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?