Microsoft in a service oriented world…

Here is an interesting article from Business Week about why Microsoft is not so scary anymore. While I do not necessarily buy the argument that a company with billions of dollars of cash on its balance sheet is not scary, the article does raise some interesting questions about Microsoft’s growth, particularly on the enterprise side. A quote from Merrill Lynch software analyst, Jason Maynard, sums it up:

“Microsoft still has the critical mass and the franchise of Windows and Office, but there are fundamental changes going on in how we computer and how businesses get value out of IT,” says Merrill’s Maynard. He further points out that many of these trends, including the rise of on-demand computing models, and software as a service, putting more computing power into the networks, are somewhat antithetical to the Microsoft model.”

That quote definitely resonates with me. In fact, I recently had lunch with a friend who is heading up the Enterprise Architecture group for one of the largest health companies. His goal is to move the company to a service oriented architecture in the next 4-5 years. At the end of the day for him and his organization it is all about having better capacity utilization. Instead of having to roll out a new server with a new database and new storage for every new application, his company wants to deploy the app in a grid and increase the capacity utilization from 30% to 80%. During this 2 hour conversation about architecture and technology, Microsoft was never mentioned until I brought it up. When I prodded him further about this he mentioned that he recently spent time with Microsoft and was less than convinced of how Microsoft was going to help him realize his goal. He said the products are nice, tell a good story, but it still seems disjointed. In addition they are not moving fast enough for him. Just look at the delays in getting the monolithic Longhorn out as an example. Increasingly his organization is relying more and more on an open source, commodity stack, which, by the way, is delivering product on a much more rapid pace. In his view, Microsoft cannot tell the same story that an IBM or HP can in helping his company move to a service-oriented world. While this is one data point, I do believe that there will be challenges ahead for Microsoft in the enterprise. The commoditization of technology is definitely a strong force.

Published by Ed Sim

founder boldstart ventures, over 20 years experience seeding and leading first rounds in enterprise startups, @boldstartvc, googlization of IT, SaaS 3.0, security, smart data; cherish family time + enjoy lacrosse + hockey

3 comments on “Microsoft in a service oriented world…”

  1. Interesting topic – this has been the emerging issue Microsoft is facing in the rise of open technologies. As much as software is a significant role in making a change, user attitude is huge. If the end-users have a negative perception of open source, such as Linux, then they will have low tolerance for a new system.

  2. Good points. Salkever writes in BW: “Business customers more and more treat software as a commodity and a service.” This is reminiscent of Tim O’Reilly’s outstanding discussion of commoditization in “The Open Source Paradigm Shift” ( ).

    Contrast this with Steve Ballmer’s call today at the Gartner conference for a $100 PC: “The biggest problem we have right now is that people who should be paying for software aren’t.”

  3. Ultimately, the whole point of software as a service is to refocus IT on solving business problems, rather than on selling bits. Do you care what brand of wrench your plumber uses? Of course not…you just want the damned drains to get fixed. So why should business managers signing checks for IT care about whose software they use…except to the extent that one system is better suited to their problems than another?

    Microsoft’s billions in cash and huge established base mean they won’t be inside a bankruptcy court any time soon…but the advantages they’ve had that _got_ them those billions and that base are going to be ever more irrelevant in a service world. And a paradigm shift so drastic that it would put them in a position to lead that new market would leave a company that might still be _called_ Microsoft, but would bear no meaningful resemblance to the Microsoft of today.

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