Microsoft Looking Like An End-Stage Company

Our columnist argues that Steve Ballmer needs to pull out all the stops now and instill radical change, because Microsoft remains stuck in the PC era.

By Paul McDougall , InformationWeek
October 30, 2010 04:00 AM

I believe that Microsoft as we know it may not be around in another decade--maybe not even in five years. There's hardly a single tech industry trend line pointing in Redmond's favor right now, and some of those curves are about to get a lot steeper, real fast.

So it's hardly surprising recent Microsoft-related news has been pretty much on par with where things stand for the company these days-mostly all bad.

Explorer's market share has fallen below 60% for the first time in recent memory, the software maker has largely conceded the only way it can compete in smartphones is through the courts, and so it sued Motorola (and, by proxy, Android developer Google), and Microsoft's board deemed CEO Steve Ballmer's performance over the past fiscal year so mediocre that it slashed his bonus.

Most significantly, Microsoft waived the white flag on social media when it pulled the plug on Windows Live Journal, dumping the blogging platform's users onto the open source WordPress system. Think about it: Microsoft, still the world's largest software company by revenue, is so clueless on Web 2.0 it can't make a simple blogging platform people will actually use.

There's probably thousands of middle-schoolers creating blogging software in their spare time between Social Studies and Gym class, but Microsoft can't compete in the space?

What's that say about its chances in mobile, or search, or tablets, or any of the other growth markets that are driven by younger professionals' demands for tools that are social, collaborative, instant, and always on?

Microsoft's defenders, and Microsoft itself, point to the company's lock on the PC operating system market (more than 90%) as proof it's still a dominant player that controls a bunker from which it can generate piles of cash and withstand reversals in other segments.

But that's just whistling past the graveyard, spouting a tune written from backward-looking data not particularly useful for gauging the impact that hugely disruptive new products like tablets and smartphones and even tablet-smartphone hybrids are about to have on Microsoft's place in IT.

Market research group NPD recently found that 13% of iPad users bought the Apple OS-based device instead of a Windows PC. That's a hugely significant number for a product that didn't even exist a year ago. Just wait until it gets more features, and comes down in price. And do you know anyone under 30 who uses anything but a phone for the bulk their personal computing and communications needs these days?

Microsoft's Windows Phone 7 will hit stores in November, but most analysts believe the offering, though slick in many respects, is too little, too late to meaningful bolster the company's meager 5% share of the mobile OS market.

Where does all this leave Microsoft? Out in the cold within just the next few years unless big changes are made-and those changes need to start at the top. The best thing Ballmer can do to preserve his legacy and ensure he's not Microsoft's last CEO is to start assembling a new management team that can build a foundation for real change--and rid the company of its PC-centric focus.

Ballmer has said he wants to stick around until about 2018. But realistically he's only got a couple of years to make Microsoft a leader in the categories that matter going forward-cloud, social media, mobile, and tablets. If he fails, he'll be out the door, possibly within months if Windows Phone 7 turns out to be as big a bomb as the KIN phone. If that happens, Microsoft's status as a tech industry leader won't be too far behind him.


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