Foley on Microsoft

Microsoft Spreading Itself Too Thin?

In its quest to be "hip" and "cutting edge," Redmond may be forgetting the essentials.

There's a thin line between diversification and over-commitment. Has Microsoft strayed too far over that line? I've been mulling over this question a lot lately. While I understand Microsoft's desire and need to seek out The Next Big Thing, I feel the company should stick closer to its core competencies in its quest.

Consider this: In the span of two weeks in late September, Microsoft rolled out:

  • Halo 3
  • A new family of Zune digital media players
  • A new Web search engine
  • A consumer health-care service
  • Test releases of new Windows Vista and Windows Server
  • Media Center Extenders to allow streaming of content to TVs and DVD players
  • New software for small-business phone systems
  • An updated version of Office for Windows Mobile phones
  • An update to its adCenter online-advertising platform

What exactly is Microsoft these days? A business software vendor? A development tools shop? A consumer-electronics company? A services vendor? An advertising company?

Microsoft CEO Steve Ballmer would no doubt answer all of the above, in spite of his recent proclamation that, "'Brand Microsoft' should be seen as a software competence company."

Head in the Sand
Even with close to 80,000 employees, though, how can Microsoft possibly do a stellar job addressing its myriad competitors in specialized markets -- ranging from Red Hat and Nintendo to Google and Apple? Even IBM, the company to which Microsoft execs traditionally point when asked who is Microsoft's No.1 competitor, is dabbling in far fewer markets than Microsoft.

It's the huge investments in consumer markets Microsoft has made that I'm puzzling over the most. Microsoft execs have done their darndest to justify Microsoft's increasing focus on gaming, consumer electronics, IPTV and other home-entertainment arenas by claiming that consumer technologies are the source of most technological innovation these days.

Here's what Chief Software Architect Ray Ozzie told attendees at Microsoft's annual financial analyst meeting in late July:

"Something has happened ... over the period of time that I've been in this industry: Technological innovations first hit within the corporate data center, and worked their way outward. Nowadays, the most exciting things are happening in consumer electronics, and the technology innovations really find their way into IT, as opposed to the other way around. And I think IBM in general, or any IT company that lacks that consumer component, is going to be disadvantaged from the perspective of IT."

I don't buy this line of reasoning. I think an equally strong case could be made for Microsoft sticking to its knitting, but that doesn't equate to sticking its corporate head in the sand, either.

Two Steps Behind
Instead of looking to build its own social networking platform with Windows Live Spaces or investing hundreds of millions in Facebook, why not look at how to best add social networking functionality to Windows, Office, Windows Live and so on? (Even if the real answer is antitrust fears.) Instead of building an iPod competitor from scratch, why not focus on writing software that would power offerings from Creative or other hardware partners that have more consumer-electronics know-how?

Microsoft isn't good at being hip or cutting-edge. Those qualities may be mostly irrelevant in the business and software development worlds, but they aren't in the consumer space. No matter how much outside talent it brings in to build up its consumer know-how, Microsoft is going to be two steps behind the leaders in these realms for the foreseeable future.

From my point of view, Microsoft needs more LINQ and less Soapbox. Do you agree?

About the Author

Mary Jo Foley is editor of the ZDNet "All About Microsoft" blog and has been covering Microsoft for about two decades. She has a new book out, Microsoft 2.0 (John Wiley & Sons, May 2008), about what's next for Microsoft in the post-Gates era.

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Reader Comments:

Mon, Dec 10, 2007 Anonymous NC

"Is MS trying to do too much?" Great question. Is Google? What about IBM? HP? Is Apple? Or any other company.

Time will tell. There is a lot of change happening in the computer industry. Sitting and resting on your laurels just isn't going to cut it.

Microsoft got where they are because they have offered the standard platform for software development and delivery. (Standards are what the most people use, not what some group of "experts" claim they are.)

The software industry requires a standard platform. IMHO, this is a natural monopoly. It just costs too much to develop cross-platform. Some evidence:

* IBM pre-PC. ('nuff said, still true in mainframe market.)
* IBM PC
* MS beats out IBM to be the PC standard, because IBM's OS/2 was too much change from the standard, too fast.
* Apple would have died a long time ago, except for MS-Office for the Mac. MS-Office is a vital part of the standard platform. Having it on the Mac provided interoperability with the standard platform. (There was a time when MS made more money from software sales on the Mac than anyone else.)
* Java got where it is, because it is a platform that can run on the standard.
* Google is being touted as the next great silver bullet, because it is percieved that they are building an alternative platform.
* Apple iPod/iTunes would have been nothing, if they didn't work with the standard.
* Apple Macs only started to grow their market share when users could actually RUN the standard on their Macs. (e.g., Macs sales are up because they run Windows. The irony kills me. Gates must be laughing its head off.)
* Vista is struggling because, like OS/2 before it, it tried to push change too far, too fast. A lesson MS has learned.

I didn't address it here, but the standard is far more than just Microsoft, Windows, and Office. It includes all kinds of hardware vendors, networks, wiring in buildings, and even UNIX servers.

The summary is that the war is for who will control the standard platform.

Microsoft hit the nail on the head when it started touting integration and interoperability. And no one does that better, with more partners, or with more openness than does Microsoft. How many companies make IBM PC compatibles? How many standards are involved to make that possible?

And which alternative platform is in vogue this week? Let's see. Is it Ruby on Rails? Google's new phone? Apple's latest flashy, but over priced devices?

The alternatives are good, because they are free to invent new things. If you aren't part of the standard, who are going to care if you screw it up? Microsoft goes that one step further. They take inventions (their own or others) and move the entire standard platform forward. No one else can do that.

Fri, Nov 9, 2007 Jared Spurbeck Georgia

From the point of view of someone who wants Microsoft to make money by selling good products (i.e. Microsoft shareholders), it makes no sense what they're doing.

Microsoft, however, has never competed on merit in its core markets. Instead, it has competed by leveraging its monopoly, and using any means necessary to destroy potential competitors.

Company leaders must realize that the PC operating system market is no longer as relevant as it once was, and that it will become more irrelevant as time goes on. They're scared by Google especially, the founders of which have built a company rivaling Microsoft on top of its own OS. Because they realize that Google is, in essence, the next Microsoft -- just as Microsoft picked up where IBM left off -- they're trying their darndest to start up in any new field they can, not with the intent of making money but to try to create a new monopoly.

The problem is, Microsoft's not so good at competing on merit. Hence, the billions of dollars thrown into sinkholes.

Tue, Nov 6, 2007 David Turnbull Anonymous

Not to be mean but your forgetting about playsforsure. MSFT already tried to let others build devices. Every Playsforsure company though is losing money or are barely breaking even, compared to the literally billions Apple Has made with itunes. MSFT Since the very begining have only copied other's peoples work, they rarely innovate a new and exciting way. To be fair Apple rarely has unique Innovations themselves, Nintendo rarely have unique innovations.

What they do though is change perspective and are willing to try something new breaking with old ways. The Iphone is far from the first touch screen smart phone. but it is the first with a simple usable interface. The Wii isn't much more powerful than a 6 year old computer, but it has a totally new controller. that integrates into the games very well. It's not just an addon.

MSFT routinely fails to impress on the total package. while the individual features are cool the whole package is lacking. Vista is a prime example, the underlying tech is awesome, but the whole setup is lacking polish. Sadly it is something that won't change until after Gates and ballmer are long gone.

Fri, Oct 26, 2007 Marvin Omaha

I totally agree.
Zune-meh
Live search-lol, when I was at microsoft their employees used google about 4 to 1.
Hardware virtualization-they are about 3-4 years behind VMWare and loosing ground not gaining.
While I understand their drive, what doesn't grow dies, and they have reached saturation in most markets they are in rather then inventing from scratch they might just consider investing in 4 or 5 up and comers then when one of them busts out, they backed the right horse and are in at the ground level.

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