Microsoft Misplays at CES 2010

CES – Consumer Electronics Show in Las Vegas is devoted to gadgets and entertainment. Yes, PCs and computers are accepted – but the lighter and the redder they are the better. So Redmond’s PR top command should have been able to supply CEO Steve Ballmer with plenty of eye catching material about XBox, Project Natal’s human smart game controllers and more than halfway hints about whats going to be in Windows Mobile. And on the PC side there was the HP Courier promised for later this year plus a raft of fullscreen, multi-touch, thin, light notebook goodies.

So IT pundits were expecting a rousing, “Microsoft, Microsoft, Microsoft everywhere” kind of exciting keynote from Steve. What they got was “Not Exactly”. In fact attendees had to suffer through a long, parabolic distortion of stats on Windows 7 and Bing’s success [see eWeek’s frank appraisal of Windows 7 here]. But for IT journalists that is part of the job – penetrating through Redmond’s PR Flak attacks. There was some substance as well:

-The usual Marketing Jabber about Windows 7, Zune, Netbooks and Bing.
-Some hints about 2 or 3 slate/tablet computers; but as always deferring to Apple and its upcoming announcement on January 23.
-Lots of new features to come to Windows Mobile phones including TV and broader interconnections
-Mediaroom 2 demo and keeping pace with TV and 3D movie technology
-demo of and promises to deliver the impressive Natal gaming technology in a product soon
In general, gosh Steve was excited about what Microsoft had to offer this year.

But the pundits begged to differ:
enGadget – “Wow. Incredibly boring. Incredibly, incredibly boring. Really”
MSNBC – Microsoft generates little buzz in CES opener
TGDaily – Microsoft’s Ballmer keeps audience in the dark
eWeek – scathing assessment:10 Reasons Why Microsoft Disappointed at CES
Paul Thurrott’s Windows Supersite – even a Windows fan was skeptical at best
But why should the pundits expect any difference. Steve Ballmer is the defensive specialist at Microsoft. Bill Gates as Chairman is still the offensive strategy man. And Bill’s Redmond formula is to preferentially not pioneer; let others take the cost of setting the table – then copy, clone and extend on the market proven technology with Redmond’s own vintage. Use Microsoft’s monopolies on desktop technologies like Windows, Office, Exchange, IE and others to act as leverage in helping to secure a comparable dominant position. So why argue with past success? Well the argument among the pundits seems to be that Microsoft needs to be more offensive.

The Need for Offensive Punch

The consensus among the pundits is that they are impatient and want to see more transparency and frankness on the key issues confronting Redmond. They also want leadership. There are critical factors like Windows 7 upgrade/service pack. When and what will be in the much awaited Windows Mobile Phone 7 OS? Can Microsoft close the gap on Google’s move to Web dominance beyond Search extending now to all software/hardware utilizing the Web.

I don’t disagree with these assessments but extend the question and ask if Microsoft can use its copy, clone and extend others pioneering efforts any more? Take Windows Mobile OS. Its generally conceded that Windows Mobile is well behind the major players – Apple, Google, RIM, and Palm in features as well as market share. And Windows Mobile 6.5 was no help. Here is the crux of the enGadget review on WinMo 6.5 :

Put simply, 6.5 won’t win a single user to the platform, even though the snazzy hardware that’s running it just might. What it does do is make the full touchscreen use case just bearable enough to keep users already in the WinMo ecosystem hanging around — and a stop-loss plan is exactly what Microsoft needs while it gets version 7 locked and loaded over the next few months. Let’s make it happen, guys.

Windows Mobile raises the question – can Redmond afford to run from behind anymore. Three factors says no.

First, the rate of change in many electronics/computing markets is so fast that both the first mover advantage on breakthrough features is large and the catch up time is much shorter. This can be seen in the Mobile Phone market where Apple’s first mover advantage of 100,000 plugins act as a barrier to entry for all other players – much like Microsoft’s millions of apps for Windows has helped preserve its monopoly through virus and Vista shortfalls.

But also consider that catchup time has fallen. The CES 2010 show is a good example. Google, Palm and RIM all announced new features in their Mobiles that are available now and further raise the bar versus Windows Mobile 7 which won’t be available til the end of the year at the earliest. Catchup time is reduced and any faltering in these hyper active markets puts also rans like Windows Mobile further behind.

Second, the players in the market are mature and savvy to Microsoft’s prowess and game plan.
All the players in the mobile phone market are well aware of Redmonds ability to start a distant second yet finish on top. Hence all of the vendors but especially Apple and RIM tend to be ultra-secretive about their offerings not allowing Redmond to clone/copy based on leaked or pre-announced features. Also significant open sourcing, particularly in the case of Google, restricts two Microsoft ploys: 1)low ball or zero pricing key portions of the solution set [think of free BI to sell SQL Server and free IIS and IE to kill Netscape]; 2)seeding a market with free Microsoft code and/or development software and/or support. But Google and others have already made key parts free as open source code and tools. In sum, first mover, leading player and open source reduce the chances of Microsoft establishing their proprietary technologies in steps to achieve monopoly advantage. Also all of the players are well aware of Microsoft’s willingness to promise standards and then renege or even sabotage as in the case of Web standards like HTML, CSS, DOM, JavaScript etc.

Third, and perhaps most important, more than ever before systems need to be integrated. This means a lot of devices like mobile phones, eReaders, cameras, netbooks and game systems need to be integrated both internally and externally with each other. In the latter case, this tends to de-leverage Microsoft’s monopoly hoistings because Microsoft has to offer connections to Android, Kindle, iPone, Facebook, Twitter, Myspace and other direct competitors to MSN or other Redmond offerings [see integration topic below]. Also Microsoft has to deliver on Web and other standards and can no longer afford to delay or sabotage W3C, Web, device and other IT standards in order to insure that “things run best on Windows”.

The rise of smartphones and Kindle-like eReaders has shown that Redmond no longer controls the user interface to computing power with Windows. Consumers voted with their dollars to go for alternative UI innovations first with PDAs, then iPods, iPhones, smartphones, Garmins, Kindle eReaders and the scores of new UI devices shown at CES 2008 thru 2010. Microsoft got a reprieve on Netbooks by backfilling with a resurrected Windows XP [the Vista and Windows 7 bloaters would not fit – see here]. With the upcoming merger of iSlates, eReaders and Netbooks, integration with competitors plus open standards in both hardware and software becomes the rule of the road. In short, this means that Microsoft can no longer preferentially pick what Windows supports and interfaces with. The problem is that Micrsofties still think they can.

Integration internally means how well a provider integrates with all its own offerings – backend plus consumer development side. With Windows this has been a mixed bag as both Windows Vista/7 and Windows Mobile have lacked the software oomph to do things Android and iPhone can do. But internal integration also means offerings a uniform development and delivery environment which Microsoft is hard pressed to do with so many different OS platforms to target to: Windows 2010 Server 64bit, Windows 7 32 + 64 bit; Windows XP for Netbooks, XBox 360, Windows Azure for the Cloud, Windows Mobile 6x– and Windows Mobile 7. Can you imagine the headaches in supporting let alone having to develop for even a group of these platforms?

Courtesy of Mary J Foley, I leave the last words on innovation to Mark Andersen of Strategic News Services:

The Phone vs. the PC: A Split Along Two Paths (enterprise vs. consumer).Note: The phone is now the most interesting computer platform, and it is driving innovation: software, business models, distribution. Netbooks are next up as drivers….Microsoft loses in its Consumer play: except for gaming, it is Game Over for MS in Consumer. This will make Consumer the place to be, where the most robust and exciting change artists will work….2010 will be The year of Operating System Wars: Windows 7 flavors, Mac OS, Linux flavors, Symbian, Android, Chrome OS, Nokia Maemo 5. The winners, in order of unit sales: W7, Mac OS, Android. W7, ironically, by failure of imagination and by its PC-centric platform, actively clears space for others to take over the OS via mobile platforms.

Finally, there is another factor at play here about Redmond and Steve rough reviews.

Failure to Apologize

Perhaps just as important as missing presence or features to the pundits has been Microsoft’s failure to apologize for its mistreating consumers, loyal users and supporters. There were no apologies for its antitrust transgressions. There were no apologies for its succumbing to browser and virus attacks through the late 1990’s and early 2000’s. There was one mea culpa by Bill Gates for for 5 years of no updates to IE from 2001 until 2006′; but then Microsoft continued to fall way short on HTML, CSS, DOM, SVG, JavaScript and other Web standards through IE7 and IE8[and contrary to Bill’s promises slow on the IE refresh cycle]. And no apology for the Vista boondoggle. Computerworld’s Preston Gralla expresses the sentiment well here.

The Antitrust case of 1998-2000 marked a transition of the Microsoft from this awshucks, boy entrepreneur and PC hero in Bill Gates to the “doing evil” monopolistic company. It was as if Microsoft had become the monopoly-protecting company that it had mocked in IBM 20 years earlier. There has been many opportunities since Steve Ballmer took over 10 years ago from Bill Gates as CEO to re-orient the company towards its customers and suppliers. Even Goldman Sachs Lloyd Blankfein had the sense to make at least a sorry apology for Goldmans malfeasance in the Financial Crisis. But Steve has offered neither an apology nor a change in the hardline style of the company; hence there is very little sympathy among the IT pundits now that Microsoft has to play serious catch up in just about every one of its key markets.

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