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Reports of Microsoft's death greatly exaggerated - Arvind Narayanan's journal [entries|archive|friends|userinfo]

Reports of Microsoft's death greatly exaggerated [Apr. 9th, 2007|05:58 am]
Arvind Narayanan
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I was sad to see Paul Graham, whose writing I normally respect, post a rather trollish essay titled "Microsoft is dead." Of course, the rest of the essay doesn't assert anything nearly as dramatic as the body, but is nevertheless hyperbole. Here, I'm going to try to objectively analyze how Microsoft is doing. I've had this on my mind for a while, and much of it crystallized during a conversation I had with iliada a couple of weeks ago.

First, the good news. IIRC, Microsoft's primary revenue source has been office software for quite a while, not Windows, and MS-Office continues to do extremely well. Openoffice is still nowhere near as good a product, and Office 2007 uptake has been very good even as Vista reception has been surprisingly poor.

But it starts to go downhill from here. First, Microsoft is not in a position to leverage monopolies anymore, which is something that they have historically been very good at doing. This is what Paul Graham means when he says no one is afraid of Microsoft anymore, and he's right. Looking at their current stronghold, office software, there's the fact that document formats are being standardized and import/export plugins for other suites are getting rapidly better. On other turf, Firefox has made it pretty clear that if you have a better product, you can destroy a Microsoft monopoly. Then there's always the EU snapping at Microsoft's heels with almost sadistic pleasure. Perhaps the only major monopoly that still gives them some traction is Exchange Server, and it's not much.

It remains to consider the traditional Microsoft monopoly, the operating system. Graham argues that "It now seems inevitable that applications will live on the web... no one who cares about computers uses Microsoft's [OS] anyway." The first point is true in a limited sense: most common apps except office software are probably going to migrate to the web, and MS has so far failed to integrate its web apps with the desktop in a significant way (it remains to be seen how things will pan out with Vista.)

The second point (about all the cool kids using Macs) has a grain of truth to it: the reported 95%+ windows market share is still largely based on desktop PCs as opposed to laptops. Laptop percentages appear to be quite different. But people with any sort of clue have stopped buying new desktops for home use, as they're just a waste of space. So market share in the next 3-5 years is going to shift to reflect this, and once those aging home desktops are replaced, Apple's market share is certain to reach the double digits. Not nearly enough to threaten Microsoft, but large enough that Microsoft doesn't have a desktop OS monopoly anymore.

Finally, let's talk about missed opportunities. 5-6 years ago, it seemed like MS was going all-out for the home entertainment market. But that never happened. To wit:
  • Cellphone OS -- hardly a dent (5.6% according to wikipedia).
  • Music player -- the Zune is a non-starter.
  • TV -- looks like an Apple walkover again.
  • Gaming -- well, there's the Xbox, salvaging some pride, but market share is hovering at around a quarter to a third. Nothing spectacular.
  • Small form factor tabets -- this is still an emerging market, and it is not clear if these will become household devices. Nevertheless, the UMPC is a very admirable effort. Let's see how it pans out.
On the whole, though, it surprises me how Microsoft seems to have dropped the ball on the whole entering-new-markets thing.

So anyway, there we are. Microsoft is a strong player in a number of markets, but is left with very few leverageable monopolies, and therefore quite incapable of doing any BigBadScary things. Thoughts?
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Comments:
From: (Anonymous)
2007-04-09 07:58 pm (UTC)

Hmmm...

Ok - I'll bite
>> But people with any sort of clue have stopped buying new desktops for home use, as they're just a waste of space
Huh? I can see clueless people who do nothing but browse and email buying laptops, but anyone who does any gaming, any video-editing or any development at home uses a desktop so with its superior video cards and larger/faster hard disks

>>but market share is hovering at around a quarter to a third. Nothing spectacular.
So, a 30% marketshare for the Xbox is 'nothing spectacular' while Apple's possible double digit marketshare in 3-5 years is somehow spectacular.

Sorry, that kind of stuff makes me flip the bozo bit on people.

- UmeshUnni
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[User Picture]From: arvindn
2007-04-09 08:21 pm (UTC)

Re: Hmmm...

Huh? I can see clueless people who do nothing but browse and email buying laptops, but anyone who does any gaming, any video-editing or any development at home

Video editing and development is a very small segment of the market. You make a good point with gaming though. Still, that's a minority of home computer users. You don't have to take my word for it -- the numbers have been suggesting a big desktop to laptop migration for a while now. [1],[2]

So, a 30% marketshare for the Xbox is 'nothing spectacular' while Apple's possible double digit marketshare in 3-5 years is somehow spectacular.

I think I was pretty clear there that I was talking about monopolies. MS has lost its desktop monopoly, and has also failed to gain a gaming console monopoly.
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From: devdasb
2007-04-11 07:06 am (UTC)

Re: Hmmm...

Isn't the biggest monopoly hold for Microsoft in business desktops?

In the larger scheme of things, home users are fairly irrelevant. When you start seeing businesses move away from Microsoft (especially large ones), then you can speak of the death of the monopoly.
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[User Picture]From: reubgr
2007-04-11 05:35 pm (UTC)
I'm confused. You said that Graham's essay is trollish but then you agree with most of it.
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[User Picture]From: arvindn
2007-04-11 06:11 pm (UTC)
Actually no: there's parts of the essay I didn't quote and don't agree with, and secondly when I say "grain of truth" I just mean grain of truth, not that I agree with it.

Graham claims applications will live on the web, I don't see that happening for a large, important class of apps -- office productivity. Graham claims nobody uses windows anymore, I make the much more measured claim that in a few years, MS won't have a leverageable windows monopoly in the home desktop segment.
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