Q&A: Will Yahoo Deal Force Microsoft To Abandon 'Windows Everywhere'?

Six days later, tremors are still being felt from Microsoft's $44.6 billion bid to acquire Yahoo. And with good reason. The deal would certainly change the way Microsoft moves forward with its perpetual "Windows Everywhere" strategy, because it would force the company to deal with a raft of Web-based, open source technologies. After a decade of trying to discredit open source, Redmond might find itself in the ironic position of having to give equal weight to Windows and open source.

I spoke with Dana Gardner, president and principal analyst of Gilford, N.H.-based Interarbor Solutions Inc. in about the proposed deal. He had some interesting things to say.

Redmondmag.com: How does Microsoft reconcile its undying commitment to Windows with the acquisition of a major company that has a strong open source-oriented development culture?
Gardner: Not sure they can. If this deal goes through, Microsoft becomes the owner of one of the largest distributed open source data center complexes in the world. This is unbelievable irony. [What] they are saying to large enterprises is, "Our way to win on the Web is to go open source and we liked it so much we bought the company." They instantly become an open source company. No two ways about it. For them to try and shoehorn the Yahoo data center infrastructure into a Windows environment is the equivalent of swapping the Atlantic and Pacific oceans.

What's the potential impact of Zimbra's open source collaboration tools as part of this deal?
The Zimbra acquisition [by Yahoo last September] shows the importance of rich client vs. fat client approaches to business services such as communications, e-mail and collaboration. Yahoo, being a Web company, is interested in reaching out toward the rich clients with AJAX enablement. Microsoft is coming from the fat client side but moving toward the rich client side with Silverlight and other initiatives. Zimbra sits in the middle between the Yahoo heritage and the Microsoft heritage. It could be an interesting way for Microsoft to enter more rich application activities.

How do you see their corporate cultures meshing?
Yahoo is very much a Silicon Valley company that is of, for and by the Web. Microsoft engineering is very centralized up there in Redmond, 850 miles away. Microsoft seems to think it will get a lot of engineering talent form this, but as we have seen with other big acquisitions, the talent has walked. So there is significant risk. Anyway, I think Microsoft is more buying the audience than it is the employees. Remember that Yahoo is much more a media company and Microsoft is an engineering and software company, which is where their corporate cultures are most at odds. I guess you need to be both these days to succeed. But one monetizes around advertising and media and the other around licensing software. It is more a case of a dissonance of business models than it is one of culture.

Google Continues Toward the Cloud
With Microsoft and Yahoo grabbing all the headlines this week with its proposed merger, Google today gave the would-be combined company something to think about in terms of online applications. The company announced Google Apps Team Edition, which officials say will allow users to insert a hosted applications service right smack in the middle of an enterprise.

The offering is meant to tempt corporate users away from the dark (their comfortable and traditional Microsoft-based desktop applications) and toward the light (the sort of free Web-based applications Google and others are promoting).

The point here is Google is pushing the idea (and hopefully the popularity) of cloud computing -- an idea that Microsoft says it's grabbed onto but has been slow to actually execute. The proposed Yahoo acquisition, of course, would help Microsoft get there faster. But with today's announcement, Google made clear that it isn't exactly waiting around for Jerry Yang to answer Steve Ballmer about whether he wants to play on the Redmond team.

The new Team Edition essentially is a service that allows corporate users to work more easily with Google Apps. It's an integrated suite of products made up of the company's Docs, Calendar and Talk applications. Company officials said that just about any user can open an account and use the new suite to access shared documents over the Internet.

Big Blue Sheds Some Light on Cognos Investment
Last November, when IBM plunked down $5 billion for Cognos, Big Blue officials said it did so because the Ottawa-based company's technology was a good fit with its overarching Information on Demand strategy.

Well, yesterday in New York, Steve Mills, IBM's senior vice president and group executive of the Software Group, laid out more precisely how Cognos technologies would contribute.

First was a series of 10 new IBM-Cognos solutions for vertical markets, including some IBM favorites like banking and a number of manufacturing industries. Second was the roll-out of six other offerings that include "pre-integrated" IBM-Cognos-flavored products that can help business managers in IT shops use business intelligence more smartly. The goal of all of this is to provide the ability to deliver the right information to people when they need it and, to boot, give them the sort of business insights that result in a competitive advantage.

OK, sounds pretty good (if not a little dry) -- but is this going to be worth the $5 billion investment? Mills thinks so. He said the Cognos products all fit neatly into the "business optimization" IT market, which he expects to be worth about $117 billion in 2008. This market takes in products that deal with managing and presenting information as opposed to automating business processes.

The Cognos products will be used as the glue that ties together IBM's entire portfolio of business applications and tools, a core advantage of its Information on Demand strategy launched almost two years ago to the day.

Mailbag: Thoughts on Microsoft's Yahoo Play, More
Here are some more of your opinions -- mostly negative -- on Microsoft's $44 billion bid for Yahoo:

I must be missing something. I cannot see the value in Yahoo for Microsoft, much less borrowing the money to buy it. Couldn't MS create it's own Yahoo equivalent in-house for much less?
-George

In my opinion, many of Yahoo's customers will move to other services if Microsoft buys Yahoo. In the end, Microsoft would have payed way too much for the company.

Take Zimbra, for example. How will Microsoft integrate Zimbra customers into Exchange? Many of them ran from Exchange to Zimbra.
-Demola

What do I think of Microsoft's bid to take over Yahoo? The only surprise here is how generous the offer is. I think the bid amount is about $40 billion too much. I just don't see the value there. Microsoft could have hired some outside talent to develop a new system to compete with Google for a fraction of that. That bid seems to indicate some urgency on Microsoft's part. It apparently needs to take Google down ASAP and doesn't care what it costs. That is the real issue here.

I don't think Microsoft cares about the services that Google offers or competing in the search engine/advertizing business. Its concerns are the size and growth rate of the competition and the competition's profit margin. As long as Google continues to grow and have great success doing what Microsoft has failed to do, which is innovate, Microsoft will see it as a threat to its dominance in the software and services market. That means that Microsoft must squash Google ASAP.

Frankly, I don't give a rat's tail about Microsoft taking over Yahoo and I don't think Micro-hoo will be able to close the gap with Google. We're at the point, finally, where we don't depend on any single software giant.
-Gary

It seems that MS is up to its old tricks of trying to buy innovation, rather than cultivate it.
-Steven

The Microsoft-Yahoo deal is NOT the same as two petroleum companies merging. It is a whole different beast. Microsoft runs on the Windows platform which has proven inadequate to run big Internet companies. There is not ONE big Internet company -- and I mean BIG, like Google, Yahoo, Amazon, eBay and so on -- that runs on Windows besides Microsoft. Microsoft's software platform has been a disaster supporting their search engine, e-mail and other free business services. They are being beaten by Google and Yahoo on that, who run on open source software which has been shown to be much more efficient then Windows servers.

Now here comes the big issue: Will Microsoft move Yahoo to Windows? If so, they will go broke, because this is just what has not worked well. If they do not, they will be writing up the Windows platform obituary, because when people realize that Microsoft itself can run on Linux and does not need Windows, they will follow through. To my knowledge, the simple fact that Microsoft is bidding to buy Yahoo means that Microsoft has thrown in the towel on the OS platform, and that the Windows platform is a thing of the past.
-Marcelo

Bruce shares his take on the ongoing chip wars, which got a little more complicated after Intel's announcement of its new Tukwila chip yesterday:

What I think got lost in all of the chip wars is the fact that availability depends a lot more on the OS than the chips. I can't remember the last time a server crashed due to a chip hardware failure. But I can easily remember the last time an OS got toasted by overuse (a few days ago). If I had a single-chip, single-box system that I needed up and running and not die, it would be Linux, hands down. In other words, take out the system redundancy and make it totally dependent on the OS to keep on running, and then throw a whole bunch of crap at it and see if the OS dies.

Here's my take: I bet any version of Windows craps out before Linux. I see it here all the time -- same app, different OS, same story. I'm not talking about bots taking it down, or anything like that. What I'm talking about is a bunch of developers beating on a server, working overtime and over-taxing a dev box which are often single-chip things. Am I just lucky in picking apps that crash Windows or am I seeing the same thing everyone else does?
-Bruce

Lafe reported yesterday on yet another new botnet detected by BitDefender researchers, and asked readers what they do to protect their systems. For one reader, it's simple:

Get a mac. It's true. That is what I did.
-Anonymous

Finally, Doug recently checked out Microsoft's "HEROES happen {here}" comic strip -- and was stumped. Turns out he's not the only one:

Am I not laughing because I too do not know what an "etagere" is? Would Dennis Miller get it? I doubt it. I'll take www.routergod.com (the IT version of the Onion) any day.
-John

Got an opinion on anything we've covered here? We want to hear it! Leave a comment below or send an e-mail to escannell@redmondmag.com.

About the Author

Ed Scannell is the editor of Redmond magazine.

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