For Microsoft, 2006 Ends as a Sprint to the Finish Line

By Peter Galli  |  Posted 2006-12-21

For Microsoft, 2006 Ends as a Sprint to the Finish Line

For Microsoft, 2006 may have started off as a casual walk in the park, but it ended as a sprint to the finish line.

Over the year the company faced product delays and the resultant unhappy partner and developer ecosystems, as well as a change in leadership at the very top, with Bill Gates announcing his intention to spend more time working at his charitable foundation.

Is Microsoft ready for Gates transition? Click here to read more.

Jim Allchin, who has led Windows product development for the past 15 years, will retire as soon as Windows Vista ships to consumers, with Steven Sinofsky, who headed the Office team, given broad responsibility for planning future versions of Windows.

The software maker also made some half-hearted attempts to be clearer about its software-as-a-service vision, which is being led by Ray Ozzie, Gates replacement as chief software architect.

But Ozzie has been laying low for the past few months, with rumors and speculation about the future of that vision taking center stage while he and other Microsoft executives remain strangely quiet on that front.

Read here about whether Windows and open source can learn to play nice.

But, on the positive side, the company overcame potential issues with European competition law to get the green light to ship Vista in Europe at the same time as everywhere else.

The Redmond, Wash., software company has also penned some significant deals, particularly with regard to working alongside competitors on product interoperability, as well as releasing Vista, Office 2007 and Exchange Server 2007 to its business customers with volume licenses.

Rob Enderle, principal analyst at the Enderle Group, says the most notable Microsoft milestone in 2006 was the deal it struck with Novell around interoperability and patent protection.

"By visibly changing tactics, Microsoft caught the open-source software crowd off guard, while enhancing their own image in the process," he told eWEEK.

Click here to read about Microsoft handing out subscription certificates for SUSE Linux.

Another notable milestone of the past year was getting Vista released to manufacturing. The product appeared "badly stuck midyear, and each release candidate seemed months away from being ready," Enderle said. "Then the RTM version came out stable and in good shape for market."

The effort to take a product that was "on life support" and turn it into something that was actually ready for market "almost seems super-human given how far the product came in the last three months," he said.

Michael Cherry, the lead analyst for Microsoft at research firm Directions On Microsoft, agrees that the companys most notable achievement in 2006 was the shipping of new versions of its flagship Windows and Office products.

"It has been some time since the latest update, depending of course, on how you define Windows XP Service Pack 2. Vista also has some interesting features, like User Account Control and BitLocker Drive Encryption," he told eWEEK.

That being said, Vista was also one of Microsofts biggest failures for the year, according to Enderle—because it reminded hardware manufacturers "just how dependent they were on Microsoft and started them talking about finding alternatives to create the same dynamic they created with AMD [Advanced Micro Devices] to correct a similar problem with Intel."

Next Page: Microsofts poor image.

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Another problem for Microsoft, according to Enderle: its poor image. Companies and individuals still do not trust the company, he said. And without its market influence, products like Zune "that probably should have never been funded, because they are counter-strategic to a tools company, actually reach the market," he said.

For his part, Cherry is concerned with Microsofts inability to clearly articulate key messages—for example, its explanation of its agreement with Novell, which he finds "confusing," despite the positive findings of a survey Microsoft and Novell sponsored about customers perceptions of the deal.

Read here about why technology decision makers are upbeat about the deal.

"There has also been a lack of clear explanation about what Office and Windows Live really are, and which pieces constitute really new and revolutionary approaches and new services versus a repackaging of MSN properties, such as Passport," he said.

The company has also not been clear enough about when products would be completed and what they would include.

Its marketing themes such as "People Ready" are "too generic—who wouldnt want to empower their employees? But how Vista and Office specifically do this better than, say, XP SP2 and Office 2003 is never documented. It is as if you have to have faith your employees will be more productive if you trust Microsoft and use all of its products," Cherry said.

But, on balance, both analysts say 2006 ended on a high note for Microsoft as it got Vista, Office 2007 and Exchange 2007 out of the door—at least to volume business customers; the consumer launch is Jan. 30, 2007.

The company also made progress on some ongoing efforts, such as security, which Cherry feels improved substantially in 2006, with better availability of information and an improved delivery of patches through the security response center.

To read about the "biggest launch Microsoft has ever done," click here.

However, the performance of some of Microsofts strongest competitors, Apple and Google, "left them in the dust, and they did nothing material to address their long-term inability to do demand generation marketing," Enderle said.

There were also several shifts and organizational changes during the year, not all of which were good, he said.

The organizational changes made over the year seemed to address the operational problems the company was having, and aligning product groups around common interests made a great deal of sense.

Also, while Microsoft had put together "one of the best marketing teams on Vista that anyone can remember, they appear to have under-funded the effort, which could be a problem," Enderle said, adding that there were a lot of staff changes in people-facing positions, which are critical to maintaining relationships during difficult times.

"This group should be relatively stable and coordinated, and they dont seem to be either," he said.

Cherry also expressed some concern about Microsofts strategy of moving people around, thinking that will create a change.

"There is no question that Steven Sinofsky is talented, but moving him across to Windows may not have the effect that everyone thinks it will," he said. "After all, Brian Valentine [who left the company for an executive position at] was brought in to get Windows back on track once before."

Click here to read more about Microsofts restructuring of its Windows core operating system division.

Also, while it is "great to have unlimited faith in the power of software, there are some process and logistical issues that have to be fixed," Cherry said. "Merely calling a premature beta or release candidate a technology preview doesnt appear to speed up the development process or improve the quality."

Microsoft made some strange decisions over the year, according to Enderle, including using the Xbox model to create Zune. "It seems strange that Microsoft is changing to look more like Apple than the other way around. Microsoft is best when it is the standard across many vendors; it is weakest when it is the vendor itself," he said.

With regard to the companys focus on the software-as-a-service vision, which is being led by Ozzie, Enderle said Ozzie was brought in to fix collaboration and the company appears to be making slow progress in that regard.

"He [Ozzie] is kind of shy and not good in front of audiences, which may explain his invisibility. On the other hand he is an outsider, and they, historically, havent done particularly well in Microsoft, although the same could be said of any large and complex company," he said.

According to Cherry, Microsoft spent a lot of time over the year getting late products out the door, and getting itself in position to deliver its Office and Windows Live services. But, while the Live pieces made public so far "could be interesting … they are confusing," he said.

Take Office Live. It has services small businesses may find interesting, but its very name has some people expecting to find Web-hosted versions of Word, Excel and PowerPoint, Cherry said.

Read here about why Windows Live is Microsofts top priority.

"And the services really only work with the latest version of Microsofts browser—it seems to me that a company who thinks they can offer Web-based services to only the latest version of Internet Explorer doesnt get the whole premise of Web-based services," he said. "If you are really serious about this, then you would support all browsers currently in use, or at least Firefox and Safari."

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