What’s Wrong with Microsoft? May 28, 2010
Posted by Peter Varhol in Strategy, Uncategorized.1 comment so far
That’s a loaded question. On the one hand, it’s difficult to say that anything is wrong. The company continues to increase sales year over year almost like clockwork (until last year). It has had a successful launch and good reviews of both Windows 7 and Office 2010 (now if they can only get come consistency in their product numbering schemes).
Yet Apple, a smaller company is sales, now has a bigger market capitalization than Microsoft (market capitalization refers to the stock price times the number of shares outstanding). I noted a few weeks ago that this seemed likely to happen in the near future.
Note that market capitalization doesn’t directly reflect revenue or profits. Microsoft had $58.44 billion in revenue in its last fiscal year, with $14.57 billion profit. Apple had $36.54 billion in revenue, with $5.07 billion profit (both figures are for fiscal year 2009, but the fiscal years are different). Instead, it better reflects the collective belief of the stock market participants on the health and future prospects of the respective businesses.
As of May 26th, Apple’s market capitalization was $221.36 billion, and Microsoft’s about $219 billion, according to the Wall Street Journal, CNN Money, and others.
Both are enviable numbers. But the fact that Apple is now worth more than Microsoft says something about how they are perceived. To wear the mantle of a growth company, it’s important to be able to show that your prospects for strong revenue (and profit) growth will continue into the future. You do that through product introductions and new features that make your intended audience (both buyers and investors) believe you can keep it up for a long time.
As I pointed out above, Microsoft has also had reasonable successful major product introductions over the last year. While these products have been successful, Microsoft has failed to excite customers with them. A large part of that is because they tend to be new versions of longtime products, rather than innovations with new market possibilities. Microsoft will get the vast majority of Office users to eventually pony up, but there are no significant new market possibilities for the next iteration of a spreadsheet application.
And that pretty much sums up what’s wrong with Microsoft. It has a lucrative market core and serves it well, but focuses so much on that core that it is unable to open big new markets. It’s important to realize that Microsoft also sees the value in the consumer market, but with the limited exception of the Xbox, it has failed to excite that market. It tried to sell a phone operating system the same way it sells Windows, and the results seem to be getting worse every year. It tried to build a music player to compete with the iPod, and offered users no compelling feature reason to consider it.
So to continue its growth as a business, Microsoft needs to come up with new products, or enhancements to existing products that open large new markets. Easier said than done, but Microsoft will remain stagnant until it can define new markets with its products.
Don’t Confuse a Skill with an Education May 24, 2010
Posted by Peter Varhol in Strategy, Uncategorized.1 comment so far
I am hardly someone qualified to give advice on building a successful career, but this column in Fortune magazine is so blatantly poor that I can’t help but respond. The question was asked by a college freshman interested in computers if there were good career prospects by majoring in computer science. The answer seems to be, with the exception of network security, no. Network security, on the other hand, is a growth field with opportunities aplenty.
Um, I’m not even sure where to begin here. It’s true that tech companies, and tech jobs in general, are rather more dynamic than may be the norm. And Thomas Friedman was right; the world is flat. Some tech jobs, such as software development and technical support, have been outsourced to other countries where the skill may be comparable and costs are less.
But to say that tech job prospects aren’t expanding is a serious misnomer. This problem, I think, is one of categorization. Computer skills of any type are widely transferrable, and while the growth of dedicated IT jobs in specific categories may be slow, the number of jobs that require a broad knowledge of technology is growing rapidly. Categories that don’t exist in government jobs databases today will be the largest ones tomorrow.
Also, many don’t look at a computer job as a career in the traditional sense. I’ve met hundreds of people who work in computers, yet can count on the fingers of one hand the number who have had a traditional career with steady advancement of pay and responsibility with a small number of employers. You do a job, that job changes or goes away, and you move on to the next one.
The problem with technology, and in particular software technology, is not jobs, but change. The majority of skills that you acquired a decade (or less) ago are obsolete. If you try to run a career by advancing your skills incrementally or not at all, it is likely that the career will falter before you have a chance to conclude it.
In a larger sense, this column, as well as many others I’ve read over the years, confuses an education for a lifetime with a technical skill of the moment. We don’t go to college to get a job; we go to establish a career direction in life. That direction may be fairly specific, such as when you major in electrical engineering, or it may be vague and general, such as a major in philosophy. And it may change over the course of forty years or so. But you have presumably acquired the ability to learn and adapt, while using that education as a foundation for your future endeavors.
A skill such as network security, on the other hand, is rarely acquired in a formal degree program (except perhaps at the two-year technical college level). That skill may be the basis of your next job, but it is almost never the basis of a forty-year career. You are likely to acquire a dozen or more discrete skills during that time, each valuable for perhaps a few years. If you don’t have the broad fundamental education to enable you to learn and apply new skills, your career will die with the market need for the one skill that you mastered.
And, most important, you can prepare, but there are no guarantees. After all, it’s a long career.
The Technology Torch Has Been Passed May 22, 2010
Posted by Peter Varhol in Software platforms, Uncategorized.1 comment so far
I’m back from vacation, and lo and behold, technology didn’t stop moving forward without me. Take, for example, this article from Gizmodo (and reposted on MSNBC), which describes how Apple and Google are battling for supremacy in computing, and about how Google has now gained the inside track in this battle.
There are several things that I can say about this. First, I dislike technology competitions being positioned as battles in an ongoing war. It’s a poor analogy, and it makes it seem as though technology vendors are more focused on what the competition is doing, rather than what customers want or can use. And the comparison with war, though used over and over again over the years, is simply wrong.
However, that’s the nature of technology reporting, to set something up as a battle. It is misleading more than anything else. It is true that the market leader often ends up with the lion’s share of business, but competing vendors rarely if ever play out their competition directly against each other. The market and customers make that call, based on product, pricing, marketing, and a myriad of other factors.
Another and more significant point is that this kind of article gives a stark picture of how far Microsoft has fallen in the world of tech today. Why, you may ask; it doesn’t mention Microsoft at all?
That’s just the point of course. A decade ago, you couldn’t write an article like this without positioning Microsoft as the power to determine whether or not a particular vendor or technology would be successful – would Microsoft let it happen?
I rather respect Microsoft, for its longevity, and its single-minded pursuit of the adequate, if not the great. The company has done some good things (and plenty of not-so-good things). Its people are largely smart, engaging, and likable. It largely defined computing as I have come to know it. If it is not an innovator, it has at the very least defined de facto computing standards for almost twenty years.
And to some extent Microsoft is an innovator. Windows Mobile (or whatever they are calling it this season) has been around since before Symbian, and was mature before Apple or Google gave any serious thought to mobile computing. Microsoft dabbled in hosted services with Hotmail (granted, it was one of its many acquisitions) before it was trendy.
But computing is in the process of moving on, and Microsoft is poorly adapted to making that move. I have speculated in the past on this blog as to why I think that’s the case, and I can easily come up with additional reasons.
Microsoft’s position rather reminds me of publishing, the industry I have been in and out of for many years. When capable people, leaders in their industry, can best defend their tradition by fiat – “A paper magazine feels good in my hands.”
Just so. Microsoft can shout to the heavens that desktop computing is fundamental, but I doubt such arguments can be made rationally.
Is Apple the Next Microsoft? May 4, 2010
Posted by Peter Varhol in Software development, Software platforms, Strategy.add a comment
I mean that in both the best and worst possible ways. On the positive side, recent reports have noted that Apple’s market capitalization was approaching that of the much larger Microsoft, and was likely to surpass it in the near future (I think this has happened, at least temporarily). On the negative side, the SEC is reported to be looking into changes in the Apple developer license agreement that some observers claim are antitrust issues.
I don’t want to get into that debate. It’s been a long time (two decades) since I was a certified Apple developer, and these days I rarely launch Visual Studio with the intent of serious code development. And Apple in particular seems to bring out the worst in people – mindless and obnoxious advocates, and equally mindless and obnoxious detractors.
(Aside: The mindless and obnoxious Apple advocates can’t hold a candle to the old Amiga puritans.)
It seems to me that the crux of the difference between Apple and Microsoft are what they have been since the 1980s – closed (Apple) versus open (Microsoft). One might think that “closed” is a pejorative in this context, but by maintaining a high degree of control over hardware and software, Apple has consistently produced high quality and easy to configure and use products.
I recall doing a review of Windows and Mac video capture boards in 1990, a time when this technology was new and difficult to use. There were far more hardware cards for Windows than the Mac, but the Mac products simply installed and worked, whereas the Windows alternatives required technical knowledge and a large helping of patience.
That and similar observations have made me wonder is Apple’s closed model is an essential ingredient in innovation. Microsoft has many bright and creative people, probably more so than Apple, yet few would call the company innovative. Or perhaps it is creativity applied in a different way – making technology more adaptable, rather than making it perfect.
It’s difficult to have this discussion without a comparison of the companies’ respective brainchildren, Steve Jobs and Bill Gates. That discussion is rather beside the point today, with Gates years away from active involvement in Microsoft, but prior to that both companies were largely reflections of their founders’ respective characters. Both were confident to the point of arrogance, yet Jobs is popularly described as aloof and a perfectionist, whereas Gates is acclaimed as a business genius.
I think their mode of travel is telling. When Jobs returned as Apple CEO, part of his compensation was in the form of a private jet. Gates famously flew coach.
(I pass no judgment here; I will never have a private jet, and were I Gates I would have managed to get myself approved for Business Class).
It would be instructive if we could have the innovation debate rationally. But I don’t think such a debate can answer the question of the best ways to innovate. Both Apple and Microsoft are the products of their creators, with many of the unique strengths and limitations of those individuals.
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