Inevitable Microsoft Decline (editorial)

Peter de Vries has sent us an editorial on why he believes that Microsoft will decline in the future. Interesting stuff.

What follows is an editorial by Slashdot Reader Peter de Vries

Why the decline of Microsoft's power in our industry is inevitable

Peter de Vries [e-mail]
Sunday, April 12, 1998

A large segment of both the open source community and the computer trade press seem to have a certain sense of fatalism about Microsoft's control over the industry. According to them, it seems like nothing can stop the giant. No matter what the ingenuity of a new idea or apparent bright outlook for a new firm - a Microsoft copy-cat or buyout is "only a matter of time". I find this somewhat of a disturbing trend, especially the error in judgement on the part of the industry press. Their many years of seeing empires come and go should have taught them better.

In this essay, I've set out to cover three key factors that I believe will lead to a serious decrease in Microsoft's overall industry dominance in the next half decade:

Realizations by the corporate world.

The very fact that so much attention has been given to Department of Justice's probe into Microsoft should be an indication that the corporate world is waking up to the state of the computer industry. Why do I single out corporate interests in particular? Because most major transitions in computing technology have been foreshadowed in the corporate marketplace long before "six pack joe" realized what the next "wave" was going to be. The purchasing decisions made by corporations help form the personal preferences of their employees. These decisions also effect what products are taught (and therefore promoted) in educational environments.

Corporate software consumers are becoming more discerning. Once educated, their purchasing decisions tend to be based more on tangible benefit (increased profits) rather than marketing hype or brand loyalty. People are realizing that graphical computing doesn't have to be synonymous with Microsoft Windows. Purchasing managers and technology integrators are realizing there is more than one way to fry an egg. You don't need Microsoft Word to do word processing. You can use a competing product and have similar levels of productivity. The increasing appearance of "educated" consumers is going to force Microsoft to deal with my second major factor:

The divergent nature of Microsoft need's versus those of it's clients

In addition to learning about the state of the industry as a whole, people are learning about Microsoft's business practices. What they are learning is that despite popular belief, Microsoft isn't driving to create products that are "insanely great" (to borrow a phrase from Steve). Instead, they are driving to create products that increase their market share. Bill Gates is a capitalist first and a technologist second. Unfortunately for Microsoft, what's good for their market domination objective may not (and increasingly is not) good for their clients.

What company wants a major input factor of it's operations to have only one supplier? None that I know of. Consumers desire interoperability - but Microsoft can't easily offer that in the context of it's current business model. Interoperability would allow you to purchase someone else's product down the road if Microsoft falters on price or performance. Witness ActiveX & OLE. Both did little to improve on the existing technology they were based on. Both technologies were proprietary while the pre-existing technologies were not. Both failed. Both tended to serve Microsoft's sales interest but offered little of benefit to the consumer. Hence no one bought into them.

The fallacy of Microsoft's appearance as a "industry leader" (technology wise) is beginning to be exposed. Because of these failures, it's becoming clear that Microsoft creates very few technologies that people actually want. Instead, their creative energies tend to be devoted to designing technologies that increase their future option for a sale.

Case in point: Internet Explorer 4.0. Microsoft did an admirable job at catching up to Netscape in terms of HTML capability in just 12-18 months. At the third generation of browser both were pretty much neck and neck in terms of feature set. Why is it then that in the forth generation, IE didn't pull away from Netscape in terms of HTML implementation? Why isn't IE4.0 thought of as revolutionary product instead of evolutionary? Did Microsoft scale down it's personnel and finance allotment to the browser division for 4.0? Certainly not.

The apparent lack of progress in advancing the web paradigm is due to where attention was paid. Instead of focusing on increasing the browser's ability to accomplish it's primary function, they added proprietary features to the product such as CDF, ActiveDesktop and shell integration. The problem for Microsoft is, most people couldn't care about the features they chose to develop. The result was a comparable product to Communicator when evaluated in terms of the features people actually wanted. Nevertheless, the resulting product cost Microsoft many times what Netscape spent on developing Communicator.

The trivialization of Microsoft's core technologies

The third major factor which Microsoft faces is the travialization of it's core technologies. One only has to look at the balance sheet of Microsoft to realize that the vast majority of Microsoft's revenue comes from it's Windows and Office franchises. Both of these core franchises will face major challenges in the near future.

The Windows empire was built on the basis of a golden rule Bill Gates learned long ago: "compatibility is king". Windows 3.1 caught on because it could co-exist with legacy software. Windows'95 defeated OS/2 out of the box because it could run legacy DOS and Windows 3.1 software - software that was intrinsically tied to the MSDOS/IBM PC based architecture.

However, these days software is written much more abstractly, in C/C++ as opposed to assembler, using linear 32bit memory models instead of being tied to the crazy segmented architecture of the 16bit x86. Through the progression of time, most firms have replaced any 16 bit MSDOS based software that formerly would have been a major concern when looking at purchasing an OS. Internet technologies such as HTML and Java are quickly becoming prevalent in the corporate world through the deployment of Intranets. These technologies don't rely on any specific OS. Many of the specific technological concerns that made the Windows family of products so compelling in the past simply don't apply anymore.

Microsoft's Office family of applications gained dominance for two reasons. First, Microsoft's competitors didn't want to build a comparable product. Second, by the time Microsoft's competitors figured out they did want to build a comparable product, Microsoft controlled the only OS that such a product could be realistically implemented on. Obviously the first factor no longer exists - software companies recognize the profit potential of graphical productivity applications and are desperately looking for a way into the market.

In the past, the second factor has allowed Microsoft to stay ahead of the development curve. While other companies tried to offset Microsoft's head start by adding some creative features to their products, Microsoft simply poached these features and consistently provided a better all around solution. Now the situation is prime for a reversal. Microsoft has brought the graphical word processor, spreadsheet and database to their pinnacle. One only has to look at the obvious lack of new innovation in Office'95 (a simple 32 bit transfer of 2.0), 97 and 98 to see that there is little of genuine value left to be added to these products.

As a result of this stagnation, other "suite" software companies have started to return Microsoft's early 90's favor - completely copying their software and undercutting them at every turn. Is it any surprise the Corel, Applixware and Star Office looks similar to Microsoft products? In the future Microsoft will have a tough time continuing to charge what some have termed the $350 "upgrade tax" for new products that essentially don't offer anything of real value over the last revision. At the same time, Microsoft's competitors will be knocking down doors with knock-off products sold at cut rate pricing.

Parting thoughts

To conclude, when people tell me they are concerned about the state of the Industry, I say, don't worry. This industry is young. In just two short decades this industry has gone from a human interest story to the largest sector of the Western economy. Although Moore's law states that processors double in computing capacity every 18 months, people are still trying to grasp the dynamics of an industry that is so very different in comparison to conventional economy. As a result, temporary imbalances are sure to occur. Market forces will eventually cause these imbalances to be worked out.

It will probably take some severe hit's to Microsoft's revenue before they learn to operate as more of a team player. They too will learn as IBM did that it's a fatal mistake to think you can control this trillion dollar enterprise we call personal computing. And just like IBM, they probably won't go bankrupt or even become unprofitable - they'll just learn they can't control the world. In the mean time, I'm looking forward to the future of this, the most exciting industry on the planet.