Posts Tagged ‘unix’

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Over the weekend the press were full of talk of Steve Ballmer, the CEO of Microsoft, who has announced his plan to retire next year. This begs the question: what next for the company? Should it revisit the idea of a merger with Yahoo?

Some focused on the somewhat less than gushing terms of the Microsoft release announcing Ballmer’s retirement. Some reckoned they saw hints of a rift between Ballmer and Bill Gates. The two men have been colleagues for decades. By the way, Ballmer was Microsoft’s 30th employee, joining the company in 1980. He became CEO in 2000.

It is not hard to point to what is wrong with Microsoft these days, and as the boss Ballmer will clearly receive most of the blame.

It is not so obvious that things would have been much different if Bill Gates had stayed at the helm. Gates famously failed to predict the rise of the internet, so it is doubtful whether he would have come up with a plan to counter the threat posed by Google, Apple and Facebook.

In fact, you may recall that back in the 1990s Microsoft, led by Bill Gates, and Apple began a joint venture. Some Apple aficionados saw a tie-in with Microsoft as akin to a pact with the devil. Few foresaw a day when Microsoft would be struggling, and living in Apple’s shadow.

But will Microsoft come back?

It is suffering from classic innovators’ dilemma with a little bit of recession to the mean thrown in for good measure. See: The UK’s export-led recovery

The market it has dominated for so long is changing – arguably disappearing – and Microsoft seems to be left plugging technology people no longer want.

It was not always this way. Back in the 1980s, Microsoft learnt how to experiment. To tell the story, we must rewind the clock to 1987. The company had a massive dilemma. It had enjoyed a good run, thanks to DOS, but the world was ready for change. The industry was alive with competitors – many much larger than Microsoft – wanting a slice of the action. Eric Beinhocker tells the story well in his book: ‘The Origin of Wealth’. These days we just assume Microsoft chose to ditch DOS and develop Windows. But it wasn’t as simple as that. It appears that Windows evolved, and a by-product of its development was the failure of most aspects of the Microsoft plan.

In fact, before Windows won through, Microsoft put more resources into beefing up DOS. It entered into a relationship with IBM for the development of OS/2; it held discussions with third parties for products aimed at the Unix market; it bought a big stake in a seller of Unix systems; created software for the Apple market; and, of course, invested in Windows.

By Ballmer’s own admission, Surface was a bet-the-company product, but there was never a need to take such a gamble.

What of the future?

Not so long ago Microsoft tried to buy Yahoo, but the price seemed to be the sticking point. Under  the dotcom seems to be staging something of a renaissance.  Maybe some kind of merger should come back on the agenda, but it’s difficult to see Mayer heading up Microsoft. If, however, she was to head up some kind of joint venture between Microsoft and Yahoo, now that might be more interesting.

© Investment & Business News 2013

The rumour mill has it that Microsoft is set for an embarrassing change in direction. When Windows 8 was announced, CEO Steve Ballmer called this a bet-the-company product. Well, the bet does not appear to have paid off.

The ‘FT’ drew a comparison with Coca Cola, when it announced Real Coke, only to reverse direction, after customers turned their noses up at the new drink.

Real Coke was a flop despite research showing that customers would prefer it.

But the analogy between Microsoft and Coca Cola is not precise. The drinks company changed because it thought it needed to progress, but it underestimated how unwilling customers are to change.

Microsoft, on the other hand, has to change. Innovation and potential disruptive technology demand it.

It is just that customers are conservative. Coca Cola found that they didn’t want to change drinks; Microsoft is finding that they don’t want to see such a dramatic change in their computer’s operating system.

This is classic innovators’ dilemma. See: Innovators’ dilemma http://www.investmentandbusinessnews.co.uk/directory/innovators-dilemma/4855 Clayton M Christensen, who produced the study that we now credit with giving rise to the Innovators’ dilemma theory, found that most companies look to change their products, but it is their customers who stop them.

Take the disc drive industry, for example. The emergence of 5.25 inch disk drives for desktop computers changed everything. Many of the existing market leaders examined the new technology; some invested. However, they stopped short of embracing it; their customers used mini-computers and were not interested in “here today gone tomorrow” desktops.

By the time the desktop market was established, with 5.25 inch drives showing signs of dominance, it was too late. The new entrants, with their specialisation in the latest technology, held all the cards. The former heavyweights lost market share; many went out of business.

Microsoft is struggling to change because its customers won’t let it. As a result it is vulnerable to new disruptive technology. Microsoft has been here before, when DOS was heading towards the end of its natural life. But back then the company dealt with the challenge differently.

To tell the story, rewind the clock back to 1987. The company had a massive dilemma. It had enjoyed a good run, thanks to DOS, but the world was ready for change. The industry was alive with competitors – many much larger than Microsoft – wanting a slice of the action. Eric Beinhocker tells the story well in his book: ‘The Origin of Wealth’.

These days we just assume Microsoft chose to ditch DOS and develop Windows. But it wasn’t as simple as that. It appears that Windows evolved, and a by-product of its development was the failure of most aspects of the Microsoft plan.

In fact, before Windows won through, Microsoft put more resources into beefing up DOS. It entered into a relationship with IBM for the development of OS/2; it held discussions with third parties for products aimed at the Unix market; it bought a big stake in a seller of Unix systems; created software for the Apple market; and, of course, invested in Windows.

At the time, the company was lambasted in the press for being inconsistent – for having no strategy. In reality, it was just opening itself up to internal gales of creative destruction.

And now back to 2013, it seems Microsoft has forgotten the lesson of DOS. Instead of experimenting, it bet the company.

Windows 8 was not a bad idea, but it was a mistake to rely so heavily on this one idea.

© Investment & Business News 2013

Windows zzzz. Sorry, must have nodded off there.

Let’s try again. Windows (yes it is possible to say that word without falling asleep) looks a tad bit like yesterday’s news. Now tablets are a different matter; they can cure the headache of many an electronics company and its shareholders.

So Microsoft is now a tablet company. And indeed it’s a hardware company too. Its Windows RT operating system may well turn out to be rather good.

The snag relates to all that legacy. Windows may be a tad dull, but most of us would be just a bit stuck without Word and Excel.

So Windows 8 has backwards compatibility with all that old Microsoft stuff. Presumably, this means that the price you pay for Windows 8 and its backwards compatibility is a slower PC.

But RT, now that’s different. It’s a new operating system and is not being hamstrung by all that baggage.

The new Surface is Microsoft’s attempt to muscle in on the tablet market. It is too early to tell whether the product is any good, or whether it will fly or dive, but credit where it is due, it’s a bold move.

Microsoft’s partners are a little worried. Microsoft is all about producing operating software, and letting its partners worry about the hardware. Sure, the software company moved into games hardware, but that is different. In the world of PCs, Microsoft always has been software, while the likes of Dell and HP focus on hardware.

Now Microsoft has moved onto their turf, so that’s a risk. Of course Microsoft retorts that the Surface is a kind of shop window; it is just trying to trail-blaze a way forward for its partners.

Microsoft’s new operating system is new. One could even say it’s an attempt to start all over again – new hardware, new software. The old PC is not exactly going the way of the Dodo – not yet – but it is tempting to say it is going the way of the Siberian tiger.

The company’s CEO Steve Ballmer admits the new products are vital; that he is effectively risking the company on them.

Then again, Microsoft has been here before. Before there was Windows, there was DOS and that really was dull.

But when DOS appeared to be coming to an end, what did Microsoft do?

Conventional wisdom has it that it ditched DOS and hyped up Windows.

In reality the company experimented. It considered beefing up DOS; it considered working on a new joint venture with IBM or Apple in the Unix market, and even a company sale. Windows was just one of several ideas. The company was lambasted in the media for being too inconsistent, for not having a clear strategy.

Windows evolved in the true Darwinian sense. It was one of many experiments, but it happened to be the one that worked.

Private equity firms don’t like that kind of strategy. They like to see plans stretching into the future and companies that stick to them rigorously.

Luckily for Microsoft, Bill Gates didn’t see things that way and the company flourished.

The problem with these ‘bet the company’ moves is regression to the mean. In the long run companies don’t always perform better than rivals.

Microsoft seems to have forgotten its own lesson.

©2012 Investment and Business News.

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