Just as there are theories about how the Earth will eventually meet its end, so there are theories about what will happen to Microsoft someday. Not that the death of a software company—even the software company—is very significant compared with the loss of ones planet, but whatever happens to Microsoft could actually happen in our lifetimes. Almost by definition, the end of the world will not.
I mention this upfront to demonstrate that there are worse things than a world without Microsoft. Some would say there are few better things than a Microsoft-free environment. I wont get into that discussion today, instead concentrating on the challenges Microsoft faces and how they play out over the long term.
Challenges from below—I used to think the big threat to Microsofts dominance would come from an easier-to-use PC that would change everything. There was a time when it looked as though a game machine might eventually grow into a general-purpose home computer and, eventually, into a general-use desktop.
There is still a possibility, even a probability, this will happen, but its not going to happen very soon. But I remain unconvinced Windows will ever be the operating system that makes personal computers both ubiquitous and loved by their users, and that means there must be something else that accomplishes the goal. Maybe it will come from Microsoft, but maybe not.
The differences between hardware platforms (game boxes vs. PCs vs. media centers vs. whatever) have become increasingly slight and will disappear over time. Home media servers will appear, and real broadband-to-the-home (100M bps and up) will change how both information and applications are delivered. These things also threaten Microsofts dominance, but this is a 10-year horizon, and much can happen.
It should also be remembered that Microsoft is in some ways a stronger consumer products company than it is an enterprise player. That could create two Microsofts at some point in the future, one for each market.
Customer challenges—The Microsoft packaged software business model is broken, and Redmonds attempts to fix it thus far havent worked. Peter Gallis story about the woes faced by the Software Assurance program point out the difficulty Microsoft is facing in transitioning customers from individual software purchases to ongoing subscriptions.
This is something Microsoft needs to make happen, and customers are predictably loath to sign up for. Microsoft needs predictable, ongoing revenue from enterprise customers. These customers like the pay-as-you-go model and want to hold onto it. They see subscriptions as paying for software in advance whether or not they actually end up using it.
So Microsoft foisted SA onto a mostly unwilling body of enterprise customers and then, in the opinion of many, underdelivered. A bad first impression is hard to erase, and leaving a sour taste in the mouths of software subscribers is a major failure. In short: Microsoft must find a way to generate predictable, ongoing revenue from enterprise customers. If not, serious troubles follow in a five-year horizon.
The Globalization Threat (aka The Linux Threat)—This summer I have been taking a wildland firefighting class. One of the things Ive learned is that an easy way to be burned-over (killed) is to lose your anchor point and let the fire come around and get you from the side or behind.
I am telling this story because Microsoft is under a similar threat—with Linux and open source playing the role of fire.
In firefighting, you begin building the fire control line (a wide line devoid of fuel, often cleared by a bulldozer) at a road or other fixed point the fire will have trouble crossing. The anchor point provides a fixed end to where the fire can go—at least thats how its supposed to work.
But if the fire line isnt properly anchored, all the bulldozer lines in the world wont keep the blaze from sliding around the end of the line and hooking back to get you. Linux could do that to Microsoft, simply by going around Microsofts “anchor point” in the U.S. and European markets.
In those places, Linux is a self-limiting phenomenon that Microsoft can hold indefinitely at bay. But in the rest of the world, Microsoft is relatively weak and the allure of free software is strong. Heck, most software in developing nations isnt properly licensed and paid for anyway.
If Linux and other open-source products become popularized in developing nations, I predict they will eventually improve enough and create a big enough market to threaten Microsoft in the developed world.
There is a very real prospect that the rise of “free” software outside the United States will eventually change the world market for operating systems and commodity applications. This wont drive Microsoft out of the market, but it will create significant pricing pressure on the companys cash cows.
Like the other two scenarios, this wont threaten Microsoft immediately, but the notion that software developed atop Linux in places like India, Thailand and China could someday end up on U.S. desktops shouldnt be taken lightly if Microsoft is planning a long, happy life for itself.
Of course, all this is speculation, hopefully informed speculation, but nevertheless entirely speculative. For one thing, Microsoft could afford to hemorrhage money for many years before real trouble would set in. Second, Microsoft could use this money>—as it has in the past>—to make acquisitions and buy its way out of trouble. Third, Microsoft isnt above playing hardball when it has to.
There are other threats to Microsoft, of course, but there are the long-term issues I am watching today, each of which is probably worthy of a future column of its own.