Archive for July 2009
Microsoft announced their quarter and year end financial numbers today (reported in detail in many other places). This is the first year ever that MS has reported a year over year decline. It’s easy to blame the economy for these numbers. Microsoft’s CFO compared them to how the economy was doing in general and how the IT sector was doing in particular; claiming that MS dropped by about the same amount as the economy and IT sector. However this strongly contrasts to the recent good earning reported by Apple and Google. In fact Apple claims they could have grown even more if they could just manufacture more iPhone GS’s. All this in spite of Microsoft’s monopoly on PC operating systems and office productivity software. These earnings also showed how badly MS’s on-line business is doing. As Google (only an on-line business) reported huge earnings gains and profits, MS reported their on-line business brought in under 1 billion in revenue, but lost almost 1 billion dollar last year. So for every dollar the on-line business brings in, MS spends 2 supporting it.
MS started as a small software company producing Basic interpreters for hardware manufacturers like Apple. Then they got the contract to develop the operating system for the original IBM PC (basically a CPM clone). MS was then able to re-invest the money from this and take over the office productivity space with Excel, Word, Powerpoint and Access. The problem is that since then they haven’t been able to produce another successful product. Basically they just keep making new versions of Windows and Office and milking these cash cows. They take all this money and throw it at other ventures like Zune, Bing, XBox, Dynamics, and such; but, keep losing huge amounts of money on all of these. This was all good fun when revenues from Windows and Office kept growing at phenomenal rates year after year. But what now?
It appears that sales of Windows and Office have peaked and are starting to decline. MS has no new business to replace them. Competitors smell the weakness and are attacking. Witness Google’s ChromeOS and online applications business. Apple is becoming more aggressive and taking away the high end of the market on one side with MacBooks and the low end on the other end with iPhones and iPods. It looks like the hardware companies are getting nervous and can’t afford to be afraid of MS anymore. More and more are offering Linux based computers and saving users the MS operating system tax.
Anyway, don’t take Microsoft’s dismal financial results as an indicator of the health of the high tech industry. Use more innovative and leading companies like Apple and Google to judge this health. We are basically seeing Microsoft undergo the same transformation IBM went through from a products company to a services company. Microsoft products will stay in use for many years to come and Microsoft can make quite a bit of money offering consulting services to these products. But the days of Microsoft compounding huge growth off product sales are gone.
Google announced they are going to release their own PC operating system called the ChromeOS. Basically the Chrome browser with a Linux kernel. They haven’t really said what else it will include. Many people have heralded this as a beginning of the end for Microsoft and their Windows monopoly. But I think the beginning of the end was MS’s failure to capture any meaningful piece of the mobile smart phone market. This has basically gone to Apple, Nokia and RIM. Google Android is a small but growing competitor as well. Basically small mobile devices are where the action is these days.
With Vista and Windows 7 being such large resource hogs, Google (and others) see a huge opportunity for small low cost notebook computers that they are calling netbooks. Basically notebooks that are under $500, where it doesn’t make sense to add another $100 for the price of Windows. Another development is that there is about to be a flood of even cheaper ARM processor based notebooks. These ARM notebooks will probably shave another $200 off the price. Windows only runs on Intel and Intel clone processors. It doesn’t run on ARM, nor can Windows easily be made to run on ARM. There is a huge opportunity here.
Microsoft is now feeling squeezed between Apple which owns the higher end of the market with easy to use and stylish Mac notebooks, and the low end soon to be dominated by mobile phone OS and Linux based OS notebooks. As Macs become cheaper and the low end notebooks and smart phones become more powerful, MS is being very strongly squeezed.
Google hopes to succeed where Linux has failed by offering a full suite of applications to go with the OS, namely all the Google web based productivity applications which include all the usual office type things along with some quite innovative new offerings.
Meanwhile what does that mean to us as business application developers? We are now faced with a plethora of platforms to support. Its not just Windows on Intel/AMD anymore. The only way to survive in this brave new world will be to write truely portable platform neutral standards based applications. Writing Windows desktop applications or fake web based applications based on ActiveX, Java Applets, Silverlight or Flash will no longer cut it. With the forthcoming new HTML 5 standard we have the opportunity to write truly platform independent applications that will run in any decent browser on any hardware/operating system. If we can be successful here and all these pieces keep falling into place, there is a really great opportunity to really provide much higher customer value.
Customers will be able to run their business applications on any variety of low cost devices with very high mobility (always connected via the cell phone network), better screens that current smart phones and batteries that will last days between charging. Ease of use will become much better as everyone standardizes on the HTML 5 standards and best practices. TCO will really become lower. You just need one of these low cost netbooks and the URL to connect to your application. No more workstation setups or program installations. Everyone will be up and running and productive very quickly. Definitely things to look forwards to.