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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