I am sure a lot of my former Microsoft colleagues will look on this title with horror and possibly even shame and anger towards Hans Hoffmann. Everything Microsoft has accomplished over its 30+ years existence can be traced back to the vision and success of the Windows Operating System. On top of this all Microsoft has just released the best operating system in its history, Windows 7. The most recent Microsoft earnings reports, though dismal on some front, shows that Windows 7 has been a huge success. I will be forthright, I run Windows 7 and it is rock solid. I have been a very happy user of the OS, but it has raised some questions in my mind. In particular the role that the operating system will play in our lives moving forward.
I guess the first question I had when I finished booting my Windows 7 operating system was how simple the user interface was, there was not much there. It did however offer quick access to the browser. There are some cool features, like when I hover over the browser it shows me all the windows that are currently open. But in the end it was very basic, the user interface was not very busy. In fact I would say it was very clean. For many years some of the most valuable real estate in the PC industry was the Windows User Interface. Because no matter what you wanted to do on your PC you had to launch Windows first.
There had been many efforts to try to drive revenue by leveraging the Windows UI. After the launch of Windows 95 and the birth of the web, it was felt that Microsoft needed to have an offering for ISP’s where they could put their logo on the Windows UI and customers then could sign up for their online offering. Microsoft would then get a fee for every user that signed into the ISP’s monthly service. The initial ISP’s selected were AOL, Earthlink and Prodigy. For a while in my career at Microsoft I managed the Prodigy relationship, with the primary responsibility of collecting the money. They paid us about $600k per year, not bad revenue. Later on with Vista there would be the ill-fated attempt at gadgets. A memory hog and not something I was going to pay for. This has all changed in today’s world as most users boot a OS and launch right into the browser. The most valuable real estate today is on the web, not the desktop. The desktop more or less is a system I boot to get to my browser.
This brings us back to the simplicity of Windows 7. The competition is taking notice and trying to restructure the playing field and doing in at different levels. At the base level (or consumer level) we have what Google is trying to do with Chrome. And at the enterprise level you have two things occurring, virtualization and what VMWare is pursuing and then the cloud efforts which pretty much everyone is doing.
For over three decades now the world of the personal computer has played by the same rules. You have a microprocessor, a basic input output system (BIOS) and an operating system that handles the interaction between software and hardware. Every 3-4 years we either buy a new PC with a new OS or just buy the software and upgrade the existing OS. Certain technical limitations have facilitated that model, however that model is under threat with increasingly powerful hardware now providing the mainframe of yesteryear now in a small laptop and allowing us to be where we want to be. In addition the power of the web seems to grow exponentially every year.
Things are changing in the industry towards this traditional view of computing. In a recent interview on CNet, former Microsoft GM and now Google VP, Vic Gudotra talked about his time at Microsoft and the belief during those days that there were certain things that only the PC could do and that the web would not be able to replicate. In particular he mentioned a partner, KeyHole which had created a cool PC based app that was a prime example of an application that could exist only on the desktop. Not long after KeyHole was acquired by Google. Today that application is known as Google Earth. The main point, which I agree with is never underestimate what can be done on the web.
When I think what VMware is doing with virtualization and the cloud it’s hard not to think back to Microsoft’s introduction of .NET. One of the key architects and brains behind .NET was then Group President, Paul Maritz. In an industry trade rag article written around that time it was suggested that Microsoft was trying to decouple the .NET framework from the underlying OS thus reducing the dependency of the Windows operating system. I can not validate the truth of this, I was not in the room when those types of discussions took place, but it would make sense for Microsoft to look towards the future and discuss the role of the operating system of the future. This much I do know is if those discussions took place Paul Maritz would have been involved and a primary driver of any strategic and technical thought process. Today Paul Maritz is CEO of VMWare. Look at what they are doing and do the math.
The Microsoft OEM channel is not immune to these changes either as some of the major Microsoft partners are starting to experiment with OS’ that are not Windows. This is not a new phenomena, as during the dotcom revolution Dell toyed with OEM versions of Linux, but eventually dropped as a desktop OS. However the world has changed very quickly on the last 10 years. The net is no longer new but an established part of our everyday life and available everywhere in the world. The world of mobile computing has taken off as Laptops are cheap and replacing the traditional home computer. All schools in the US have some type of laptop program for students. The thin device called a netbook has found place for many users in daily life. Finally mobile computing within the phone has increased drastically, in large part due to the iPhone phenomena. Recently HP acquired Palm, which has its own Mobile OS, which I am sure could be extended to a Tablet. Acer is also in the process of launching a Netbook based on Google’s Android OS. Given the rise of Android as a mobile computing platform I think the chances of success are pretty good this time around.
Another issue is the rise of office productivity applications, that are not Microsoft Office. One of the key drivers for the success of Windows has been the success and innovation that has been a cornerstone of the Microsoft Office Platform. Though not universal yet it is not uncommon these days to find PC’s running OpenOffice or Google Docs. These applications are tightly aligned with the browser and can run across multiple platforms, thus rendering the underlying OS not as relevant. Though still a small percentage of the overall market they are gaining traction. Even if they only got 10% of the market in the next 3 years it would be a significant financial blow to Microsoft.
Part of the dilemma in this rapidly advancing world of technology for Microsoft is how do you embrace this new world without cannibalizing $20 billion in revenue? I think in general that is the challenge for any company with a large cash cow. In technology when change starts to happen it happens with tremendous velocity and cannot be contained. It is the nature of the industry and also what makes the tech sector one of the most exciting places to work. The impact of technology is felt in everyday life and in every industry. For many years Microsoft was able to see these changes and envision where it would play when those changes took place, of course Microsoft’s place in those tidal shifts was at the top of the industry. We are now at a shift which could fundamentally alter how traditional computing has been viewed. It will affect what we purchase, where we purchase and whom we purchase from. If the operating systems as we know it starts to lose value as other alternatives become available, what then for Microsoft? With tremendous change comes tremendous opportunity, but when something is so core to your identity it is hard to make the change as it is as much cultural as financial. The risk of course is the tremendous opportunity will happen it will just go elsewhere. As I said earlier the computing model for the operating system has not changed a whole lot in 30 years, but today that transition is happening off of the PC operating system. What was once the sole domain of the PC is now part of the universal domain of the web. It’s been a great ride but now it’s on to the future, may the desktop OS rest in peace.
Good Night and Good Luck
Hans Henrik Hoffmann June, 1 2010
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