[y66]

From yesterday's blog post by NY Times tech critic David Pogue:

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By now, you’ve probably heard: Steven A. Ballmer will soon be stepping down as chief executive of Microsoft.

Many of the factors in his departure — stock price, internal politics, shareholder pressure, public relations — aren’t my area of expertise. I’m a tech critic, a reviewer of products. But even from my particular angle of examination, Mr. Ballmer’s time as the head of Microsoft has been baffling.

He completely missed the importance of the touch-screen phone. (“There is no chance that the iPhone is going to get any significant market share,” he said in 2007.) He missed the importance of the tablet, too. Yes, Microsoft now sells attractive phones and tablets, but they came years too late. They have minuscule market share and little influence.

It doesn’t take a psychologist to understand why Microsoft missed these tidal shifts: It’s always been a PC company. It helped to create the PC revolution, its bread and butter was the PC — and so of course the company kept insisting that the PC was the future.

It would have taken an exceptional thinker, an out-of-the-box visionary, to admit that the company’s foundation was crumbling. Mr. Ballmer wasn’t that guy.

Indeed, his instinct to cling to the past is also responsible for the train wreck that is Windows 8. Under Mr. Ballmer, Microsoft created an elegant, clean, easy-to-use, unnamed new operating system that I call TileWorld; it’s the touch-screen face of Windows.

But Mr. Ballmer and his team lacked the courage to break completely with the increasingly complex, bloated desktop version of Windows. So they created Windows 8 simply by grafting TileWorld onto the old desktop Windows. The result is exactly twice as complicated as before, because now you have twice as much to learn.

Windows 8 computers haven’t sold well; Microsoft’s Surface tablets have bombed; Windows Phone has about 4 percent market share. The dawn of the touch-screen-PC era that Microsoft predicted hasn’t come to pass, either. And PC sales, all over the world, are way down. That may be partly because of the phone-and-tablet revolution — but the Windows 8 mess certainly didn’t help.

In some ways, Microsoft has been frozen in time since Mr. Ballmer took the helm 13 years ago. It’s still raking in money from its big three cash cows: Office, Windows and XBox. Even if it did nothing but rearrange the toolbars in each year’s new versions, they’d still sell.

But most of Mr. Ballmer’s initiatives haven’t fallen on fertile ground.

As the New York Times article about Mr. Ballmer’s resignation makes clear, it won’t be easy for his successor, whoever that turns out to be. Microsoft is a sprawling empire without a particularly clear vision, other than, “Keep Windows, Office and XBox alive.”

How do you even begin to design a successful operating system if you don't have a clear vision for the machines it is supposed to operate? And how do you grow or even maintain Office sales in a world in which the machines people want are not running your operating system?

Will Microsoft figure this out?

[gwnn]

I think Windows 8 is not doing that bad as he says. Why else would Samsung, Lenovo, Asus, Acer, etc insist on making new tablets on it? It can be argued that it came too late but it's growing now. And the interface is a matter of taste. I personally really like it. Windows RT was the real flop. I guess it will be discontinued.

[mike777]

This criticism is as old as time itself.

It is difficult if not impossible to cannibalize or eat your young.

This is the problem all companies but especially older successful companies face and why so very few can ever survive.

It may take a new younger generation who views the personal computer desktop as we do the horse and buggy. Quaint and yes still around but hardly relevant to their every day life.

Microsoft's market cap, value, is far less than it was in 2000, 13 years ago.

Look at the furor over the ACBL trying to take away cell phones, now that fight is over.

[y66]

From an article in the Seattle Times by tecchnology columnist Brier Dudley:

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Yes, Ballmer was caught flat-footed by the iPhone and iPad. But that may fade in importance. The smartphone wave seems to be cresting and tablet prices are plummeting, turning them into cheap commodities with small margins. Even Apple is struggling with slowing sales of its marquee devices and casting about for the next big thing.

Web-connected watches and smarter TVs may come next, but the bigger business opportunity is powering online services that are becoming essential to companies, governments and consumers around the world.

This is where Ballmer is leaving Microsoft in a strong position, with infrastructure, software tools and customers invested in the company’s platform. It’s the “services” side of the “devices and services” company Ballmer has been reshaping Microsoft into over the last year.

Microsoft will make some but not all of the devices that connect to its services. It probably doesn’t need to dominate any single category as long as its services are ubiquitous.

It’s also why Nadella seems like the leading candidate to run Microsoft over the next decade. Over that time period the price of smartphones may fall to $30 and tablets will be given away free with an oil change, but you’ll be paying $10 or $20 a month for online software and file storage.

While Steve Jobs was winning with the iPod, iPhone and iPad, Ballmer was winning over companies with Microsoft servers and business software. Jobs tried and failed to break into the enterprise server business and nobody cared; Ballmer struggled with music players and phones and was mocked.

Popular opinion now judges tech companies first by their shiny gadgets and second by their stock price. Ballmer didn’t seem to care much for either one.

As a near founder and uber billionaire, Ballmer was always more interested in the long-term success of the company and employees than he was in popularity. Investors won’t miss this attitude, but others will, especially around here.

Indifference to Wall Street demands is a hallmark of Seattle’s greatest public companies. It’s why Microsoft continues to make long-term bets and offer benefits that draw smart people from around the world, some of whom go on to build other companies in the area. It’s also why Microsoft continued building its online infrastructure — the foundation of its services platform and its future — despite investor pressure to cut back or sell it for a quick lift.

Let’s hope that Maritz, Nadella or whoever is next has skin half as thick as Ballmer’s.

Focus on the services side of "devices and services"? This sounds like something out of Louis Gerstner's playbook at IBM.

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From Wikipedia:

Gerstner is credited with saving IBM from going out of business in the early 1990s. The subsequent refocusing on the IT services business (which grew to nearly 50% of the IBM's revenues), the embrace of the Internet as a business phenomenon, and a broad effort to revive the company's culture are widely seen as having resulted in one of the most remarkable turnarounds in business history.[7]

In his memoir, Who Says Elephants Can't Dance?, he describes his arrival at the company in April 1993, when an active plan was in place to dis-aggregate the company. The prevailing wisdom of the time held that IBM's core mainframe business was headed for obsolescence. The company's own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called "Baby Blues." Gerstner reversed this plan, realizing from his previous experiences at RJR and American Express that there remained a vital need for a broad-based information technology integrator. His decision to keep the company together was the defining decision of his tenure, as these gave IBM the capabilities to deliver complete IT solutions to customers. Services could be sold as an add-on to companies that had already bought IBM computers, while barely profitable pieces of hardware were used to open the door to more profitable deals.[7]

While IBM had been credited with making the personal computer (PC) a mainstream product, the PC's reliance on Intel chips and Microsoft software meant that IBM could no longer monopolize this market. Outgoing IBM chairman and CEO John Fellows Akers, as an IBM lifer, was excessively immersed in its corporate culture and loyalty to traditional ways which masked the threats to the company.[5][8] However as an outsider, Gerstner had no emotional attachment to long-suffering products that IBM developed in order to try to regain control of the PC market. Gerstner wrote that his colleagues were "unwilling or unable to accept" that OS/2 was a "resounding defeat" as it "was draining tens of millions of dollars, absorbing huge chunks of senior management's time, and making a mockery of our image", despite its technical superiority to the dominant Microsoft Windows 3.0. By the end of 1994, IBM ceased new development of OS/2 software. IBM withdrew from the retail desktop PC market entirely, which had become unprofitable due to price pressures in the early 2000s, and sold the PC division to Lenovo in 2005, just a few years after Gerstner stepped down as CEO.[9] To Gerstner, focusing on the desktop PC ran counter to IBM's view of where the tech world was headed.[10]

In his memoir, Gerstner described the turnaround as difficult and often wrenching for an IBM culture that had become insular and balkanized. After he arrived, over 100,000 employees were laid off from a company that had maintained a lifetime employment practice from its inception. In the goal to create one common brand message for all IBM products and services around the world,[1] IBM under his leadership consolidated its many advertising agencies down to one - Ogilvy & Mather. Layoffs and other tough management measures continued in the first two years of Gerstner's tenure, but the company was saved, and business success has continued to grow steadily since then.

Following his success in IBM, Gerstner has also become a mentor to Howard Stringer, CEO of Sony Corporation to turn around the Japanese corporation.[11]

[mike777]

Yes for some reason IBM has been able to eat its young, in other words get rid of its main profit maker and move on.OF course they missed some really big stuff such as software, OP systems...etc..

1) First they were in business machines.
2) Then main frame computers.
3) Then they became king of the PC.
4) Then they were able to walk away from that into services.

But they are the exception not the rule.

[barmar]

Is MS really doing that well in the services side of things? Isn't Linux the OS du jour for web and application servers?

[billw55]

Whatever else happens, I don't think that the physical keyboard and large screen are going away for office productivity applications. Who wants to work with documents, spreadsheets, AutoCAD, etc, on a phone-sized touchscreen? Not me.

One thing I do think is headed for the grave is PC gaming. All it would take to kill it completely is for Xbox/playstation to offer keyboard-like controllers for the more complex games that benefit from them.

[Vampyr]

billw55, on 2013-August-25, 19:39, said:

One thing I do think is headed for the grave is PC gaming. All it would take to kill it completely is for Xbox/playstation to offer keyboard-like controllers for the more complex games that benefit from them.

I doubt it. I play games mainly when I am watching TV, or on my iPad if I am on a bus or in the garden or in bed. I don't think that casual gamers are holding off from buying games consoles because they aren't satisfied with the interface; I think that people who are more dedicated to computer games have bought a console, and people who are no very dedicated have not. It seems to me that buying habits will stay the same if different controllers are offered.

[mike777]

I am far from any kind of tech expert or seer of the future of high tech companies but I though the future is wearable computers and direct brain access to the internet.

I assume many many companies will compete but only a few very very few will make a profit and that is ok.. which few I have no idea.

[Mbodell]

Microsoft has a number of big problems, but it is still a large very profitable company. Even with the Ballmer retirement stock boost and trading near the 52 week high it still has a P/E ratio of just 13 and a market cap of $290B. I'm sure many, many companies would love to be in that position. That said, here have been some of the problems:

1. Microsoft's stack rank system of forced curves is absolutely poisonous for company morale. And it encourages smart people to not work with other smart people. And given smart people generally like working with other smart people that means either they suffer at forced rating time or else they go elsewhere to other companies.

2. Microsoft, at a product level, has for the most part not been that innovative (there are exceptions and msr does tons of cool things, but they mostly don't make it into products until they are fast following someone else). They've usually tried to be "fast followers" where they see what is working and copy that and perfect it over time and expect that their execution + market share + financial run way means that even if they start behind on v1 or v2 they'll have caught their competitors by v3 or v4 or what not. A number of the more recent innovations, however, are business with natural monopolies with huge first mover advantages. So in search, social networks, cloud computing, and others it isn't as easy to catch up as it was in the days of Excel (Lotus), Word (Word Perfect), Windows (Macintosh), and IE (Netscape).

3. Very inward focused. As part of being in Redmond, instead of in the center of high tech like a number of their competitors, Microsoft is somewhat disconnected from the rest of what goes on in tech. And in addition, Microsoft is very focused on the important internal products Windows and Office primarily, Bing, Azure, XBox, Windows Phone and a few other secondarily. But if you are working on a product, the way you will be judged, prioritized, and get resources is related much more to what impact you can have on those big Microsoft products. And if one of those big products doesn't like what your doing, or thinks you'll disrupt what they are doing, then it will be very tough for you to make progress. Moreover, you'll be forced to integrate, even if that doesn't make sense. A number of good ideas at Microsoft have been killed because of this, and a number of others have failed to execute well because they needed to be running Windows or integrate with Windows Phone instead of being able to do what made more sense for that product (maybe run on Linux servers or focus on iPhone and Android first).

Microsoft does still have some significant advantages:

1. IT departments like Microsoft and they still are the significant players at business IT computing.

2. It still brings in billions of dollars a month in profits primarily on the backs of Windows and Office. Both are under attack, but both are still amazingly profitable businesses.

3. One of the exceptions to the rule of how Microsoft has operated is XBox and Kinect. Microsoft let XBox go and do their own OS instead of being tied to Windows. XBox could also do its own brand instead of Windows or Microsoft prominent branding. Kinect is one of the places where they were innovative (maybe a little fast following of the Wii, but the Kinect natural user interface is way beyond any Wii technology). And capturing the living room as a very valuable toe hold into the house is a place where Microsoft is ahead of its rivals and in a position of strength. It isn't a risk free position as TV companies, tablet makers, and Google, Apple, and Amazon are all coming after the living room in one form or another. But unlike the phone space or the tablet space Microsoft has a pretty good current market position here.

There are others too (Microsoft is generally good at developer ecosystems in software, Microsoft is now a lot better at standards and standardization, Microsoft is no longer thought of in technology circles as an evil empire, Ballmer leaving will be an opportunity - fairly or not - for change in direction and recharging of the company, having missed the last couple of waves of technology might be able to better skate to where the puck will be than companies who will be trying to defend their position on these waves).

That said, I'll be surprised if Microsoft goes away in the next decade, but I'll also be surprised if Microsoft regains a position as one of the top 3 companies in technology/high tech in the next decade either. But either is possible, even if unlikely, of course.

[mike777]

as I mentioned MS is selling for less than 50% of its marketcap 13 years ago...
Microsoft Cash and ST Investments:
77.02B for June 30, 2013

I agree MS has lots and lots of cash...the owners may prefer to get a check, rather than see the ceo spend it given the last 13 years.

My guess but only a guess that will be the next big fight. Do the owners get that cash, now, or does the next ceo get to spend it on whatever...

Ultimately the question really is can the owners do better with that cash in hand, create more value or will the next ceo?

[billw55]

Vampyr, on 2013-August-25, 20:04, said:

I doubt it. I play games mainly when I am watching TV, or on my iPad if I am on a bus or in the garden or in bed. I don't think that casual gamers are holding off from buying games consoles because they aren't satisfied with the interface; I think that people who are more dedicated to computer games have bought a console, and people who are no very dedicated have not. It seems to me that buying habits will stay the same if different controllers are offered.

Interesting, I agree with your premises but differ with your conclusion.

I also don't think casual gamers are holding off buying consoles because of the interface - I think some serious gamers are doing so. Or at least, they are still playing some games, such as complex RTS and RPG, on PC because of the controls. Or rather, the games aren't available on console because of the controls: try playing Starcraft without enough hotkeys.

Meanwhile, casual gamers are increasingly satisfied with phones and tablets running things like candy crush, angry birds, etc.

[y66]

From Young Tech Sees Itself in Microsoft’s Ballmer by Quentin Hardy:

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“Getting disrupted is the defining characteristic of this industry,” said Aaron Levie, the chief executive of Box, an online data storage company. “You can even have a near monopoly like Microsoft did, and then everything gets redefined.”

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“All technology aspires to be legacy,” said Scott Dietzen, chief executive of Pure Storage, a data storage start-up. “It’s that or obsolescence.”

“The most powerful factor,” he added, “is that the very best talent is drawn to doing something disruptive to the legacy, something new and fresh. And in this business the best are so much more productive than anyone else.”

Mr. Levie, 28, grew up near Microsoft’s headquarters in Redmond, Wash. Several of his schoolmates’ parents worked for Microsoft. Few of his generation, he said, followed their parents there. Among those who did, he said, few stayed.

“I think about being 40 or 50 and being disrupted,” said Mr. Levie, whose company was founded in 2005. “You can be a visionary, and have a great business model, but no tech company can avoid it. There is no quick way to transition into the next thing.”

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Aneel Bhusri, the co-chief executive of Workday, a cloud-based business management software company with a market capitalization of $13 billion, recalled sharing a beer a few years back with Marc Benioff, the founder and chief of Salesforce, a $25 billion company offering sales and marketing software via the cloud.

“It was early days, but we were confident about cloud computing,” Mr. Bhusri said. “Marc said we had about a dozen years, then something else would come along.”

Mr. Bhusri didn’t suggest what that something else could be. That is the problem: When you’re caught up in running your business, it’s difficult to foresee the shifts that could upend it, Mr. Bhusri said.

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“You can imagine a world without Windows, but not without the network, so the cloud feels like it can’t go away,” said Mr. Nelson of NetSuite. “We’re in the middle of where the world is going.”

“I can’t say it’s the last computing architecture,” he said. “It’s my last. The PC was Ballmer’s last.”

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“Microsoft had phones, Microsoft had tablets, but they tried to put Windows in them,” said Zach Nelson, chief executive of NetSuite, a maker of Web-based business software. “They couldn’t leave the PC world behind, even though they saw the change coming.”

Some Microsoft executives did see the change. Ray Ozzie, Mr. Gates’s successor as chief software architect at Microsoft from 2005 to 2010, said in his farewell memo to Microsoft employees that they had to imagine a post-PC world. What, he wrote, would such a world look like?

[mycroft]

I think that Microsoft has been tied to two things for 30 years: the Windows OS and Office. And, to give them credit, both are arguably best of breed, if you're comfortable doing things the Microsoft Way. Certainly Active Directory is best of breed at what it does, and the only thing it doesn't do well is "non-Windows machines" - but then again, why would they? And anything that would imply "no WinOS, or no Office" is "No to that".

It turns out that if you don't need a desktop, neither is best (certainly their attempts to create stripped-down versions of Windows that work on hand-held devices have been suboptimal - anything that gets referred to as WinCE can't be perfect, you know?) and their insistence that it must do Windows and our customers write/plan/present on Office has caught them badly in the past. In fact, the whole point behind Windows Eight was to build something that would work well "everywhere" - on the desktop, on touchscreen monitors, tablets, WinCE phones, ... And frankly, I don't think it *would* be bad on anything without an external keyboard or mouse. You can tell with their latest campaign for "Surface RT tablets" - the tag line is "the tablet that runs Office". Eh? Eh?

(having said that, even as one who thinks the only thing MS does well is mice and routers, if that came in carryable-without-briefcase/purse sizes, like my Nexus 7, I'd be interested. Attachable cover/keyboard/rest is a big thing. But in 10" footprint, it does nothing my Zenbook doesn't.)

Unfortunately they're not the only one pushing the One True Computing Style is Fullscreen Everything - my linux of comfort has gone with (l)Unity, which works *great* on a dual-head 1600x1200 screen and focus-follows-mouse. (So I've switched to XUbuntu, and am investigating others...)

[Mbodell]

mycroft, on 2013-August-26, 10:54, said:

having said that, even as one who thinks the only thing MS does well is mice and routers...

And Excel. Excel is pretty terrific.

[mycroft]

Having never seen a need for it over "building tables", and having had no luck whatever when attempting anything beyond that, and having worked in Business Practise Automation with several companies whose current documentation was in sets of Excel spreadsheets sent back and forth over email (and unchecked, of course)...it may be pretty terrific, but it's a Swiss-Army Chainsaw with instructions in Ukranian to me. And its "-alikes" are at least as good, for 99.9% of the population (frankly, who use it like me, and who occasionally has to read a spreadsheet sent to them from Excel) (and run on my choice of OS).

For the 0.1% - it's the Tool of Choice, and their world would be twice as hard were it not there. And since I have my own set of those, who am I to complain? But hardware. MS is really good at hardware.

[hrothgar]

Mbodell, on 2013-August-26, 13:36, said:

And Excel. Excel is pretty terrific.

So long as you aren't concerned with the accuracy of your results...

The floating point issues are well known.
Less well known are some ppor design choices in their regression code.

These issues aren't going to bite you unless your really worried about numeric accuracy, however, its scary to think about.

[mycroft]

Heh, I just got my latest Excel spreadsheet ...

It's a task list (with delivery dates and effort hours and responsibilities). We're supposed to update it and share it among 10 people.

• Wanna bet how long it takes until we have two incompatible copies?
  
• Or how much human time it's going to take to reconcile them?
  
• Or how much is going to get missed because it got put into a version that *didn't* get reconciled?

For every time we need actual Excel, there are thousands of these. There's task tracking software, of course, which handles all of that for you. But Manglement only speaks Excel...

[y66]

mycroft, on 2013-August-27, 11:22, said:

Heh, I just got my latest Excel spreadsheet ...

It's a task list (with delivery dates and effort hours and responsibilities). We're supposed to update it and share it among 10 people.

• Wanna bet how long it takes until we have two incompatible copies?
  
• Or how much human time it's going to take to reconcile them?
  
• Or how much is going to get missed because it got put into a version that *didn't* get reconciled?

For every time we need actual Excel, there are thousands of these. There's task tracking software, of course, which handles all of that for you. But Manglement only speaks Excel...

That's pretty funny. And pretty typical. Multiply the time spent on problems like this one by the number of Excel users in the world, add in license costs, installation costs, version problems and redundant data problems and pretty soon you have a business plan for the Excel equivalent of Google Drive & Docs.

[Mbodell]

y66, on 2013-August-27, 11:56, said:

That's pretty funny. And pretty typical. Multiply the time spent on problems like this one by the number of Excel users in the world, add in license costs, installation costs, version problems and redundant data problems and pretty soon you have a business plan for the Excel equivalent of Google Drive & Docs.

Yeah, Microsoft will claim that Excel and sharepoint solve this issue. I disagree. To be clear when I said I liked Excel it was to analyze numbers as a single person in a way that is more powerful than most alternatives (more powerful than Google docs spreadsheet) and easier to use than firing up R or some other statistical coding language.

But for task tracking a google spreadsheet doc is much, much better than Excel. The only MS office product that is good at collaborative editing is OneNote.