Paul Wallbank – Brilliant Communications

Tag: microsoft

  • A question of incentives at Microsoft and Apple

    A question of incentives at Microsoft and Apple

    Ben Thompson on his Stratechery blog speculates what Apple would be like were Steve Ballmer running the company.

    Thompson makes an excellent point – that Ballmer has been very good in building a company driven by incentives like salaries, bonuses and titles. It describes Microsoft very well and highlights the companies strengths and weaknesses.

    Were Ballmer to run Apple, Thompson concludes, it would be a far more profitable company than it is today but it would be fading into irrelevance just as Microsoft is.

    That makes sense as Microsoft under Ballmer has been able to profit from the dominant market position it built up in the late 1990s, but the company has struggled against innovative competitors or the big market shifts following the arrival of smartphones and tablet computers.

    Where Thompson is on more shaky territory is citing Amazon as another example of where profit is less important than innovation;

    Amazon famously makes minimal profits; Microsoft made more money last year than Amazon has made ever, yet Amazon too is far more relevant in the consumer market today than is Microsoft.

    Amazon may well be more relevant to the consumer market today than Microsoft, but that’s largely on the back of a business model built on shareholders subsiding customers – something that Apple has never done.

    It may well be that when investors get sick of propping Amazon up, the company’s business model will have to change. Should Amazon have a Microsoft like dominance of the online retail or cloud computing markets then customers might be in for a nasty dose of sticker shock as profits are maximised.

    Ultimately incentives are what shapes a company’s culture – whether the incentives are built around stack ranking, commissions or currying favour with the founder, they will determine how the business behaves.

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  • Mr Ballmer regrets

    Mr Ballmer regrets

    Following the announcement of his pending retirement, Microsoft CEO Ballmer held his first interview for twenty years with ZD Net’s Mary-Jo Foley.

    During the ZD Net interview, Ballmer and Foley ranged over subjects ranging from his possible replacement, reasons for retirement and his greatest highlight during his thirteen year tenure as CEO.

    Foley’s asked Ballmer what was his greatest disappointment as Microsoft CEO and, not surprisingly, he nominated the development of Microsoft Vista.

    I would say probably the thing I regret most is the, what shall I call it, the loopedy-loo that we did that was sort of Longhorn to Vista. I would say that’s probably the thing I regret most. And, you know, there are side effects of that when you tie up a big team to do something that doesn’t prove out to be as valuable.

    Those side effects of Vista’s botched development were felt across the PC industry as the operating system’s overlong development and disappointing performance broke the three year upgrade cycle that underpinned the sector’s business model.

    Unlike the similar debacle eight years earlier with Windows ME where Microsoft’s market position was unchallenged, Vista came along at the time the computer industry itself was being disrupted by smartphones leaving the entire PC industry exposed to a major shift.

    Now Ballmer’s successor will have to deal with the industry’s broken upgrade model along with the post-PC era where desktop and server operating systems are no longer the key to controlling the market. Every option is a challenge to Microsoft’s existing businesses.

    As discussed in Ballmer’s interview with Mary-Jo Foley, Microsoft still sees its future in consumer IT, whether that includes continuing the company’s three screen strategy of supplying Windows on the desktop, tablet and smartphone will be one of the early and critical decisions the next CEO will have to make.

    While Microsoft Vista might have been Steve Ballmer’s biggest mistake as Microsoft CEO, the challenges ahead for the company’s board and management are great, it’s going to take strong leadership for the once dominant software giant to maintain its place in a radically changed market.

    Song of the day – Ms Otis regrets by Kirsty McColl and The Pogues.

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  • Fighting in the sandbox

    Fighting in the sandbox

    The current spat between Microsoft and Google over the Windows Phone YouTube app illustrates the value, and hindrance, of the internet’s walled gardens.

    Google’s locking Microsoft Phone users out of YouTube shows the strength of these online empires and when coupled with control of the mobile phone platforms, as Google has with Android, it makes it hard for outsiders to compete.

    In one respect, this is corporate karma coming back to bite Microsoft who ruthessly exploited their market position with Windows, MS-DOS and Office through the 1990s and early 2000s.

    That doesn’t change the problems facing Microsoft Windows Phone users who want the same access to internet services enjoyed by Android and iPhone owners.

    Being locked out of a service because of the product you choose to use is in many ways the antithesis of the internet and challenges the underpinnings of the online economy.

    All internet and mobile phone users need to watch how this spat between Microsoft and Google develops, captive markets aren’t good for anyone.

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  • Google and Microsoft show how online business is changing

    Google and Microsoft show how online business is changing

    Both Microsoft and Google yesterday reported their second quarter earnings for 2013 and both missed the targets expected analysts. Does this really mean anything?

    Microsoft’s earnings were particularly notable as they included a $900 million dollar write off on Surface RT inventories, this almost certainly means a key part of the company’s tablet strategy has failed.

    What’s striking in Microsoft’s earnings report is the terrible performance of the Windows Division which saw sales increase 10% year-on-year to 4.4 billion dollars, but earnings collapse by over 50%. Excluding the Surface RT write off, the division would still have seen a ten percent fall.

    The company’s statement emphasised how the division is struggling with increasing costs.

    Windows Division operating income decreased $1.3 billion, primarily due to higher cost of revenue and sales and marketing expenses, offset in part by revenue growth. Cost of revenue increased $1.2 billion primarily reflecting product costs associated with Surface and Windows 8, including the charge for Surface RT inventory adjustments of approximately $900 million. Sales and marketing expenses increased $344 million, reflecting advertising costs associated with Windows 8 and Surface.

    At Google, the company’s 2nd Quarter report show trend is still upwards but the core business of online advertising is showing some cracks as the total number of paid clicks grows, but the value of each falls. At the same time traffic aquisition costs are rising at the same rate as revenues.

    This could indicate that advertisers’ appetite for online links is fading. For smaller businesses, the cost of adwords campaigns has been escalating to the point where the old days of newspaper classifieds and Yellow Pages listings start to look cheap.

    Couple the cost of advertising with the inevitable ‘ad blindness’ that web surfers have developed and a worrying trend for Google starts to appear. Overall Google’s net profit margin was 26%, down from 31% a year earlier.

    While both companies remain insanely profitable – Google earned $14 billion this quarter and Microsoft $6 billion – both businesses are showing stresses as their markets evolve. It proves no business can afford to be complacent in these times.

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  • Google and the workplace

    Google and the workplace

    Over the years Google has attracted attention for its employment practices, particularly for its quirky interview questions which challenged many a genius.

    It turns out those brainteasers have proved to be less than effective, as has the interminable interview process that saw job candidates endure dozens of meetings before being offered a role at the company.

    A recent New York Times interview with Laszlo Bock, senior vice president of people operations at Google, discusses some of the company’s employment experiences along with some of the ways the organisation manages staff.

    What’s notable is Bock’s findings on Google’s gruelling interview process with its brain teaser questions;

    We looked at tens of thousands of interviews, and everyone who had done the interviews and what they scored the candidate, and how that person ultimately performed in their job. We found zero relationship.

    The New York Times interview is particularly interesting as it reveals much of Google’s legendary employment criteria – particularly that of hiring only graduates with high university marks – turned out to be effectively useless.

    Most telling though is what Bock found about managers and leadership;

    We’ve actually made it harder to be a bad manager. If you go back to somebody and say, “Look, you’re an eighth-percentile people manager at Google. This is what people say.” They might say, “Well, you know, I’m actually better than that.” And then I’ll say, “That’s how you feel. But these are the facts that people are reporting about how they experience you.”

    You don’t actually have to do that much more. Because for most people, just knowing that information causes them to change their conduct.

    Who would have thought that accountability would make people behave better and more effectively?

    Despite Google’s learning on hiring and management, things still go wrong. Business Insider’s Nicholas Carson has a wonderful story on the difficulties at restaurant review site Zagats which was taken over by the search engine giant and absorbed into their maps and geolocation divison.

    The problems at Zagats though owe more to a cultural mismatch, as Carson writes;

    It’s about the collision between the wealthy dream world of the technology industry and the scratch-and-claw meager existence of freelance writers.

    One of the notable things about the current dot com boom is the contempt technologists and entrepreneurs have for content creators.
    In the Silicon Valley view of the world founders and coders deserve to be generously paid but artists, musicians and writers should be thankful for the exposure they get and the odd dime thrown their way.
    Google’s struggles with Zagats also exposes another problem with the tech industry’s hiring practices – that of ‘permatemps’ who never get on the payroll and have few benefits and no security. For years this was a problem at Microsoft and it remains a common practice today.
    The story of Google’s evolution in hiring practices and HR policies is something all managers should read as it describes the risks of relying on gut feelings and the importance of workplace accountability.

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