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Mix’08 Review: How Microsoft Is Fighting a War on Three Fronts
Microsoft is fighting a war — one in which it’s being attacked on three sides. Cut through the flurry of announcements out of its Mix conference this week and what emerges is the Redmond giant’s three-pronged defense strategy: consumer, enterprise and developer. Only by understanding the battles Microsoft is fighting does it become clear where the company is headed. So we’ve broken it out for you here.
The consumer attack
The front: Desktops, handsets and consoles. Flanked by Apple’s cooler desktops and devices, Google’s insight into users, and the Nintendo/Sony console world, Microsoft is struggling. Windows Mobile isn’t a consumer handset like the iPhone. Live hasn’t really taken off. Vista flopped, with the company embroiled in claims that it overstated the number of machines on which it would run. And the Xbox, despite its success, has an alarmingly high recall rate. Perhaps most frighteningly, it’s becoming clear that when it comes to consumers, advertising is paying for it all (what Chris Anderson calls the “freeconomy”). But Microsoft isn’t plugged into that ad stream.
The defense: One OS to rule them all. Users have dozens of devices, and Ray Ozzie wants them all to work seamlessly together. Expect Danger, Zune, Xbox and Vista to share and synchronize automatically. Carriers and labels will love it. Consumers will settle for it. And once they’ve got a central identity, they’ll be able to carry their desktop applications (with varying degrees of functionality) from their desk, to their car, to their hip, to their sofa.
But how to pay for it? What Microsoft needs is an ad network like Yahoo, and media formats like Silverlight that lure advertisers. Ballmer’s clearly not resistant to the concept of advertising: In an on-stage Mix interview with Guy Kawasaki, he performed a mini-monkeyboy dance, only to demand of the person who had requested the jig: “If your buddy behind you just gave you a buck, I want 50 cents.” He knows where his consumer revenue’s coming from down the road.
The enterprise attack
The front: On-demand apps and a mobile workforce. Salesforce.com has gone from a turnkey contact manager to a full-fledged ecosystem for developing CRM applications. Amazon lets hundreds of upstarts build project planning, accounting, word processing, messaging and more — apps that traditionally filled Microsoft’s coffers. Standards like OpenID give interoperability without buying a suite. As companies realize the inevitability of on-demand computing, Microsoft has to completely change its business model. And on the mobile front, Windows Mobile can’t hold a candle to the BlackBerry.
The defense: Connected productivity and an easy move into the cloud. Expect the firm to retrench on mobility. Exchange still holds the bulk of business users’ internal relationships. More and more, it’s focusing on workflows and business process. Moving those processes between the enterprise server, the mobile device and the web — seamlessly — would be a big win that companies will love. With Danger, Windows Mobile can stop being a tweener and go after Research In Motion. And Microsoft’s asp.net architecture is still the easiest way for its legions of developers to build online applications.
When companies are ready to port their data centers into the cloud, Microsoft will make the transition as painless and transparent as possible using Windows Live Storage, SQL Server Data Center Services, and other services with codenames like CloudDB, Horizon, and Live Core that execs are still tight-lipped about.
The developer attack
The front: Open source, web apps and video. The thing Bill’s always done right is focus on developers. He put in functions. He opened up APIs. He showered them with development resources. And it worked. But today, we have Sourceforge for snippets of code. Eclipse gives ActiveVisual Studio a run for its money. We built Web 2.0 with Flash, AJAX, Ruby, Python — the language of the web isn’t .net, and it hurts. When it comes to video, Microsoft’s Silverlight seduces content providers with tracking and ad support, but we’ve already built those things out of Flash ourselves. And Microsoft’s notoriously long release cycle for Longhorn impacted its ability to react to market changes.
The defense: New Lego. Remember old Lego, which only had a few pieces? You had to carefully build the front of a spaceship from thin rectangles and dozens of identical bricks. But new Lego is different. There’s a single piece for the front of the spaceship. And while old-school Lego types cry foul, now pretty much anyone can build a spaceship.
That’s Microsoft. New features in Internet Explorer 8, working in concert with the company’s web servers, will make it easy to drag-and-drop sex appeal into the application without needing much talent. And enterprise developers will embrace it, as they always do, because it’s easy. Things like Feedsync and Sliverlight will make it that way. Even the Popfly site makes anyone who can drag a mouse a coder, performance be damned. By breaking the software into services, there will be less delay between releases, which should fix the Longhorn drought.
How will the battle go?
Mix08 was an upbeat event. But read between the lines, and it’s clear that the company is bracing for a fight from several sides at once. Don’t write off Microsoft: We were here once before, when Netscape was going to put the company out of business. But Gates issued an edict, the company turned on a dime, and a few years later IE was the dominant web browser.
But you never want to fight a war on multiple fronts, and that’s what Microsoft faces in battles for consumers, enterprises and developers. If it survives, the Microsoft of tomorrow will be a very different company.
Mobile social networks, don’t go it alone
The web-based social network boom and the rising use of cell phones for non-voice functions, makes the trendy ‘mobile social network’ phenomenon an obvious area for investment. But the reality is that it’s difficult to base a business off of just turning an unknown brand into a single mobile social network. You need a lot of money to grow the subscriber counts, and mobile users aren’t so enthused about mobile data in most markets around the planet.
Only 4% of U.K. mobile users and 6% of U.S. mobile users have uploaded content to social network sites (including sharing sites or blogs) from their phones, according to Telephia. That’s just uploading mobile content, and doesn’t include any of the other mobile social network features from the mobile web, or an application. And with MySpace mobile leading the way in these small markets, with 32% of U.S. mobile upload traffic and 21% in the U.K, what do you do if you’re a small startup with a little-known mobile social network?
If you’re InterCasting, a startup founded by CEO Shawn Conahan, you try to make friends with your web-based potential competitors. The company has been working on building its mobile social network and chat service Rabble for several years now, but has recently started selling a technology platform service for carriers and web-based social network providers. Basically, social network providers can plug into Intercasting’s gateway via APIs, and the service combines a server software and a handset client.
Conahan, in an email response to GigaOM, said: “I agree that it is difficult to start a mobile social networking business from scratch, AND it is cost-prohibitive for existing social networking sites to build their own mobile applications, and that is why we think enabling the whole opportunity is a better approach.”
The company’s investors must think the strategy shift is a good move, otherwise they wouldn’t have handed over another $12 million in a Series B financing, led by Venrock and including existing backers Avalon Ventures and Masthead Venture Partners. We had mentioned that the company was looking for investment in a recent post.
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Why Apple shifted coders to iPhone
Anyone looking for proof of the strategic importance of iPhone to Apple doesn’t have to look beyond Apple’s press release page — the company is delaying the next version of its Operating System, code-named Leopard, by four months, and instead shifting resources to iPhone, now slated for late June 2007 release.
The press release issued by Apple points to a weak link in Steve Jobs’ grand design for global digital domination: not enough minions.
However, iPhone contains the most sophisticated software ever shipped on a mobile device, and finishing it on time has not come without a price — we had to borrow some key software engineering and QA resources from our Mac OS X team, and as a result we will not be able to release Leopard at our Worldwide Developers Conference in early June as planned.
The future of Apple is devices. Non-computing consumer electronic type devices are much less powerful than traditional computers, and need programmers who are thrifty in their code and skillful enough to squeeze the very last pico-hertz of performance out of lower-power embedded processors.
It is even more important in the mobile phone world, where poorly written code could simply negate the best efforts of hardware engineers. Apple doesn’t want to do that — it has a beautiful device, with an elegant user interface. However, lethargic applications and poor battery life could destroy user experience and chill the demand for even the hottest phone on the market. Apple historically has been home to coders who squeezed every drop out of those low-powered Motorola chips.
Typically, OS upgrades have provided a financial boost to the company’s profit margins, but this shuffle indicated that Apple is glad to forego those profits and instead opt for its next big cash cow - iPhone.
Now we can smirk, and point to the fact, Apple did drop Computer from its name after all.
PS: This delay should stop those Vista-delay jokes, because those who live in glass houses don’t throw stones.
Photo by Niall Kennedy via Flickr.
Why do we have a VoIP patent mess?
Verizon’s lawsuit against Vonage is the VoIP version of showdown at Ok Corral!
The weary entrepreneurs have gone from fighting the regulatory morass to fighting the patent morass. The ability of Verizon et al to play the dimensions of uncertainty associated with patents makes one nostalgic for the ability of Verizon et al to play the dimensions of uncertainty associated with the regulatory pronouncements of the FCC. Anyone not attracting a patent lawsuit should feel a bit embarrassed. All the companies with some claim to success will get their turn before Verizon exhausts its legal budget.
Lost among the legal theories, predictions of Vonage’s demise, and the wishful claims Vonage’s troubles are unique is the fact that the future of the VoIP industry depends on challenging vague, generic, overly broad patents. The hope for low cost communications, cool applications, and connected devices has been lost in a patent system gone wild, where companies file patents, just as telemarketer dial for dollars.
The birth of the VoIP industry happens to coincide with the greenlight on “method patents” aka software patents. The framing of Verizon’s patents as “technology innovations” reflects a press release version of reality. Verizon’s patents address methods of communication between network elements.
They would have been unpatentable as little more than mathematical algorithms until lawsuits overruled the patent office’s distaste for method patents in 1999. Efforts to establish the quality of method patents represents a particular challenge, because applying companies pursue an application fatigue strategy. Companies make a long list of broad claims and await rejection. They use information in the rejection to refine the claims and repeat the process.
Method patents remain in dispute and Congress appears ready to pursue reform, but the VoIP industry seems unlikely to survive long enough to benefit from a cure. The need for a better means of vetting software patents motivated IBM, Microsoft, GE and others to assembled a public peer review process in conjunction with the patent office, but other priorities and a slow start mean the project does not offer a near term solution for the VoIP industry.
Participants in the VoIP industry will need to quit cowering in the corner and initiate their own efforts to move the patent process back toward meritocracy. The three surviving patents Verizon claims Vonage infringes represent a good place to start. They look like the prototypical “garbage patent” clogging the system.
Five years of graduate engineering education, five years at Bell Labs, and five years working on VoIP startups should equip me to appreciate the innovation content of Verizon patents. In fact, as the Project Director for Vocaltec Communications, I was the senior technical person responsible for implementing Verizon’s first VoIP pilot in 1997. Reading and re-reading the patents leaves me at a loss as to their innovation content.
Extensive scrutiny of patent claims represents the only way forward. The Internet that sparked several million articles associated with Wikipedia can cope with due diligence on 2200 VoIP patents. AT&T successfully prosecuted 600 patent infringement cases between 1876 and the expiration of the telephone patent in 1891. This time around there is no patent on the basic innovation underlying VoIP.
Verizon can’t make the Internet go away with a patent lawsuit. Vonage’s poor showing in court does not prove patents on implementation issues and features will ultimately sink the VoIP industry. Verizon’s success reflect genius in applying for and defending patents, not genius in innovations protected by patents.
I don’t begrudge Verizon’s right to pursue all legal means to preserve the status quo, but three generic and ambiguous patents seem a thin reed for a $90 billion company. If patent disputes ultimately undermine the VoIP industry, it will owe to the self-inflicted wounds of inertia, not patents. The industry need not sit idle for the next 15 years waiting for patents to expire. Take a look and judge for yourself.
Click here for our previous Vonage-Verizon patent dispute coverage.