Thursday, June 12, 2008

Microsoft--Weakened Core?

Is Microsoft trying to enter into new areas with its core businesses (cash cows) strong or weak? There is a general consensus that Microsoft can milk its cash cows (Windows and Office) for at least a few years, while it positions itself in the post-Gates post-desktop network era. This core assumption seems to be somewhat shattered by a report about Microsoft Vista.
BusinessWeek reported that:
According to a Bernstein Web survey of 372 information technology professionals fielded in May, companies expect just 26% of their PCs to be running Vista by the beginning of 2011, down from an estimate of nearly 68% of computers by respondents to a similar survey a year ago....
Companies expect to install Vista on only about 10% of the PCs they already own, compared with estimates last year that they'd be able to do so on 27% of their machines.
The stock performance is showing a downward trend in 2008 just as Gates is leaving.

Most companies that tried to create radically different business models that bear no core connections to historical core competencies have failed. Microsoft seems to be in that position now. Sure, there are hopes and high expectations for the next version of Windows simply called Windows 7 for now (after a rather ambitious label, Vista!) with cool touch interfaces. But, the core constituencies for Microsoft are the enterprise customers and they seem to be--for the first time--not embracing Windows as enthusiastically as in the past. Is this an early warning signal of major shift underway for Microsoft's performance potential?
As Ballmer takes over from Gates, Microsoft needs a compelling and clear strategy. Here's my unsolicited advice on priorities.

1. Focus on Enterprises: All Sizes, All Sectors and All Continents. Vista is a major lesson and use that experience to reposition Windows for the enterprise and co-create the next generation OS with leading enterprises.
2. Forget Zune but focus on Xbox. use xbox as the platform to encourage the next-gen consumers. Use search and search-related advertising using xBox. It's futile to take on Google (even with Yahoo) as it will only siphon valuable resources away from other critical priorities.
3. Make Windows Mobile a Leader: Apple, RIM, and Google are formidable but Microsoft has established relationships and demonstrated interoperability before.
4. Experiment Selectively: Explore specialized, high-value extensions such as Microsoft Automotive (e.g., Sync) and HealthVault.
5. Research on Next-gen Applications (and user experience). Search and search-related advertising is today's battleground. What's tomorrow's opportunity in the global network-era where software will be at the core of value creation?

IBM wisely moved away from markets where it lost its historical prominence to seek a leadership position in an emerging market arena (services). What Microsoft should do is to stake a position in tomorrow's stream of value-creation than be caught up in yesterday's and today's battles. Easier said than done. But, that's what differentiates great leaders from mere mortals like me!

This video reinforces my recommendations as well!!

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