Friday, September 5, 2008

Why Microsoft is a dying giant

I said in my thoughts about Google's Chrome that I think Microsoft is a dying giant. I feel that I should justify such a bold statement.

First I want to mention that I see the above statement in long-terms. Of course Microsoft won't vanish tomorrow.

Here are my main reasons for my claim:

  • Microsoft is relying an cash-cows and so can't change

  • Microsoft is not able to be successful in new fields

  • Microsoft's competitors have adopted a robuster business model

The problem for Microsoft with their cash-cows is that they can't pursue new application and business models that endanger their existing software like Office or Windows. The Web versions of their office suite for example is very restricted that it does not cannibalize the original. Their competitors, like Google, don't have this handicap.

On the other hand Microsoft is not able to launch new products that earn money. Their internet-activities are very expensive, the X-Box doesn't get revenues and the Zune-Player is a flop. That will be a big issue in the future.

Last their competitors of their cash-cows are open source software. It's hard to beat free in the long run, if you need to sell your product. Linux and Open Office don't need a price tag, their makers earn money with service agreements and share the development costs. This is a completely new situation for Microsoft, normally they pushed their competitors away. Look Netscape, IBM with OS/2 or Star Office, but against OSS this is just not possible. You might say Microsoft is still making a lot of money with its OS and its office suite. That is right, but things are going to change, look for example at the EeePC. This thing is selling very well and it runs on Linux and uses Open Office. My opinion is that this trend will intensify.

I think the only chance for Microsoft to survive in the long run is that it reinvents itself. It may be unlikely that they will earn so much money again like they do today, but we will see. The first war about browsers has already started...


Craig said...

1. Every business tries to have a cash cow. Microsoft just has bigger/more cows than everyone else. They're also the kind of cows that have longevity.
Google has a similar cash cow.. Search. They are not going to endanger that either.

2. Microsoft's new ventures make relatively less money initially, like other ventures they've done. Regardless, the products you named are good ones. The X-Box is loved, and Zune is a better player/store than the overwhelmingly loved competition. Their mice are hot.
The fact they have not been making that much money in new fields does not mean that they are "not able" to be successful in new fields.

3. Looking at the kind of money Microsoft makes, there's a lack of evidence for arguing that the Linux "business model" is "more robust". The things you mentioned were just predictions, guesses.

Microsoft is a slow giant, but a capable one. It will not let itself die.

Marco Laspe said...

1. The problem with cash cows is if times changing (read SAAS) it is very hard to take the lead in this change.
2. Your right, but they have yet to proof that they can make money. Google has the same problem. By the way I like computer accessories from Microsoft. They keyboards are very well done.
3. Of course I am just guessing, nobody can predict the future about 10 years from now. But I am pretty sure that they have to reinvent themselves.