Microsoft at the Crossroads
By Judith Hurwitz, CEO
O.K., here is a quiz: take a look at this slogan: “Client….Server….Service….” Quick, what does this mean? Is it a reference to the bygone days of client/server? Is it a new approach to distributed computing? Is it a toaster? In fact, it is Microsoft’s new articulation of its strategy announced at its TechEd conference in June. While at first glance this is a confusing articulation of a strategy, it actually reflects the cross roads that Microsoft is in the midst of navigating. So, here in a nutshell is the three-pronged strategy:
Client. Clearly, Microsoft’s Windows desktop franchise is the engine that has delivered an unparalleled revenue stream for the company for the past several decades. Each new operating system and Office release generates billions. Even if only 50 percent of the installed base upgrade, the magnitude of the revenue stream is staggering. Even if a company chooses to stay with XP rather than upgrading to Vista, the revenue is staggering. But this is a time of enormous upheaval in the client world. Browser and Web 2.0-based productivity applications and the rapid rise of Google have put pressure on the Microsoft desktop franchise.
Obviously, Microsoft has no intention of putting its client environment on life support. Instead, the company is using its Vista launch to reposition the value of the desktop environment as the front-end for business applications. In the emerging world of service-oriented architectures, Microsoft will be positioning the client environment as the container for composite applications. It’s clear that Microsoft’s client strategy is to focus on the developer – both from a development and design perspective. Development has long been a key strength of Microsoft with its Visual Studio platform.
Microsoft’s development arsenal is being extended as Microsoft pushes into virtualization and composite applications. Microsoft executives painted a scenario where a customer uses an Excel spreadsheet as the container for aggregating information and data from a variety of backend systems. Design is a new focus for Microsoft – clearly intended to challenge Adobe’s market position.
Server. While the client-focused part of Microsoft focuses on the developer and the “people” side of computing, the server side of Microsoft focuses on computing infrastructure. Although the two organizations are part of the same company, their focus and perspective on the world are quite different. The server side of Microsoft has evolved significantly over the past ten years. On the server side, Microsoft’s focus is on the enterprise platform through .Net, its SQLServer database platform, and its packaged software offerings. Within the server side of the business, Microsoft positions itself as a platform vendor – along side the likes of IBM, HP, SAP, etc.
Even though we couldn’t identify one central focus of the server side of Microsoft, there are key areas – especially from a service-oriented architecture perspective. For example, communications is a core capability. Unlike some of Microsoft’s competitors there is not a single packaging of its communications and collaboration technologies. Key technologies include Biztalk Server, the process platform, Windows Communications Foundation (Indigo) – the messaging backbone. In addition, Sharepoint Server is becoming an increasingly strategic platform since it is vital to Microsoft’s emerging services play. Microsoft is positioning Sharepoint as the foundation for collaboration across client and server environments. In addition, Microsoft is leveraging its investments in XML as the foundation of its client and server strategy.
Services. The newest strategic direction for Microsoft is its focus on software as a service. The company has come under pressure from Goggle and others. It plans to use its “Microsoft Live” as a platform for offering everything from collaboration and document management to hosted applications. It is indeed an early stage for Microsoft’s software as a service strategy. Our sense is that the company will have to figure out how to finesse its SaaS strategy with its Windows strategy to keep all the various factions happy. If Microsoft reaches the right balance, it could develop a compelling set of offerings.
Conclusions. Microsoft has made impressive strides – especially on the server side of the business. Microsoft has taken the time to dramatically evolve its infrastructure components to the point where it is emerging as a competitive player in the enterprise infrastructure space. It’s clear that Microsoft has some work to do in terms of packaging and articulating a service-oriented architecture message that resonates with the market. Today, the company uses different terminology than its competitors. There is also a different perspective depending on which side of Microsoft is articulating the messages. I’d put my bets on the server side of the business.