Wednesday, July 1, 2009

How Microsoft falls

I know this is not the usual content of this blog, but an insight hit me today and I wanted to pass it along. It came from reading this Business Week story about the high prices Microsoft wants for Windows 7.

Microsoft's revenues have two main drivers: the Windows operating system and the Office suite. Now what happens to those revenues when Apple and Google release cradles for their phones (and the iPod Touch) that will drive a full-size monitor, keyboard, mouse, speakers, and printer - with built-in Firefox, Chrome, or Safari browsers to access cloud applications? (like Google Apps) If I have modest computing needs - web, email, pictures, video, documents, spreadsheets, presentations, etc. - why do I need a full-size PC or laptop with Windows and Office if my phone can drive everything I need to do and fit in my pocket to boot? As an added bonus, I can also choose to drop my home broadband service and go all 3G. All of a sudden Windows PCs and laptops are a niche market for high-end gamers and graphics.

It will take a little while to get there - faster phone processors, more memory and storage, better browsers that are stronger application platforms, iTunes conversion to a cloud app - but the trend seems inevitable, and the transition could happen very quickly once it starts. Microsoft has been able to drop Windows prices to hold on to netbooks (vs. Linux), but a price drop won't be able to stop this wave.


Rao said...

Tory, I am intrigued with your thoughts. Thanks for sharing that. using PDAs as primary devices, i guess, is a very real possibility besides netbook craze.

I am not sure I agree with everything.

High prices are actually what you want when you know your monopoly is about to end (like in pharmaceutical industry). Brand loyal people who want your stuff will pay (read most locked-in enterprise folks who deferred Vista stuff and long overdue for an upgrade and most other brand loyal people).

Secondly, you want high prices for existing product if you have a segmentation theory worked out and you know what other cheaper option(s) you can offer for the "cheap ass" crowd.

I am as big into collaboration and SaaS as you are, but the concept hasn't yet set the world on fire yet. I once heard that Microsoft makes its investment in a major Windows update in 2 weeks flat.

So, my point is that between the emerging tech you pointed out and MS ability to fight back, I am skeptical of MS fall any time soon.


Tory Gattis said...

I agree that MS plays the price discrimination game very well (and continues to beat *free* Linux). But that's why this scenario is such a threat: it really has little to do with price. If people can do all they computing they need from their phone (a huge area of weakness for MS), why hassle with a PC or laptop?

Consumers will switch away first (as they are somewhat trying to do now with netbooks), and businesses will fall behind later, since they will need to convert internal apps to be web-based (which many are doing, albeit slowly). I agree there is pent up demand for Windows 7, but it may be the last major Windows upgrade they do, since all their employees will probably have these super-phones within 4 years.

Microsoft will not disappear, of course. It will just become less relevant, like Sun did when the world moved on from Unix workstations.

Braden Kelley said...

I've been talking up this concept for a couple of years (to help make it happen), and I do believe that this is the future - either in a wired or wireless manner. The mobile device will become the hub, will be connected to the cloud to augment its capabilities, and will be able to connect to a wide variety of input and output devices that will come on the market to connect to the mobile device.