Automotive systems are one of the key markets for Microsoft as the company tries to move into markets beyond the stagnating personal computer sector and should the reports be true that Ford is looking at moving to the rival Blackberry owned QNX system then Windows Embedded has taken an embarrassing blow in a key market.
More serious though is Bloomberg’s report that Microsoft plans to cut its licensing fees for Windows installed on cheaper devices.
While not unexpected, this will damage the company’s earnings given the Windows division made up 22% of Microsoft’s earnings last year.
It’s clear that the free Android system is beginning to hurt Microsoft both in the smartphone and personal computer markets.
For Microsoft’s new CEO Satya Nadella, dealing with Windows’ place in the new Microsoft is going to be one of his most pressing challenges and will almost certainly define his first year in the role.
As the Internet of Things and Machine to Machine markets grow, Microsoft is going to have quickly decide if the company wants to compete in the market.
“I don’t use ninety percent of what’s in Microsoft Word” has been the complaint of computer users for years as they struggled through the myriad features of box software products.
In the days of floppy disks and CDs, software developers tried to deliver as many features as they could; despite the fact that the ordinary user only needed a core set of functions and that most items on the menus went untouched.
The result was bloated, difficult to use software. The cloud computing model changes this, particularly in business fields like accounting software.
Last week saw a blitz of releases from cloud accounting services with Xero, Intuit and MYOB all making big announcements.
MYOB announced a wide ranging product refresh, Intuit their mobile service and Xero its new board directors that point the direction for its US expansion.
A key part of all the announcement was how the services are all boasting of their partner ecosystems developing add ons that improve users’ functionality.
Once consequence of having an army of developers plugging into the product means that companies don’t have to ship bloated packages that have dozens of features that are irrelevant to each users’ needs.
Xero’s Australian CEO, Chris Ridd, put this well during the week by observing that company aims to “address the basic eighty percent of needs”.
This is the exact opposite of the box software model of the past where vendors would try to pack more features into their products which gave rise to the term bloatware.
Microsoft’s Office package was probably the best example of this massive growth in the product size, with the installation files eventually taking up a full 4.3Gb DVD to deliver something that most people were happy with when WordPerfect 2.0 shipped on three floppy disks.
That change to the software model is a good example of how business practices and methods change as technology evolves; it also illustrates just one of the fundamental changes older software companies are having to deal with as cloud services change their industry.
We can still have all the features we want in a software package, but we’ll just have to connect – and probably pay for the add ons.
Today, we’re more likely to be scrambling to find an add-on rather than complaining about features we don’t need.
Earlier this week Microsoft co-founder Paul Allen celebrated his Seattle Hawks winning the Super Bowl while his former business partner, Bill Gates, still struggles to escape the clutches of the software giant they founded forty years ago.
After a long drawn out process, software giant Microsoft has finally chosen its replacement for CEO Steve Ballmer however founder Bill Gates finds himself firmly trapped in the company’s orbit.
Hoodie wearing Satya Nadella‘s ascension to Microsoft CEO was probably the poorest held secret in the tech industry having been openly reported for several weeks.
Nadella has a massive task ahead of him as the industry that’s been so lucrative for Microsoft over the past thirty years evolves to deal with the post-PC era.
Microsoft CEO Satya Nadella
How Nadella manages Microsoft’s transition will define his business career and tenure at the top job, it will also determine the company’s position in a marketplace where PCs running Windows are no longer relevant.
The biggest news from Microsoft’s announcement though was that Bill Gates will step down as Chairman of the Board and take a new position as ‘founder and technology advisor’.
Microsoft also announced that Bill Gates, previously Chairman of the Board of Directors, will assume a new role on the Board as Founder and Technology Advisor, and will devote more time to the company, supporting Nadella in shaping technology and product direction. John Thompson, lead independent director for the Board of Directors, will assume the role of Chairman of the Board of Directors and remain an independent director on the Board.
Despite leaving the CEO role over a decade ago, Gates finds himself back in a hands on role at the company.
The value of Bill Gates
It’s questionable what value Gates is going to add in the role of ‘Technology Advisor’ as Microsoft’s markets are very different to those the company was founded in and came to dominate in the 1980s and 90s.
For Nadella, it’s not exactly a vote of confidence from the board in appointing the company’s founder to hover over his shoulder offering helpful advice.
On a personal level this must be disappointing for the founder and former CEO as well in that his mind is on far greater topics such as eliminating malaria through the Bill and Melinda Gates Foundation.
Trapped by Microsoft’s gravity
Gates’ situation though is a classic example of a business founder who’s never been able to get out of the orbit of their business. Despite their best efforts, they keep being dragged back to give a helping hand.
Bill Gates’ dilemma though shows how tough it is for business founders to escape the gravitational pull of their creations, even when it’s as big a business as Microsoft.
Paul Allen showed how to step away from a business and is enjoying life, Bill Gates’ story though is much more typical for business founders trapped in the enterprises they built.
Microsoft’s evolution to the post PC era has been a fascination of this blog for several years now as the company’s once flagship Windows becomes irrelevant in a world dominated by smartphones and tablet computers.
The launch of Windows 8 and the Surface tablet were the great hope for the company, but it appears the business model that built Microsoft into one of the world’s biggest companies is doomed. Microsoft is shifting to the post-PC era where Windows has little role.
Yesterday’s financial results emphasised the shift as the consumer licensing business fell 6% year against last years revenues while the company’s overall revenues rose 14% – the old consumer Windows business is dying.
This is illustrated in the company’s quarterly report, where the business units that delivered the growth were all in non-Windows areas.
SQL Server continued to gain market share with revenue growing double-digits
System Center showed continued strength with double-digit revenue growth
Commercial cloud services revenue more than doubled
Office 365 commercial seats and Azure customers both grew triple-digits.
Drilling down into the numbers the trend against Windows is even more stark, here’s a chart of the performance of the division over the last ten years.
Microsoft Windows division financial performance
As we see, life was good for Microsoft Windows until the iPad arrived.
Following Apple’s proof that tablet computers could deliver what business and home customers wanted from a portable device, Windows’ revenue stagnated and now income and margins are falling.
The devices and services strategy of outgoing CEO Steve Ballmer recognises is a reflection of how Windows is becoming irrelevant to the business.
It’s hard to see where Microsoft now goes with Windows, the product still remains a key part of the business with 22% of revenues – although that’s down from 27% last year – and its hard to see a buyer parting with the hundreds of billions the division would be worth as a stand alone business.
For Steve Ballmer’s successor as Microsoft CEO dealing with the Windows problem will be one of many big issues they’ll have to deal with, the future of the once iconic product though won’t define the future of the business.
One of the most dangerous things in computer malware is the Zero Day Exploit where an error in a program is used by the bad guys before it can the hole in software can be fixed.
A particularly irritating zero day exploit is the TIFF bug in Windows systems where users using Microsoft products can be fooled into opening what appears to be an image file but what turns out to be something more malicious.
Even more irritating with this bug is that Microsoft aren’t going to fix the problem in Windows XP systems until January’s patch Tuesday which means many people will be susceptible to this problem for nearly two months.
Zero day exploits are a good reason why every computer user needs to have an up to date virus checker and to take basic precautions before surfing the web or downloading email.
For Windows users it might be worthwhile taking extra care with email attachments for the next few weeks.
