The Future of Microsoft

The Future of Microsoft

Today Microsoft moves the bulk of its customers over from Windows Messenger to Skype, the VoIP and messaging company it bought for $8.5bn. It shows just how times have changed for the technology giant that rather than integrating acquired technology into its own services, it’s moving its own 100 million active users over to an acquired service.

Why? There are many good reasons. First and foremost Skype has a better structured revenue model, generating income from a proportion of the 2bn+ minutes of voice calls it carries every day. Skype also has more active users and is growing, compared to the declining Windows product.

Finally there’s the issue of brand. Windows? Not sexy. Skype will become progressively more integrated into the Windows/Office environment over the coming months. But I find myself wondering: will anyone care?

Microsoft remains a major power — if not the major power — in PCs. For all the talk of the PC’s decline, they remain the best platform for much of our computing work. I’m writing this on a Windows 7 PC and very happy I am with it too. But I am no longer tied to Windows. And I’m no longer tied to Office. In the last two years I have jumped happily and easily between a Macbook, a Linux laptop, and a Windows desktop. Dropbox, Subversion, Google Drive, and InSync keep all my files available. Office, OpenOffice, AbiWord, and Google Docs allow me to edit them anywhere I need to with near-equal capability. Microsoft may still dominate the PC market but it no longer owns it. If I buy another PC (this one has lasted probably four or five years), I’m not convinced I’d pay for a Windows licence. I almost certainly won’t buy another copy of Office.

Where does this leave Microsoft? Clearly the loss of my custom won’t trouble the company too much. But it’s what it indicates that might: they no longer have a de facto role in the tech marketplace. And nothing they have tried to do in the recent past such as cloud services or tablets looks likely to earn them back that position.

You could argue that Microsoft has been playing catch-up for 20 years now. The company was late to the internet market, late to the mobile market, and late to the cloud. Its sheer scale makes agility tough and it hasn’t manoeuvred its juggernaut-like weight with sufficient foresight to be in the right places at the right times. What has sustained the company until now has been the incredible power of its market position, one gifted to it by a company in a similar position in the late 70s to the one Microsoft is in now: IBM.

Microsoft’s market position comes in part from Bill Gates’ early decision to licence MS-DOS to IBM for the first PC, rather than selling it outright. Instead of a few thousand dollars up front he chose a small licence payment with the same of each PC. IBM was happy with this because it didn’t have Gates’ confidence in the success the PC would prove to be.

IBM had handed development of the PC over to a little ‘skunkworks’ group within the company because developing something through the usual channels would have taken so long that new competitors like Apple would have established an even more significant lead in the burgeoning personal computer market. In other words, innovation had begun to stagnate inside the giant IBM.

This seems to be the situation facing Microsoft today. Even its biggest announcements around tablets and Windows Phone recently only seem to have brought it to a ‘me too’ position with its competitors. Because it is struggling to innovate it has to acquire companies like Skype. And whereas in the past it would have bought those companies for technology and people, now it buys them for brand and market position.

When tech companies hit this stage of maturity, the chequebook can only take them so far. Microsoft may still be strong today but it is waning. In order to check that decline the company needs to innovate again, not delivering products that match the competition but reinventing the market faster and better than Apple and Google.

To finish on a positive — and I would like to see Microsoft stay in the race — now is a really good time to make a new market. I’m strongly of the opinion that we have hit pretty much the zenith of smartphone and tablet capability, if not sales. I think there is a big form-factor shift coming, backed by an evolved set of cloud-based services. Microsoft is a company with a big cash pile and a load of clever people. It could yet find a product that keeps it at the top of tech for another 20 years.

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This article is by Tom Cheesewright. This post forms part of the Future of Business series. For more posts on this subject, visit the Future of Business page.

Tom Cheesewright

Futurist speaker Tom Cheesewright is one of the UK's leading commentators on technology and tomorrow. Tom has worked with a huge range of organisations across a variety of markets, to help them to see a clear vision of tomorrow, share that vision and respond with agility. Tom draws on his experience to create original, compelling talks that are keyed to the experience of the audience but which surprise and shock with unexpected facts and examples.

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