Is Microsoft becoming the old IBM?
Back in 2000, Microsoft chairman Bill Gates reportedly despaired of his company's growing bureaucracy, asking underlings, "When did this company turn into IBM?" Six years and tens of thousands of employees added to the payroll later, Gates's fear is more true than ever, according to SeekingAlpha. Carl Howe writes there that Microsoft is set to lose the software business much like IBM lost the personal-computer business to rivals like Compaq in the 1980s. Apple has released five versions of Mac OS X since Microsoft's Windows XP came out, and Google is endlessly improving its search and advertising technologies while Microsoft struggles to come up with something workable. As Fortune's David Kirkpatrick points out, Microsoft's new self-regulation efforts are hardly going to help the company move faster. Already, the company has spent $20 billion on R&D in the last five years, SeekingAlpha's Howe argues, with no amazing new businesses to show for it.

Howe also points to the threat from Google's recently launched spreadsheet and word-processing software. But Jeffrey McManus doubts that people are ready to switch away from Microsoft Office: "The apps we're seeing today seem to say, 'Behold! I bring you an in-browser version of Word for Windows 2.0 circa 1991. Bow down and worship me, losers!'"

What do you think? Is Microsoft's software business toast?
Posted by Owen Thomas 10:06 AM 43 Comments comment | Add a Comment

I think Microsoft wants to be everything to everybody and it begins to lose its focus on what made it who it is, the Windows and Office flagship. I know that it has to find other markets to grow in because of the saturation in the operatings system market, but it may be too big and innovation lacking to be able to overcome other companies that have succeeded and staked their claims in hose markets. I think the best thing for Microsoft would be to break it up into separate entities with each one getting some seed money, for example an operating system company and an applications company.
Posted By Ryan, Fayetteville, NC : 12:48 PM  

Interesting thoughts on the MS (Microsoft) empire. Could it be that MS has something up its sleeve or, an even more adventurous concept, such as a new type of technological advancement for their upcoming releases (Vista and Office)? We must ascertain the logic behind the reasoning, both on a negative and positive scale. Whatever MS might reveal in the near future is unknown, but one cannot think that such a behemoth will go out of the without a few knockout punches. $20 billion does not just go down the chute without something in return.
Posted By Mike, Philadelphia PA : 1:13 PM  

Maybe I should see if Bill Gates would be interested in my income tax program.
Posted By Jon Price, Murfreesboro, TN : 1:18 PM  

I seriously doubt Microsoft is headed in the direction of IBM. Microsoft has been criticized for 2 decades with countless numbers of competitors left in the dust. Microsoft "gets it" with the xbox. The new zune product will undoubtedly do the same thing to the digital music/movie business that xbox is doing to the gaming market. Don't count microsoft out on the search wars either, they spanked netscape, mosaic, and others when they had limited market share in the browser world, and with the efforts they are placing on search, just wait. Microsoft is still a force to be dealt with on ANYTHING they set site on.
Posted By Ken, Woodinville WA : 1:26 PM  

Perhaps some segments of Microsoft's Market will certainly be replaced by more 'ground-up' designs from Companies such as Google (which by the way I really hate the .dot com era names [Google, Yahoo, Monster, etc.], what a farce on professional business names). On the other hand, I think products such as .NET (ie, C# [ what a beautiful programming language ]) still have a stronghold on software product development. Finally, I am not loyal to any Company "name" as long as it is in the good ole USA ;)
Posted By Mark, Palo Alto, California : 1:49 PM  

With as much positive cashflow that microsoft has, billions in reserve and more billions in their fiscal budget - any serious competetor can simply be purchased. IBM died because they had several major competitors, Microsoft has thwarted linux for years and if you seriously think Google is in the business to make an O/S then you are definitely living on the wrong planet.
Posted By Aaron , Dallas Tx : 2:00 PM  

Innovation is the key. The more and more that the burocracy of Microsoft endures, just like Kodak, Microsoft will have too much baggage. They will get dissrupted by cheaper better tecnology. Learn from the past Microsoft... learn from the big guys that ALL failed. Or, fail like them.
Posted By NuclearTonic, Rochester, NY : 2:56 PM  

Yep. Like IBM there employees and management have become more interested in mastering the internal bureaucracy of their company vs creating great products. It's a pitfall that IBM and many other large companies continue fall. None seem to be able to combat internal bureaucracy effectively - in many cases it's just accepted. It's a company killer and therefore Microsoft is toast.
Posted By San Francisco : 3:08 PM  

Microsoft will make a come back after investing in some R&D. Also the company can out spend any of its direct competition. The only issue that might hold the company back, are the morons across the pond (EU). That will just be a slight bump in the road. Many people dislike Microsoft, but the company has changed the way we do things today.
Posted By Sam, Danville Illinois : 3:12 PM  

Yes, MSFT has been slow to market recently and I wonder if some of that is due to the litigation that may be hamstringing their practices / processes. What I still am nt convinced of is the impact of Internet based applications such as word processing, spreadsheets, presentation tools etc. Given the ever increasing environment of data protection and security, I have a hard time seeing how corporations will get comfortable allowing employees to use an internet based app to compose sensitive information, etc. Most corporations want to control where the data resides, what tools are used to compose or process the information, etc. It will be a long time and many years before we use the Internet for this activity. Just my $.02.
Posted By Mathew Fieldcrest, Huntsville, AL : 3:37 PM  

Microsoft's market share in desktop and server operating systems will doubtless remain unchallenged for years to come. The trouble is that Microsoft is visibly losing ground with non-Windows applications (such as MS Office and Internet Explorer). Users love to do things through an Internet Browser. Web-based applications offer many advantages to "hand-installed" applications. Being able to access your data from home, the office, or cafe with a wireless "hotspot" using a PC, notebook, cellphone or gadget without having to install anything is great. Also, one person can set up a huge application (like Craig's List) without employing thousands of project managers, designers, developers, DBAs, etc. Bill Gates was slow to realize the potential of the internet, but the internet continues to grow. The internet's potential fueled the turn of the century tech market bubble. The difference now, six years later, is that this time it is for real, and Microsoft is no longer at the forefront.
Posted By Anthony Vlasics, Toronto, ON : 3:48 PM  

Microsoft will reinvent itself. It has the resources to do whatever it wants.

Windows Vista will put the company back in the spotlight and high profits and I am sure some ground breaking new technology or software that they develop will create within the next 5 years will make them even larger then they are now.
Posted By Zack , Wausau, WI : 3:53 PM  

definitively toast!
Posted By lombard, il : 4:27 PM  

I am disenchanted with Microsoft software. There are free programs that do tasks better and cleaner than some of the stuff from MS.

After twenty years of MS, patches, leaks, crashes, fixes, and discontinued support of prior versions, I am going to undertake the conversion to one of the Linux based operating systems.

It is a shame that so much has been spent on R&D with no tangible improvement in system software robustness for home users.

I think that they have forgotten the customer and have totally ignored what people really want. Arrogance begets failure.
Posted By Alton Carpenter, Round Rock, Texas : 4:47 PM  

Not Yet. They have a HUGE LEAD. However, as ever newer and more consumer friendly OS's like Ubuntu and MAC OS X continue to improve and folks start to look for better value rivals continue to take ten steps forward for Microsofts every step. Sooner or later they'll get caught. That maight not be a bad thing. Fear is the only thing that has motivated the beast from Redmond to innovate and perhaps with MAC OS 10.5 coming out in October with it's ability to run Windows Apps without any hassles that fear will get them off thier collective bloated duffs.
Posted By William Hazen Malibu California : 4:48 PM  

While Microsoft is a shell of its former, cutting-edge self, it is hardly on the verge of collapsing the way IBM did. IBM's downfall in the PC market was more from the development and full-force marketing of the PS/2 and the proprietary Micro-Channel Architecture, while competitors were working to implement easily upgradable, non-proprietary machines.

Microsoft is starting down this path with small steps, like their update website only allowing access to users of Internet Explorer, but has not fully committed to this market-limiting strategy. As long as they avoid this pitfall, Microsoft should continue to be the 800lb. Gorilla of the software industry...
Posted By John O, Fairfield OH : 4:54 PM  

I doubt Microsoft will loose its software business in the next 20 to 30 years. Workers start in school, then college, and there, they are learning Word, Excel, Power Point, etc. If you are looking for computer skills, you are looking for workers that know Microsoft Software. You buy Microsoft Software, and the rebel techie kids learn linux, Mac OS X, and other "alternative" technology.
Posted By Andy, Sanford, FL : 5:10 PM  

I use OpenOffice.org and it's way better than Microsoft office...plus it's open source software, so it's free !!
Posted By Sebastien, Moncton, Canada : 5:16 PM  

Not toast. Maybe sliced bread, though.
Posted By Jerry, New Orleans, LA : 5:22 PM  

Microsoft is involved in somany smaller projects that are innovating in their own right. on10.net is a prime example, sure a large part of it is propaganda but if you watch some of the segments they have some great new things coming... (Plus Tina and Laura are hotties!!!) I think the problem is the bread and butter-Operating Systems are usually inherently boring. Vista looks like XP with prettier graphics, I would take security and stability and an effecient design over a eye candy. In the end i don't think Microsoft is like IBM, IBM lacked active innovation, Microsoft is innovating like crazy but maybe they are spreading themselves too thin with no clear goal other than invent new crap... ie Starbucks Coffee Compass(for real, they made one)... lol
Posted By Rafael Nieves, Homestead FL : 5:58 PM  

Being a Microsoft Certified Professional and have followed the technology since the early 80's, I believe it is time we all took a good look at all the software in the world today. Most of it cannot stand any where near the quality of the Microsoft's.

Take a look at some of the freeware and open source offerings. If you were running a business with a great deal of money involved, would you trust open source? Not me!

I myself thank Microsoft for their innovation and ability to produce. I welcome the fact the software is taking longer to be delivered, that way the product is of much higher quality.

As for the Mac, it just ported to a UNIX derivative and using Intel chipsets - Hmmm. However, most of the system is proprietary. This makes for an easier deployment - don't have to satisfy all of the vendors out there.

In closing, if wasn't for Microsoft, most of the opportunies for the middle class would not exist - trust me. Let's all hope it stays an American institution...
Posted By Thomas, Los Angeles, CA : 6:12 PM  

Microsoft reminds me of the big American auto makers of the 70's. They got so big and fat they couldn't see their own shoes. The vision of a real great reliable computer & software is here now and it's named after a fruit that's being bit into by more and more people. Once people taste it they see no reason to go back to a lemon.
Posted By Robert, Ladera Ranch CA : 6:33 PM  

Word, excel, Powerpoint are all parts of our daily lexicon. Are they sexy words? No they are boring pieces of an increasingly interesting digital world. Microsofts financials are safe and sound, its emotional resonance with people is not at all positive. The failure to innovate in a relevant and, or appealing way marks its slow death.
Posted By Michael Gale, Austin, Texas : 6:45 PM  

Maybe Bill is ahead of the times.....he has already walked away for the most part and is devoting more of his time to worthy causes.
Posted By Jon, Vancouver BC : 6:46 PM  

Couldn't be anymore far off. Despite the original money Microsoft lost on the xbox they are GUARANTEED to profit with the Xbox360 this time around.

Microsoft didn't own the intellectual property for the gpu or the cpu for the original xbox so they had trouble doing price reduction so they could eventually profit from the box. This time around with the 360 its different. Microsoft owns the ip to both the ati made gpu and the ibm made cpu.

There are tons of truly top notch games coming a lot of them better than any of what sony is offering and the 360 is more competitively priced.

Microsoft is perfectly positioned to take Sony's spot as #1 in the videogame business.

List of games that will cause millions of 360s to sell later on this year and 2007. They will all make the Xbox business VERY profitable for Microsoft.

Halo 3, Gears of War, GTA4 (on the cheaper more affordable 360 compared to the ps3. The 360 version will also have better graphics) Mass Effect, Blue Dragon, Lost Odyssey, Madden NFL 2007 comes out on the Xbox360 first and it looks incredible. Splinter Cell Double Agent. The playstation 3 version of WWE smackdown vs raw 2007 was canceled for the ps3 and is only coming to the 360 we all know how popular wrestling is.
Posted By Mike Bronx, NY : 7:42 PM  

In my opinion, the issue with Microsoft is that it's trying to expand into new markets with already grounded competition. Perfect examples of this would be the Xbox and now a supposed iPod rival. Microsoft needs to stop being a doppelganger and actually come out with products containing innovation. If anything, they have been neglecting their software sector--the sector they actually have an upper-hand in--to pursue ideas that are doomed to fail.
Posted By Korie, Signal Mountain, TN : 7:50 PM  

Regarding Google's web-based office apps, I'll note that most of the time you don't need the advanced features that recent versions of Word or Excel offer. I'll take a bare-bones app for basic letter writing or budget spreadsheets, particularly when I don't have to pay $300 and up for it... :)
Posted By Chris Woodfield, Atlanta, GA : 7:57 PM  

I wish they would be toast considering the crap that they have turned out in the last few years. About the last great OS they churned out was Windows NT, and after that it was all down hill from there. Guess all there security breeches and flaws keep their programmers in business and on the payroll anyway. Just would be nice if as a user I did not have to re-download damn near the whole app via service packs to FIX flaws that should have been found using some of the 20 billion in R & D budget! Sheeeeeeeeeesh, get your act together Microsnot!
Posted By Scott, Charlotte, NC : 8:08 PM  

I sold PC's and software in the late 80"s when Office first came out - It eventually "killed" the Smart Series (a great product) and Wordperfect and even the great Lotus. It is now set up to be killed because bureaucratic management has taken over from the spirit of the entrepreneur. They have lost their edge and spend too much on legal fees and penalties to protect themselves. Sound familiar - "big blue" Loss of invention and innovation.
Posted By David, Bermuda : 8:24 PM  

While I believe that Bill Gates is one of the greatest business minds in the world, I also believe that it is true that Microsoft probably is becoming the old IBM, especially since there are signs that the momentum of the monopoly is wearing out. I believe there are several reasons for this and I can�t discuss all of them here it may take a book. But I will discuss one.

One of the major reasons is their recruitment process.

�IN MOST CASES MICROSOFT WILL NOT BE ABLE TO HIRE PEOPLE BETTER THAN THE PEOPLE WHO ARE ALREADY IN MICROSOFT�.

Doesn�t mean that there are best people already in Microsoft since then there will not be a Google or a Yahoo or many other companies. And Microsoft will not be 2nd 3rd or nth in most of the products they released after Windows and Office.

Let me explain why?

The hiring manager comes last in the line of the interviewers. Before you even see your hiring manager you go through some of your potential peers and some who would eventually report to you if you are hired. Now imagine how many of those in corporate world would say yes to hiring a peer person who is better then them? Especially if they have to compete with you for projects in immediate future. If the initial interviewers send out a �No-Hire� message then the Hiring manager will not even see you. Many companies follow this practice of team interviews but the critical part is that the hiring manager always meets the person to be an independent judge of all the interviews.

This is not a small matter, because in most cases each generation of Microsoft employees are equal or lesser smart/talented than the previous generation. This erosion probably started several generations back and now it shows in their products, ability to maneuver, innovation and their position in the market.
Posted By M D, Michigan : 8:45 PM  

as a former employee...yup, its a beaurocracy at its worst, threaded with politics, a stagnant stock price, many talented colleagues have left and ran to the hills for other opportunities.. Honestly if you ask an employee in candid if they feel they are changing the world with software(the old mantra of the 90's) you'd likely get a "uninspired" answer reflective of an old gem gone to rust -and unlikely to shine anytime soon.

unfortunate! WAS the greatest company of all time, STILL the greatest philantrophy, and admired Gates..just no longer for his business acumen - but ability to give back.
Posted By Los Angeles : 10:29 PM  

Microsft being toast? I don't think so. Their technology is so-so. But they have top notch managers who seem to understand the marketplace reasonably well and do certain things right even if they don't execute well. Proof?
Their monopoly on the desktop (front-end) side for at least a couple of decades in an extremely competitive industry. Their strength comes from how utterly fragmented their competition is. Those of you who think Google will make Microsoft vanish should know that Google develops all of its tools for Windows XP more than any other OS.
Posted By Olds Bolten, Chicago, Illinois : 11:58 PM  

What I think many don't understand in software today, is how quickly software companies are moving towards standards, as the web has become so dominant in everyday computing. Microsoft is not going to collapse, but their hold is going to quickly dissolve, because other operating systems are more advanced, and more secure, and its only a matter of time before the common user finds out they no longer have to fear isolation when using something else, like a mac.
Posted By Tom, Valley Forge, Pa : 12:32 AM  

I think Microsoft is spread too thin without a goal. They need to focus on something and then do it well.
Posted By Jeremy, Ocala, FL : 7:40 AM  

Beta was better than VHS, Token Ring was beter than Ethernet, Micro-channel was better than ISA or PCI, OS/2 was better than Windoze (and Linux), Open Office is better than Office, you can go on and on...Its not whoes products are better; I don't know what it is, though, MSFT is not toast.
Posted By Big Bass Daddy, Thorntown, IN : 8:11 AM  

Yes, Microsoft is too slow, lazy and careless. For every part of the work when it comes to innovation, work of employees, the Pubilc relations, the HR , the sales are too slow to react and that's where they will loose.
Posted By Ponnin Selvan, India, Mumbai : 9:51 AM  

I think the situation is much worse than most people realize. The fundamental problems are: (1) there is a limit to how much you can improve a spreadsheet or a word processor - I can barely tell the difference between Word 6.0 and Word 2002 and I don't even know if there is something more recent; (2) Open Office is now roughly equivalent to Word 6.0 (and free) and saves DOCs and PDFs (for free) and is available on all platforms (for free). I have been using Open Office FOR WORK for about three months after having been surprised by how far it has come in the last five years. For twenty years prior to that, I always used Word at work; (3) Internet applications may be way behind even Word 6.0, but they will rapidly improve the same way OpenOffice has. Internet applications have a fundamental maintenance advantage over "installed" applications. Thus, when they do become equivalent in features, they will have a big advantage over Office (which costs a lot of money) but not necessarily over OpenOffice (which is free). Microsoft Office is going to get squeezed in the middle; (4) generally speaking, Internet Applications make the operating system less important. Many techies already prefer Linux to Windows and many non-techies already prefer MAC-OS. Windows, which is rapidly losing its advantage of being the required platform for popular applications, is going to get squeezed from both sides, just like Office; (5) Embedded Software is dominated by Linux now and there is nothing that can be done to stop it. Windows CE is rarely being used by anyone anymore in new designs; (6) Linux is also becoming dominant in servers and there is nothing anyone can do to stop that, either (ask Sun); (7) Microsoft has NEVER really been that innovative: the vast majority of their products have been less expensive clones of what someone else has already invented. It was always their marketing/positioning that was their ace in the hole. But now all of the above market forces seem to be aligned against them. I remember telling my Dad to buy as much Microsoft stock as he could afford when it first came out as an IPO. I sold the last of my Microsoft stock in 2002. Now if anything I would sell it short.
Posted By James Fahy, Del Mar, CA : 10:49 AM  

The monopoly has become an oligopoly and Apple has finally received what they have been after since Bill Gates and Steve Jobs were buddies....an OS.
Posted By Andrew, Jackson TN : 11:59 AM  

IBM used to be first with the second best hardware and software. Micro(Sleeze)soft is now first with the second best in just about all their product lines.
Posted By Leslie Francis, Claremont, CA : 2:11 PM  

Draw a X-Y grid; one axis is "product complexity", the other "product volume". Windows XP is much more complex than Windows 3.1 But as long as Microsoft sells many more copies of XP than 3.1, its profits are secure.

The old IBM was selling expensive and highly complex mainframes, but in relatively low quantities. When the mini- and micro- computers appeared, IBM's volume collapsed.

We are seeing this replayed now in GM vs. Honda & Toyota. GM can no longer support its maze of brands and models on half of its former market share. Honda and Toyota are keeping their car brands to two, while increasing volume.

Microsoft is going down the road of more complexity. Its products span from servers to personal music players; operating systems to contents; all interconnected and somewhat compatible.

Apple's O/S can run Windows programs. It's only a matter of time when all the M/S Office functions will be open source and web based. Microsoft is far from dead, but it is not getting healthier.
Posted By Stan, San Jose, CA : 1:20 AM  

MAYBE ONCE THESE COMPETITORS BECOME AS STRONG AS MICROSOFT AND THEN THE GOVERNMENT UNFAIRLY CALLS THEM A MONOPOLY, WE WILL SEE IF THEY CAN OPERATE AS SUCCESSFULLY AS MICROSOFT HAS UNDER THE WATCHFUL EYE OF THE BEAUROCRATS IN D.C. IF WAL-MART HAD TO OPERATE UNDER THE GUIDELINES THAT MICROSOFT HAS, I AM SURE YOU WOULD SEE THEM FALTERING A LITTLE, YET SOMEHOW THEIR MONOPOLY GOES BY UNNOTICED.
Posted By SHOPPER, PITTSBURGH, PA : 1:35 PM  

One word. NO.
Posted By Charles, Charlotte, NC : 4:24 PM  

MSFT is definitely exhitibiting characteristics of IBM. This is naturally because Microsoft is growing and while IBM does not do all things well, they do some things very well.

As for MSFT slipping on dates ... it's true. I believe they were overly-ambitious in what they wanted to accomplish in the next rev of the OS. The fault for this may even go up to BGates for allowing too much to be incorporated. MSFT, however, has the luxury of missing dates b/c they have dominance in the OS market like no other. This is something that MSFT needs to work on. Had they made their original dates we would not be discussing this but the new products that were released.

Having used much of Microsoft's Beta software for all the 2007 releases, I can tell you that it is better by leaps and bounds. For end users, I'm sure you will be very impressed with the new Office applications. The next generation, however, seems to be targetted towards productivity - and this will address many of the "back-end" issues that were previously prevanlent. Integration is key and this is where Microsoft seems to be bringing the whole story together with collaboration products and integration of multiple lines of communication.

It is true you can only do so much with a Word Processor or Spreadsheet. Now it is about collaborating with many individuals in the most efficient way possible.

As for search technology and web strategy, Microsoft seems to have some catching up to do. But beware .... Microsoft usually watches who does it well and then copies it.
Posted By Sam, SF, CA : 4:04 PM  

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.