktop.

But instead of the Metro environment becoming more robust, it has stagnated, and the innovation that we were promised hasn't materialized. Microsoft has moved like molasses even in replacing their win32 apps. Absolutely crucial for Windows 8 adoption a full environment that can replace Win32 -- a fresh start. This is a herculean task, but definitely possible, especially with Microsoft's manpower. Users have rejected Windows 8 not because it was new (Like DOS-->Windows, that uproar would die down), but because it is inadequate, and continues to be so.

Microsoft, in short, attacks the problem from the wrong end. Instead of dumbing down the desktop to tablet levels, the tablet must reach desktop-level functionality in a touch-friendly environment. Windows 8 originally promised a tantalizing glimpse of this possibility. In this scenario, not only would a tablet be capable of everything a desktop can do (whether it's frequently used or not), but a desktop would still be capable of everything it's always done.

One suggestion I made early on was a slider like gMail's 'Cozy-->Comfortable-->Compact' views, which on-the-fly adapt the layout between a more touch-friendly, whitespaced version, and a compact, mouse version. I'm no coder, but WinRT seems to have the flexibility needed to adjust the UI like this on the fly.

On a broader strategy level, Microsoft needs to work over-time on getting their services integrated, "It just works." Regardless of the playing field that Matt mentioned (the three-way Apple, Google, and Microsoft), the advantage that both opponents share is the 'it just works' philosophy. Apple is famous for this standard, and Google has recently made great strides (with questionable results as of yet) with their Google+ account integration, and the Android project as a whole. Microsoft needs to imitate that cohesion. OneDrive should be available on all Microsoft hardware. Office is there by default -- not promised for years and years as is the case for Metro.

[continued]

Andrew Joyce said...

I've been a cheerleader for Windows 8 since it launched. Like other comments, I saw a lot of promise in the converged future that Windows 8 was promising -- if executed properly. Windows 8 was solid, 8.1 even better (though it made some worrying concessions), and since then made terrifying changes with the Threshold update.

What I've championed since the beginning of Windows 8 is the strengthening and improving of Metro. Instead of wasting valuable time making concessions for win32, Microsoft should have been charging ahead with Metro so that it is strong enough to replace win32. At the moment, it still isn't. We have no Explorer for Metro, no Office for Metro, nor any of the first-party applications that Windows has on win32.

I think the Metro environment shows a lot of promise on desktops/laptops. Some of the recent apps like NextGen reader (which toggles between two 'touch' and 'desktop' views, but both fully in Metro mode), and even Microsoft's own xBox Music (which, while still very limiting in function, manages to at least arrange its interface clearly and understandably for both touch and desktop.

But instead of the Metro environment becoming more robust, it has stagnated, and the innovation that we were promised hasn't materialized. Microsoft has moved like molasses even in replacing their win32 apps. Absolutely crucial for Windows 8 adoption a full environment that can replace Win32 -- a fresh start. This is a herculean task, but definitely possible, especially with Microsoft's manpower. Users have rejected Windows 8 not because it was new (Like DOS-->Windows, that uproar would die down), but because it is inadequate, and continues to be so.

Microsoft, in short, attacks the problem from the wrong end. Instead of dumbing down the desktop to tablet levels, the tablet must reach desktop-level functionality in a touch-friendly environment. Windows 8 originally promised a tantalizing glimpse of this possibility. In this scenario, not only would a tablet be capable of everything a desktop can do (whether it's frequently used or not), but a desktop would still be capable of everything it's always done.

One suggestion I made early on was a slider like gMail's 'Cozy-->Comfortable-->Compact' views, which on-the-fly adapt the layout between a more touch-friendly, whitespaced version, and a compact, mouse version. I'm no coder, but WinRT seems to have the flexibility needed to adjust the UI like this on the fly.

On a broader strategy level, Microsoft needs to work over-time on getting their services integrated, "It just works." Regardless of the playing field that Matt mentioned (the three-way Apple, Google, and Microsoft), the advantage that both opponents share is the 'it just works' philosophy. Apple is famous for this standard, and Google has recently made great strides (with questionable results as of yet) with their Google+ account integration, and the Android project as a whole. Microsoft needs to imitate that cohesion. OneDrive should be available on all Microsoft hardware. Office is there by default -- not promised for years and years as is the case for Metro.

[continued]

Andrew Joyce said...

[...continued]
A fully unified ecosystem like this makes the 'three screens' promise much more compelling. A phone, tablet, computer, and Xbox that all work together seamlessly actually does hold interest to more than just engineers. But unifying the codebase is only the first step towards that. The products must be unified, so that everything shares together. Microsoft is beginning to take baby steps in this direction, but it's not enough.

Most importantly, what Microsoft needs is a strategic visionary who can set the tone for the company. I'm feeling optimistic about Satya Nadella. His double 'cloud and mobile' emphasis is still only a promise, but makes me feel a lot better about the long-term prospects of OneDrive, OneNote Skype, and WinPhone, which I feel are some of the best products to come out of the company.

For Windows, I feel like hoping he'll reverse recent changes is a bit of a pipe dream. At the very least, I'm hoping he will continue with the Metro vision, and really push it forward to a touch-friendly UI that is available from 40-inch TV screens to laptops to tablets to phones to ereaders, even. The Metro UI needs to mature and strengthen -- and win32 needs to die, but only when Metro is strong enough to pick up the banner.

With this unified, strong ecosystem, Microsoft is finally in a position to compete not just with Apple's high-quality devices that 'just work,' but also the stunning gamut of Google services that reap such valuable advertising dollars for the company. I'm not visionary enough to propose the answer to Matt's 'third-front' question, but I think what I've proposed will at least stop the hemorrhaging on the two fronts that Microsoft is already facing. From there, they will be in a position to strike that third ground.

Andrew

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