Economy's 'fundamental reset' hurts Microsoft earnings, future
Microsoft CEO Steve Ballmer probably wishes his prediction of a "fundamental economic reset" wouldn't have proved so prophetic as the company Thursday reported "disappointing" earnings, with net income plummeting 17 percent, online ad sales down 14 percent, and overall sales for the year down 3 percent.
Disappointing? That's generous. The results are traumatic and point to the need for a "fundamental reset" in how Microsoft does business. Fortunately for the company, its SharePoint business offers some clues as to how it can revive its fortunes.
Despite the occasional base hit in its Xbox business and a solid line drive with SharePoint, which helped to prop up the Office business, Microsoft has been consistently striking out in its attempts to guard its Windows hegemony.
In part this is because Microsoft has failed to deliver compelling, new value to Windows customers. Vista was a disaster and the Windows 7 upgrade path for most customers, as Walt Mossberg writes, is so painful as to almost be unthinkable for most customers.
Microsoft points to a global weakening in personal computer demand as one reason for its Windows decline, but this same weakness isn't having the same effect on Apple, which showed growth in its Mac shipments and dominates the "premium" computer market, now claiming a whopping 91 percent share of all personal computer retail purchases above $1,000 in the U.S., according to NPD Group data.
Apple is winning in this market because customers really like its technology. Microsoft has failed to "wow" its prospective and existing customer base.
With both Intel and Apple reporting somewhat rosy earnings in the face of the harsh economic climate, it's clear that the problem really isn't with the industry, which is soft but not terminal. No, the problem is Microsoft.
Microsoft hasn't figured out premium value, even as Linux-powered Netbooks eat at its ability to compete profitably in the economy PC market. Its Web strategy is still disjointed and frail.
Microsoft is stuck zealously guarding its past successes at the expense of its future. The company needs Game Plan 2.0.
Microsoft CFO Christopher Liddell says, "There are some signs that we have at least seen the worst." The problem is, that "worst" (Apple, Netbooks, open-source price pressure, etc.) isn't going to leave Microsoft alone anytime soon.
It's easier said than done, but Microsoft needs to accelerate its experiments with open source. It needs to figure out new ways to reach customers, and to upsell them with more than repackaging of the same product. (Spoiler: Windows 7 Titanium Edition won't work.)
In short, Microsoft needs to reset itself to compete in the 21st Century, which promises to be the most painful thing it has done in its decades-long existence.
If it's any consolation, the company seems to be doing this with SharePoint, which continues to boom because of and not despite a weak market. SharePoint does several things right.
First, Microsoft SharePoint combines wide distribution of a basic and free product (SharePoint Services) that seeds a market for the paid version (SharePoint Server 2007).
Second, SharePoint helps companies bridge their investment in client-side Office to server-side services. This allows Microsoft to tie its strength in the client to a growing strength in the cloud.
Third, Microsoft has effectively (though still in limited fashion) used open source to augment SharePoint's value without undermining its pricing power, e.g., SharePoint Learning Kit. In other words, Microsoft is fostering open-source complements for the proprietary SharePoint core.
In these three ways, among others, Microsoft is showing that it can bridge the gap between its past and its future. But it needs a lot more SharePoint-esque strategy, and a lot less hubris. Microsoft's claims around the iPhone and other competitors have lately fallen flat.
Unless it learns from these experiences, Microsoft, too, will fall flat.
Follow me on Twitter @mjasay.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
Now you see - this is part of the problem. World+Dog uses actual open standards, like CSS, HTML, things like that. Makes matching the internal site to the external one in look, feel, and usability a snap when you use open standards.
But no - you get stuck with .NET (a very poorly understood and even more poorly implemented pseudo-code-script-thingy), which has modules to interact with CSS, HTML, and so forth (again, poorly). Little wonder that the inevitable mistakes in deployment, maintenance, and upgrading get easily blamed on the poor customer.
Nobody really knows how to use it because it is such a messy hack.
They can't even get the POS to work properly on singularity which pretty much represents whatever future MS has left on the desktop.
Please get a copy of Visual Studio or Eclipse or grab a book or "things like that" :-)... pseudo-code-script-thingy ... great descriptions...
Yeah, please explain how you would write server-side code, desktop applications, device drivers, and oh yes POS applications in css or html.
Have you every written code in your life?
Lookit, if you want to write a CMS, you use accepted and open standards to do it. You also don't write it to be almost all SSI with only a few bones thrown out to keep it from becoming a total headache (which was my point). Even PHP is a right PITA when you overuse it, but most devs are smart enough to not let it get in the way of the site formatting.
The SSI also needs to be something usable when you're done with it (hint: SharePoint's implementation of .NET isn't, mostly due to its overly-touchy and frail nature, even in the hands of a decent .NET jockey). Even if you're a total deity in (any language), it helps if you think of the customer when you write the damned thing. Apparently Microsoft (viz SharePoint) hadn't.
I made fun of .NET because during its early years, even Microsoft couldn't tell you what the hell it was. They branded everything that moved as ".NET" - language, servers, raison 'd etre, Bill Gates' scrotum, you name it. What was left (as a language) is singular crap - unless placed in the hands of someone who spent so much time studying/using it, that his career is going to really suck once folks decide to stop using it (and I doubt it even gets the adoption-drop arcs of COBOL and FORTRAN). At least Java has the good grace of having some actual flexibility to make up for it's evil...
HTH ;)
SharePoint is, as you say, essentially given away. They can of course afford to, because running the thing in-house will require you to spend some bank: at least four servers (Central Auth, Index, at least one fallback server (which later becomes the SP Load Balancer), and a DB server), an SQL Server license, upgrading to .NET v3.0 and above, and a lot of horsepower to run it all (check out the minimums sometime).
Now if you want an internal _and_ an external (but relatively secure) presence with it, then you get to add a Forefront product and server, and/or yet another SP server to sit in your DMZ.
Odds are also very good that you'll need to pay someone to at least put the whole thing together initially for you as well.
So yeah - Microsoft has done good for themselves there (now IMHO, you can pull off most of the functionality with a decent CMS on a LAMP server, and a decent Perl/PHP coder. All you miss is the direct Office connection).
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Slight tangent - yep, they've been selling it, but they may want to take some time to better explain the dangers of jumping in with both feet.
In spite of my own opinion, most folks jump right in and start buying a ton of gear for this "free" product, and don't realize what they've bought into until after they've thrown an obscene amount of money at hardware, software licenses, and consultants. If you don't implement this thing very damned carefully, you end up with a great big expensive mess. I've had to clean up after one such incident (and have seen at least two others from a distance), and no it isn't fun.
In too many cases, the CIO drank the kool-aid and demanded SharePoint be installed without thinking it through, but won't dare back out of the quagmire for fear of losing his pride, his arse, and/or his job - so he throws even more money at it. Meanwhile, especially in big orgs, you start seeing 'unauthorized' wiki and LAMP-based CMS servers popping up. Folks abandon SharePoint in favor of something that, while not as glamorous, at least gets the job done, and costs very little to implement and maintain.
I guess the point is, Microsoft may need to do a better job of explaining pitfalls (and costs!) in the sales pitch, instead of waiting until after the POs have been issued, and the cold realization sinks in among the suddenly frightened IT department heads as they scramble through budget spreadsheets trying to scrape up the money.
Passing around the kool-aid may bolster short-term profits for Microsoft, but long-term they will find themselves being marginalized, then abandoned. No IT exec ever wants to be bitten twice, yanno?
I just hope it doesn't end up cannibalizing their long-run prospects, a'la Siebel (but then, there's still a bit of the partisan in me that would kinda love to see exactly that happen).
3-5 years down the road it is going to come back and bite MS hard. It could be so bad that they will never recover from it.
They will not reset their strategy and they are Stubborn, look at their CEO. Ballmer is insane and does not understand the tech world, he should stay out of it. He has destroyed Microsoft and the only way I can see it making it is if Bill Gates pulls a Steve jobs and fires Ballmer and comes back in as CEO and I do not see that happening. The company has no vision, no strategic objective, and has not clue whats happening in the real world now.
Too bad Apple has more cash and has something they can grow. MS pretty much slit their bloated throat on Sharepoint.
Last time Bill Gates was CEO he nearly got his company sliced into three because he was too ruthless, reckless, and incapable of letting other companies exist.
Apple doesn't have more cash then MS they have alot but not as much as Microsoft...
May want to look at the chart which accompanies CNET's initial report of Microsoft's financials this week... it's a downward arc, and it is apparently accelerating.
"The wow stops now."
Best comment of the month.
When accessing the Web, Windows and Office are not necessary.
Windows lost its wow a long time ago.
If you are referring to the "cloud" most people and companies are idiotic enough to go back to a mainframe model where their data is under the control of a third party and if that "unnecessary" web connection goes down, you are hosed.
- by Nexuszzz July 25, 2009 3:49 AM PDT
- SharePoint (SP) is fine for small organisations but presents significant challenges for large organisations that have complex organisational structures and rich information environments. It is a case of sales and marketing hype far exceeding capabilities. Generally, organisations that do not have SP gain some benefit from having a single portal but organisations that do have SP have to deal with significant information management issues. The limitations of SP are (from my client?s experiences and Forrester also sums them up well):
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- by Random_Walk July 25, 2009 8:25 AM PDT
- Agreed. Perfectly (Our org managed to fix #1, but you really don't want to know how).
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(23 Comments)1. No federated support across multiple SP libraries and therefore an inability to apply information access and ownership policies globally to all the SP libraries that may exist within an enterprise ? the implications of this are obvious. There is no easy way for an organisation to define a global information access management policy for all of its artifacts within SP and ensure that each SP instant adheres to this policy;
2. SP has very limited content management capability and its one size fits all and does not sit well with organisations that have already invested in and evolved multiple content repositories;
3. Does not have an XML or structured information capability - no digital asset management support or a capability to understand and manage the lifecycle of digital assets. SP lacks the ability to help users produce, manage and distribute digital assets via multiple channels
4. Lacks Business Process Management (BPM) support and therefore a BPM tool must be utilised increasing integration costs and inherent complexity;
5. SP not architected to enable seamless and secure inter-enterprise collaboration;
6. Very limited support for person centric information delivery - not architected to provide solutions for organisations that have role-based strategies or require a personalised approach to information delivery, and;
7. Vendor lock-in and a single platform approach are also issues ? this is especially in organisations that have a need for a mix of operating environments or wish to include other operating systems in their IT portfolio.