Microsoft Troubles - VII, An Insiders View

A friend sent me this link to a New York Times Op-Ed 'contribution'.
Huge news...
February 4, 2010
Op-Ed Contributor
Microsoft’s Creative Destruction
Dick Brass was a vice president at Microsoft from 1997 to 2004.
This guy was a VP in the glory years - either side of Y2K, and before the 2004/5 Longhorn 'reset'.
The failure to build the successor to XP was a breaking-point: the forced upgrade cycle was gone.

He's likely to have a bunch of stock, or options, and a vested interest in the company's success/survival. His comments are likely to be both informed and as positive as they can be...

My summary:

Microsoft, he says baldly, "is struggling", "And yet it is failing, even as it reports record earnings."

"Microsoft has become a clumsy, uncompetitive innovator."

Despite many efforts, fine engineers, huge R&D and many "visionaries", it hasn't created anything substantial to replace it's two franchises/cash-cows (MS-Windows & MS-Office) - designs dating back over 2 decades, "venerable (old) products".

"Unlike other companies, Microsoft never developed a true system for innovation".
On 'ClearType' a major innovation of his, "a decade passed before ... (it) finally made it into Windows."

Microsoft, he notes, is beset by "internecine warfare".

Marketing has failed because of "understandable caution" and their "Timing has also been poor".

"Internal competition ... (has become) uncontrolled and destructive. At Microsoft, it has created a dysfunctional corporate culture..."

The best people have been driven out - "It’s not an accident that almost all the executives in charge of .... over the past decade have left." and "There has been a steady exit of its best and brightest."

"Perhaps worst of all, Microsoft is no longer considered the cool or cutting-edge place to work."


Microsoft suffers failed Management, ineffective Marketing, dysfunctional and strife torn 'culture' and is milking decades old cash-cows, too afraid to take risks or really innovate. It can't Execute and is stifled by bureaucracy and internal politics.

The 'crush all opposition' culture/mindset has rebounded and been transferred from external to internal 'competitors'. An aggressive approach that grew the company to "an accidental monopoly", has turned inwards and now devours itself. Ugly and sad...

When someone both informed and sympathetic is mourning their decline and fall, the prospects can't be good...

Ballmer is celebrating a decade as CEO (since Jan 2000). If he was able to recognise and address the problems, he would've done so by now.

Bill Gates issued his "Internet Tidal Wave" memo in May 1995, and within six months it launched MSN and all Microsoft products were "Internet enabled".
Fifteen years ago they were agile and able to Execute, capable of  fast and radical change.

The "flat decade" and stagnation/implosion of the organisational culture since 2000 can be laid solely at Ballmer's feet...

The questions left hanging are:
  • Will firing Ballmer be enough?
  • Can a strong Microsoft be salvaged from its Death Spiral?
Unfortunately, there is probably a perfect example of what's in store for Microsoft:
Unisys, the 1986 merger of Burroughs and Sperry/Univac (numbers 2 and 3 behind IBM), has declined four-fold, from $10.5B revenue and120,000 employees to $5Bn and 30,000 in 2010.

IBM expanded its 1986 revenues from $51B to $100+B in 2009 - roughly in-line with inflation, whilst surviving 2 years of massive losses in 1991/92.

I worked for Unisys on a contract in the mid-90's. A critical business system of a major Government Department was in deep trouble and they were threatening to throw them out - they were on "Worldwide Alert". It reminded me of a line from the film "Broken Arrow", it's not that has happened, but that you have a term for it (i.e. many times).

The decline was apparent then and the reasons blindingly obvious: Failed management and intense 'internal politics'.



Please be clear: I am not saying "Microsoft will suddenly collapse".
Like Unisys, I expect the brand, if not the company to linger on for many decades yet.

In 2006 I started  saying Microsoft would "hit a financial pothole around 2010".
I believe their bottom line, profit not revenues, will collapse.
When that happens the 'golden glow' around them will be shattered, herd effects they've previously gained from ("Everyone is using Microsoft"), will work against them. The herd will rush to embrace the Next Big Thing, so the cycle will repeat.

What happens next is strictly up to Microsoft Management.
The company can be destroyed, but will it be?
It depends on what happens inside Microsoft, how 'loyal' (change resistant) customers are and how aggressively the competition responds.

The brand and products will survive: There are enough successful I.T. companies whose business model is to buy 'mature products' at the end of their lifecycle,  then raise prices and do the absolute minimum of support. Customers are leaving anyway, how can they become more disgruntled? If people are locked-into your product and unwilling to change, you're 'providing a valuable service' by keeping their necessary software alive... Financial blackmail? No, 'just good business'.

I do think Microsoft can still be technically innovative and could come back and be competitive.
I just don't think their mindset allows them to do what's necessary: follow Apple's lead and embrace software standards. This, and 'Great Design', is Apple's 'secret sauce', not 'doing hardware'.

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