Online Operating Systems Are the Key
Microsoft needs to focus its attention, first and foremost, on the online operating system space. Google announced Chrome OS recently in a bid to compete with Microsoft Windows in netbooks. But anyone who believes Google will stop there is kidding himself. Google will continue its push in the operating system market, doing its best to attract users on any computer. Google doesn't just want to get into the OS market, it believes that the future of that space is on the Web and it wants gain control of that space before Microsoft can effectively counter this move.
Microsoft seems to understand that. It also announced Gazelle, which, at this point, is a model for developing a browser-based operating system that can manage system resources. That sounds more powerful than Chrome. But will it come to fruition? At this point, it's anyone's guess. But it's hard to believe that Microsoft would allow Google's domination to continue unabated as it delivers an online OS.
Another core of Microsoft's business is Microsoft Office. It appeals to both the consumer and the enterprise. It's also one of the top revenue drivers for Microsoft. Realizing that, Microsoft should be concerned that Google and a smaller company, Zoho, are attracting customers who don't have a real need for Office. They can simply go online, type up a simple document, create a basic spreadsheet or develop a simple presentation in no time. It's convenient. And as long as Google follows through with its promise to make Google Docs easily accessible through Chrome OS, it could spell trouble for Microsoft. Synergy, which worked in Microsoft's favor, is now working against it.
And that's precisely why Microsoft needs to focus its online efforts on software. Although search has helped Google stay dominant online and Microsoft has a new search engine, Bing, search is not Microsoft's core business-software is. As long as Microsoft allows Google to take the lead online, it will have an even more difficult time catching up. That could mean a severe drop in revenue and profitability.
It should be noted that that impact is many years down the road. For the foreseeable future, Microsoft will still hold the high ground, thanks to the enterprise need for on-premises software to handle powerful applications. But today is the beginning of a new OS war on a new frontier. Google is laying the groundwork for what could become a real Windows challenger. If Microsoft doesn't respond now, it could find itself clinging to Windows on the desktop as both consumers and the enterprise move online.
So, while search is a concern in the short term, Microsoft needs to look at its core business. It needs to block Google. And it needs to ensure that its ability to control software won't be put into jeopardy by focusing too much of its attention on Bing.