Microsoft’s Precarious Moment

The press is full of stories about Microsoft’s continually slipping ship date for Vista. Some will even have you believe that the farther the date slips the greater the chance for Apple to pick up serious market share. One greets that thinking with a fair amount of skepticism. Why is the most recent delay in the Vista ship date so magical when the other ones meant very little to Windows market share?

The notion that the computing masses are slavering for a new version of Windows is, frankly, ludicrous. Yes, people say they want better, safer computers. Still, as Volvo has learned over the years what people say they want and what they actually buy are two different things. In short, Vista is just another release that will be well advertised and promoted by Microsoft whenever it happens to occur. Vista will then be bundled on new computers and will slowly achieve market dominance. You can predict, easily, how fast Vista will rule the computing world by watching the number of PC’s sold.

More interesting is what happens after Vista ships, because what happens after Vista is Microsoft’s chance to turn themselves from a famously profitable company into a second rate player. In other words, it is Microsoft’s big chance to perform an Applelization.

What Microsoft will be betting the future on, according to Bill Gates, is the internet. Bill envisions a world of software rentals and internet based services. It boils down to, mostly, a thin client kind of computing ecosystem. Your apps, your storage, your entire computing experience will take place elsewhere and be transmitted to you via the internet.

Before discussing the drawbacks of this system it is necessary to note that A) Microsoft is being unusually forward thinking and B) the notion makes a lot of sense when viewed logically. Microsoft is thinking ahead because they are taking the threats from Google seriously. Surely, Writely is no competition for Word but, once you buy into the subscription model, the threat of a web based word processor seems very real.

The second part of the picture, the part that says centrally served computing will be a boon to consumers, corporations and everyone else also makes a lot of sense. The average computer user won’t have to muck with their computer near as much with the apps centrally served. Applications will always be the latest version and fully patched, while people will rejoice in the knowledge that they can now buy cheaper thin clients instead of full-fledged machines.

So, Microsoft is being proactive, the only question is will the strategy succeed and keep Microsoft on top for a few more decades? Those skeptical of the initiative are likely on the right side of the issue. While thin clients make a lot of sense, consumers and computer makers just don’t like the concept. When Steve Jobs first returned to Apple, he walked around with a Styrofoam mockup of an Apple thin client. Today you’ll find no Apple thin clients and the reason is simple: the concept was stillborn. As the thin clients were introduced, computer makers dropped prices to match the low price of thin clients.

At this point, others will sincerely opine that the reason people don’t like the concept is because people simply don’t want their data stored elsewhere. That is giving the average consumer a little too much credit. What people do really care about that one application that can’t comfortably run over the internet. While it is true that 90% of most computer users time is spent running programs that could be easily centrally administered it’s that 10% of the time that is going to be hard sell for Microsoft. For example, most people will be happy word processing via the ‘net but the moment they fire up, say, Photoshop, and the experience is less than snappy they’ll head out and buy a dedicated machine. They won’t realize, or care, that spending several hundred or thousand dollars for something they use thirty minutes a week isn’t the most judicious use of funds, they just know that their current machine isn’t up to the task.

Once someone has made an investment in a machine capable of running programs sans central server the subscription model doesn’t look so inviting. Pay a monthly fee for access to Microsoft Word or a one-time price to use it until it no longer serves the necessary function? Most people will opt to buy once and skip the monthly fee. Though, it must be noted, with the frequency that Apple changes OSes and architectures Mac users would likely come out ahead with the subscription model.

In the end, the move to internet based applications will be a big gamble for Microsoft, but a wager they can’t afford not to make. If they don’t take the jump into web based applications they run the risk that they will be outdone, quickly, by Google or some company no one has even heard of yet. If the concept catches on Microsoft’s advantageous position of being the pre-installed standard is gone. Microsoft, if they don’t make the move, risks coming to the party too late to exert the kind of market dominance they are accustomed to possessing. Once that happens it is a long, but inevitable trip, to the computing museum of oddities. The upside of such a move is huge. Not only will success in this area guarantee continued profits and market visibility it will also free Microsoft from the ball and chain of backwards compatibility every new release of Windows must drag behind it.

The trouble for Microsoft, and the possible upside for either Apple or a provider of internet based applications, is that Microsoft isn’t making the change wholeheartedly. Instead of jumping with both feet into the subscription model they are approaching the model with timidity despite the surety the company projects.

The current plan is to offer programs in both fashions: a subscription based model and the more familiar own and install model. The problem with this will be the disparity of features. Inevitably one version of Word, for example, will offer advantages that the other version lacks. To avoid the appearance of clear superiority of one version over the other and competing with its self Microsoft will be forced to hobble features to keep both versions as equal as possible. Can Apple, Google or anyone else take advantage of Microsoft’s tepid approach to the nascent subscription model? The smart money says no but it is still the biggest chance for a major Microsoft stumble the world has seen since Windows 1.0.