June 05, 2013

5 Shocking (But Not Surprising) Things About Microsoft

The word is that Microsoft is now considering a major restructuring. Shocking? Not really.

Just this past week there was an All Things Digital technology conference in California. It drew some of the biggest names in the industry including Apple, Amazon and Sony . After the conference was over, a full page ad appeared in the Wall Street Journal (News Corp owns both the WSJ and All Things D) congratulating those speakers and the others who participated. But there was something missing.  Something that caught my attention. No Microsoft.

I don’t know what went on behind the scenes of this conference. Maybe Microsoft was involved in some way. Or they couldn’t agree on topics or sponsorship. But the fact is that Microsoft wasn’t there.  Twenty years ago, I don’t believe an event of this size and exposure would be held without Microsoft’s significant involvement. Maybe I’m making too much of this, but it seems like just one of the many things that highlight the diminishing role of Microsoft in the tech world. And it shocks me. But then again, as a customer and partner, a lot of what has happened to Microsoft over this period of time has shocked me too. But not surprised me.  For example…

Shock #1:  The decline of Windows. Windows used to be on every computing device in the world. Today, its share is around 80% and continues to decline with the dramatic fall of PC sales. But even in the declining PC market, both Apple and Google have gained significant momentum. Now, one of every five laptops or PCs sold is running a non-Microsoft operating system and this trend is rising.  The launch of Windows 8 has been a big yawn for both individuals and corporations.  With all of Microsoft’s resources, how did they let Apple and Google get such a foothold into their market?

Shock #2:  Absence from the smartphone market. Microsoft makes software for operating systems.  And yet virtually none of this operating software can be found on the smartphones that most of us use. The most popular smartphone operating system in the world is Google’s Android which is followed by Apple’s iOS, with Microsoft a very distant third. How did a company with so many resources and knowledge miss this trend to such an extent that they’re a virtual non-player in the market?

Shock #3:  Trailing in the tablet market. Microsoft released its Surface tablet at the end of last year. I know about it because I’m in the tech industry. A very few others have heard about this from the company’s marketing campaign where cool looking Eurasians and hipsters are dancing on picnic tables and in office conference rooms with their new productivity device. Otherwise, it’s flopping.  Everyone I know has some sort of tablet – an iPad or Kindle or Galaxy and none of these are running Microsoft software. Research now shows that tablets will outsell all combined PCs by 2015.  Microsoft is hoping these tablets will be using Windows 8.  But not so far.  Another botched opportunity.  Wow.

Shock #4:  Loss of Office market share. It used to be if you wanted office software you bought Microsoft Office.  Now it’s a toss-up.  Many of my clients (particularly the smaller ones) have migrated to Google’s office apps because of their ease and pricing which accomplish 95% of what they want to do.  Even the analyst firm Gartner reported that Google Apps were making “significant inroads” into Microsoft Office’s market share, accounting for up to 50% of the cloud based office productivity market. No one seems to want to host their own email anymore and Gmail continues to rise in popularity over Outlook. Office 2013 is a good product and most corporations, particularly those already heavily invested in a Microsoft infrastructure, will probably stick with it. But not the millions of smaller ones. How did Microsoft lose such a big piece of the Office market?

Shock #5:  A market shift from Internet Explorer.  Back in the day Microsoft crushed Netscape and Internet Explorer owned the market. Now Internet Explorer has lost significant ground.  Today, 10% of web surfers use Google Chrome when they’re online (I’m one of them) and 36% prefer Firefox, Safari and other browsers. What happened that caused so many people to migrate away from Internet Explorer?

None of this is devastating, right? Microsoft continues to generate enormous profits every year and sits on billions in cash. The company has made excellent strategic investments and still very much dominates the operating system, office application and database markets. And even the youngest, hard-core types have respect for the company’s Xbox products which leads the gaming market. Microsoft’s doing fine and will continue to do fine. But let’s agree that the company is not the same Microsoft that it was back in 1995. There’s not the same aura of invincibility. It doesn’t have the same kind of power to lure the best and the brightest out of college like the Googles, Apples and smaller tech companies do today.  Given the company’s power, resources and leadership in so many markets, I find their deteriorating position today to be shocking.  But not surprising.

Why? Many people will give reasons for Microsoft’s relative decline. Their size and corporate bureaucracy. The slowness in adopting the cloud. Their arrogance or stubborn hold on all things that are Windows.  The unrealistic assumption that Microsoft will be able to hold on to the lead in all of these markets. But I think it’s something else.

It’s quality. Microsoft’s product quality has caught up with them.  And this is a lesson for anyone running a business today.

A few years ago people started buying Macs instead of PCs in droves. Why? Sure, Apple products were cooler but the real reason is that they just worked better. My clients were amazed that their laptops and desktops started up fast and rarely encountered those blue screens of death common to so many millions who used Microsoft products over the years.  Microsoft tried to sell Windows CE as the preferred operating system of choice for the smartphone but consumers instead flocked to the iPhone and Droid-run devices. Why? Sure, they were also cooler. But they also weren’t Windows. People were sick of the problems with Windows and the last thing anyone wanted was error messages when trying to make phone calls or check emails from the road.   Once we realized that Apple and Google’s operating systems worked more reliably than Windows we had no problems endorsing the iPhone and then snapping up iPads and tablets too.  And now people are seeing that they can use inexpensive office applications in the cloud and they don’t have to be written by Microsoft to work well.  In fact, many of these applications are working well because they’re not written by Microsoft!

Why have sales of Windows 8 and the Surface tablet disappointed?  Because consumers and corporate buyers who have been customers of Microsoft for so many years and suffered through so many problems with their products do not easily forget.  We remember the problems. We’re tired of them. We want something new.  Something not-Microsoft.  Something that works.  The good news is that because Apple and Google have created products that worked better, Microsoft has learned.  I’d argue that the quality of Microsoft’s products today are as good as their competitors.  But the damage has been done.  There have just been too many years of blue screens, frozen computers, corrupted drivers and visual basic errors.

How is the quality of your products and services?  Are you getting complacent?  Think you own the market just because you don’t see any significant competition right now?  Think you can get away with just doing what’s good enough?  Don’t.  Over the long term, inferior quality will catch up with you.   I think it has with Microsoft.  But they’ve got billions to try and correct this perception.  You don’t.


Text by Forbes

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