Microsoft’s ultimate threat – Google

When I first joined Microsoft in 1991 we were a company rapidly ascending to the top of the mountain.  We were a company trying to fulfill our destiny, “A PC on every desktop and in every home”.  To climb that mountain required laser focus.  To have people day in and day out committed to accomplishing that goal.  To do this required Microsoft to build a  great set of products.  It also required focus on what was happening  in the industry.  We needed to know at all times what our competition was doing and how it was impacting the market. The potential threat to the Microsoft bottom line.  This was driven into every employee  from the top, from the top man, the founder and chairman, Bill Gates.  Time and time again he would hammer home his fear that a company that was younger and hungrier would come along and clean Microsoft’s clock.  That Microsoft would fall behind in the game.  Every employee understood that and worked hard to prevent it.  But time and growth can be cruel lessons of missed opportunities and so what Bill feared has happened.  It did not happen overnight, but slowly and surely it happened.  A silicon valley sweet heart, named Google came along and slowly they have increasingly encroached on everything Microsoft thought was their birthright.

When Novell CEO Eric Schmidt announced he was leaving his post in Provo, UT.  It was in many ways welcomed.  Eric was well known from his days at Sun Microsystems.  Eric was highly regarded, it was actually more  surprising he took the helm at Novell to begin with as they were rapidly sinking at the time he took over. During a meeting with Bill Gates, while he was commenting on Novell, he felt they were in very capable hands with Eric at the helm.  Google was known, but nowhere near where it has ended up.    In tech circles it was viewed as a interesting and exciting move.  Schmidt was a talented guy who was leaving a dying company to go somewhere where their was a future.  It was good to see him land somewhere worthy of his talents.  He would also serve as a capable mentor to Google founders, Larry Page and Sergey Brin. There were a lot of search engine players in those days (Yahoo, Alta Vista, Lycos etc..).

Google would rise as they changed the computing paradigm with the web search engine.  It was this new business revenue model Ray Ozzie would reference in his landmark memo while he was at Microsoft.  Google was using their incredible ad revenues from search to fuel software development in other areas, among them Google Docs.  This should have served as a great warning to Microsoft executives, but instead they seemed to just read the search revenue piece and seemed to miss what else was going on and focused on the obvious.  They focused on search, not heeding Ray’s words about the funding “other stuff”.  Those being Google Maps, Android, Google Docs, Google Cloud, Robotics, Google Glass  etc..In the end what we  got was Bing.  Google has used search to be a disruptive technology company, one that changes the playing field and in doing so change the balance of power. To simply follow their lead is to risk certain death.

Microsoft has released with some success their cloud based version of Microsoft Office with Office 365 .  In the meantime Google Docs has slowly plodded along improving its feature sets and capturing the low hanging fruit. start ups who do not want to pay a few for Microsoft Office.  They are also starting to make headway into larger enterprise accounts.  With a simple flat fee structure of $50 per desktop, enterprises are talking notice and either considering Google Docs or going to Google Docs.  Companies like Office Depot, Roche and Dillards have already signed on.  Keep in mind if Google takes 10% market share that is over $1 billion to Microsoft bottom line that they lose.  It is no wonder Kevin Turner issued a ultimatum of no losing to Google Docs.  It will be interesting to see how that goes.  Corporate CIO’s would be foolish not to consider Google Docs.  It is the first true contender to Microsoft with a sales force and money to back product development.  Worst case for a CIO is they knock the price of MS Office down.  I cannot think of an instance these days where a CIO is not being asked to do more with less.

The Chrome book has been an interesting development.  It really takes us back to the early days of the internet and what Netscape founder Marc Andreessen said about Windows, “Netscape will soon reduce Windows to a poorly debugged set of device drivers”.  The problem was at the time was not the vision necessarily, but launching an attack against a competitor who had billions when Netscape only had millions.  A second point was ubiquitous bandwidth was not available yet.  Most people at the time did not have DSL services let alone wi-fi in their house.    It was still  28.8kb modem.  Fast forward to today and a couple of developments have changed that has created a new landscape.  The first is we are always connected.  It does not matter if we are in our favorite cafe, at home, at work or at the beach.  We can access the web, we can call our friends, text them, post what we are doing to Facebook, tell people what we are thinking via Twitter.  What device do we use?  Laptop? Tablet? Smartphone? Chromebook?  It is about price and convenience.  The second is Microsoft has decided to compete against its traditional OEM partners with the  launch of SurfaceRT and SurfacePro lines of hardware.  One thing Netscape struggled with in their day was access to Microsoft’s OEM channel.  Give these recent strategic decisions by Microsoft, Google will not find it as hard to gain access to this channel.  They will arrive in a much stronger negotiating position.

Android which is a huge success poses two problems: 1) The mobile OS 2) The developer.  On the first front projections are that in 2013 800 million devices will ship with Android.  How many will ship with Windows 8?  Microsoft will not catch this juggernaut anytime soon.  The mistakes made by Microsoft are many in mobility.  They got hit by Apple’s iPhone, were slow to react, watched as Google ran past them, and fundamentally did not understand what was happening in the market place.  Google in the meantime has been laser focused on building a Android ecosystem that rivals that of Apple.  They have more importantly focused on consumers mobile lifestyles,  To the point, as far as competition goes in the mobility space consumers and industry analysts do not think about Microsoft.  I sometimes wonder if my old friends in Redmond realize what an insult that last statement was.  There was a time everybody thought of Microsoft when competing in a market.  Now Microsoft is just trying to get noticed.  The biggest announcement over the past couple of years has been their exclusive partnership with Nokia, another fading star.  As Google Exec, Vic Gudotra said when this partnership was announced, “Two turkeys does not make an eagle”.  It kind of sums up Microsoft mobility.

On the developer front, Google is a huge hit with the dev community.  Google’s premier dev conference, Google I/O sold out in under an hour this year.  Last year it was twenty minutes.  As I wrote in last July’s blog post “Google I/O and the giveaways“, Google knows how to treat developers.  Like royalty.  They have the advantage of being an internet company who knows that the internet is the development platform.  That sounds obvious but it seems some are slow to learn. Microsoft is still intent on promoting and protecting its “Windows Paradise”.  That was the refrain used back in the day when Microsoft was competing against Netscape, but tat world no longer exists.  The numbers I have heard around applications written for Windows 8 for that launch are horrifying – less than 5000.  The events Microsoft holds for developer are designed to reduce costs and treat developers more like welfare recipients.  As noted Google treats developers with all the care and feeding they could possibly want and it is noticed in the community.

Then there is the area of taking risks.  Despite the billions of dollars spent by Microsoft on Research and Development, there seems little to show for it.  In a group that is funded to take risks it seems little are being taken.  Google seems to be doing nutty kinds of thing all over the place.  At South by Southwest they showed a prototype of the digital shoe.  Their Google Glass, though expensive seems to be getting lots of press.  In the bay area you can see Google’s experiments with robotic vehicles.  Google has ventured into the world of wi-fi attempting to connect cities via wi-fi service, in such cities as Kansas City.  Will any of these tie into Google’s revenue model?  As long as each has internet access you can bet that Google will figure out how to monetize.  A lot of Microsoft’s struggles in this area is cultural as it looks to protect today’s revenues while forfeiting the futures.  Steve Ballmer’s love of the Jack Welch GE model, though a legendary business lesson, does not play so well in the world of innovation.  It has become a quagmire, sort of Steve’s personally built Vietnam. Google at the same time despite their growing size, seem to have remained nimble and agile in how they go about their business.

Finally there is User Interface Design.  Yes the ever present UI – how we interact with the world of technology.  Google’s search engine has been applauded for the simplicity and elegance of its search interface.  For a long time it seemed Microsoft owned the ideas of interaction with the device.  But Microsoft became complacent and did not seem to update or change basic user functions.  With the launch of Windows 8 Microsoft finally killed the Windows 95 interface.  In the meantime we saw not only Google, but Apple and Facebook present us with much more elegant and friendly user interfaces.  Once you lose the advantage it has hard to catch up and in this case the defeat is generational.

Technology is in the end about survival.  To foresee the future and not just react to it, but shape and create the future.  The ability to stay relevant.  To push the boundaries of what is possible.  The easiest way to lose focus on what made you relevant.  Microsoft seemingly has tried to be everything to everyone over the past 15 years.  In the meantime those small start-ups who are young and crave success day in and day out have emerged.  Google seems to have the vision for what the future will be and their role that they will play in it.  Microsoft unfortunately treats Google as one of many competitors.  Google meantime has kept their eye on the prize…Microsoft billions in unchallenged revenue..Windows and Office.  Microsoft now finds itself in the precarious position of having to defend those empires.  More importantly since Ballmer has taken over the reigns from Bill Gates the desire to innovate has been lost and replaced with a culture of old school corporate politics. More concerned with maintaining existing empires rather than creating new ones.

Microsoft needs to refocus, starting by turning its sights to its most immediate threat: Google.  It needs Google more than it realizes.  It needs them to help focus the company.  To energize the companies employees, to rally them from product development to sales behind a common cause.  That was the way it was in the early days.  In those days the companies who lacked resolve faded quickly as Microsoft always looked 3-5 years out.  Companies like Lotus 123, WordPerfect, Borland, Novell etc..Microsoft was thinking ahead of the game visa vi the competition. But maybe I am asking too much of today’s Microsoft.  Maybe I am harping back to a day and a time that will never return again. Just maybe Microsoft is about to become another celebrated company that is more a part of history, rather than making history.

Good Night and Good Luck

Hans Henrik Hoffmann March 25, 2013

Advertisements

Facebook – Threats and Opportunities

For a company so young it seems odd to be writing a blog about major competitive threats, usually reserved for more mature organizations,  but at the same time it makes a whole lot of sense.  In the digital age, companies rise and fall from power is accelerating. Microsoft rose to power in 20 years.  It took Google less than ten.   In the last five years no company has risen as high and as fast as Facebook.  If you talk about Social Networking this company is the Goliath in the room.  They define Social Networking.  They have over 1 billion members.  That is a large audience.   They have already done an Academy Award film about its founder Mark Zuckerberg, “The Social Network”.  In the world of marketing it would be the “creme de la creme” of  target markets.  Over one billion people I could target and sell to.  If I had their search patterns I could create unique ads to each individual, thus increasing my average revenue per user.  Why is Wall Street down on this company?  But this is America and we love to compete so for all the opportunities that seem before Facebook there are threats.

The thing about Facebook is it is not so much a website as an internet application.  People spend time there.  Facebook has a real opportunity to capitalize on that time in ways that Google cannot.  It is amazing and worrisome how much time people do spend online.  Sometimes posting pics of what looks like a great time, when in reality it was not as special as it looked.  However when you have such a large user bases you have one of the largest opportunities in internet history.  Facebook has said the key for them is monetizing mobile ads.  It is hard to disagree as Facebook beyond being an internet application is utilized for people with lifestyles on the go.  Whenever and wherever you are, Facebook is where you tell people what is happening at a specific moment in time in your life.    No matter how mundane it may be.

I guess if Facebook wanted with its investor and partner Microsoft a common foe it would have to be Google, though things get a bit dicey after that.  With the launch of its new Social Graph from Facebook they are targeting a more sophisticated experience for developers and end users.  It starts to blur the lines of search and social networking and provides a way for Facebook to monetize its user base.  Though Facebook  has signed on to use Microsoft Bing as part of its Social Graph, I think long-term this partnership may be doomed.  Trying to draw lines of distinction on the web can be tricky and the competitive landscape changes quickly.  One day a partner the next a competitor.  Google and Apple were cozy for a while.  Google however has  taken notice of what Facebook is doing and though Google Plus has not taken off I do not expect Google just to drop their tail between their legs and run.  Facebook will use their own search engine to try to monetize their base and they will attempt to take market share from Google (and Microsoft).  Make no mistake from a competitive standpoint Google will be the company that is top of mind at Facebook.  Their paths are colliding and will continue to collide.

Another company that could cause Facebook trouble is Twitter.  Twitter is the pulse of the internet.  What is happening at a specific moment in time.  If you followed the green revolution in Iran or any other major news event (Cairo, Tunisia, Libya etc..) it seems the entire world or maybe middle east was a flame with “tweets”.  Twitter is in many ways much more fast paced than Facebook.  People post of Facebook an event they attended or something that took some amount of time to explain and to happen.  Twitter is very impulsive.  How many athletes, actors, politicians etc..have tweeted something very impulsive and ended up sounding moronic?  The number of apologies for ill-advised tweets at times is nauseating.   But Twitter moves fast and in the age of the internet there is value to that speed.  Can Twitter monetize these rash impulses?  Possibly.  If they do they can realize revenue very quickly.  What that number is I do not know, but I would bet it would start with a “B” and would be plural.  Twitter is also the main competitor in the mobile ads space.  Just like Facebook, Twitter is for people on the move.

Change happens quickly in the consumer space and changes can be generational as we move from one age group to the next.  Remember Facebook was not the first.  The first was MySpace.  Can Facebook maintain and create new excitement?  That is going to be an interesting test for them moving forward.  There are signs that people are getting tired of Facebook.  Is there another phenomena that could take revenue away from Facebook?  Always.  That is the nature of the internet beast.  I key challenge for Facebook will be staying in front of change, staying in front of disruption.  New phenomena happens and our happening with more frequent regularity.  the velocity of business is alive and well.

Moving forward I will be interested how Facebook copes with being a publicly held company.  What I see so far I like.  Despite the negative press surrounding their IPO they seem to have remained calm in the face of this scrutiny   This starts at the top with their founder and chairman, Mark Zuckerberg.  He strikes me of having that Bill Gates like demeanor when he talks about Facebook and the future.  The vision of the future and where Facebook will play in that future seems understood.  In the early days of Microsoft, dreaming of a PC on every desktop and in every home, Microsoft understood it destiny.  Then a combination if the internet and the DOJ happened and Microsoft seemed to get lost in the technological woods.  Those legal winds seems to hover around Google these days but as privacy issues evolve and if Facebook maintains their lead this could fall into their domain as well.

Chapter One of Facebook is nearing its end and we are waiting for the next big breakthrough.  A mobile device?  Zuckerberg says no.  Will it be Social Graph?  Still too early to tell.  Are there other opportunities that they may seize that could create new competitors.  Retail?  Then you bring on Amazon.  Maybe possible takeover targets?  What about Yahoo?  I am sure they would much rather be a part of Facebook than Microsoft. It is going to be a fun and interesting journey.  One I am sure I will blog about later.

Good Night and Good Luck

Hans Henrik Hoffmann March 12, 2013

Categories Uncategorized

The Drone Wars

With the recent flack about the Obama administrations leaked memo regarding drones being used in the United States by our government, I wanted to tackle the issue as it has been on my mind for quite some time before the story broke and even more so now  since the story broke. I guess my biggest question would be “is this a surprise”?  In a world increasingly caught on video we are entering a new world of surveillance. One more reminiscent of George Orwell’s “1984” or if you want to be more current, Suzanne Collins “The Hunger Games”.  This world has now taken to the air. During the hunt for Osama Bin Laden, drones were our little robotic hero’s in the sky as they patrolled the rugged mountains of Afghanistan.  Mountains that historically have been impenetrable by opposing armies.  But history has shown us often devices originally targeted for military use have a way of making their way back into the consumer mainstream.  However these new devices challenge our civil liberties in a way we had only imagined in film.  The Big brother scenarios  thought to be  far away, now seems much closer than it ever has since the fall of communism.

There have been helicopters flying over my house since my wife and I bought our home 17 years ago.  Sometimes literally over the house at 6am monitoring traffic over Interstate-5.  Unfortunately all too often.  The good news is there is a lot of movement a front to allow drones into air space  previously reserved for piloted aircraft.  According to some reports this could happen as early as 2015.  This means that my morning traffic report can be provided via these small drones that do not make nearly as much noise as their aging helicopter counterparts.  They would be controlled by some person in a remote room miles away from my house.  The individual would be just like a kid playing a video game.  This of course would be just one example of utilizing a small drone to handle work previously handled via a manual operation.  There would be ample opportunity to survey, take pictures, film etc in ways that have not been possible before.  Someone lost on a hike in the forest in the Cascades?  Drones could cover a vast amount of territory in ways that never could be done before.

Law enforcement will change as well.  Those cars that like to show off their muscle going 100 mph…see you in court and bring your wallet.  Holed up in a house with a young child as a kidnap victim?   Like the pirates off the coast of Somalia, be careful, your head might get blown up.  Night Goggles…no need, Police will have night drones.  This could be a huge benefit to underfunded and overworked police officers.  It could have the same benefits to local law enforcement that it has had to the Department of Defense in the mountains of Afghanistan.  Not to mention looking for drug facilities in remote parts of the US.  The ability to find and shut down meth labs.  There are already cities having to address this issue.   In Seattle the police department was forced by the city council to return drones it had purchased.  Many members were uncomfortable with the idea of video surveillance in the air.  Unlike traffic lights this, in the minds of the council, the Police department had crossed the line, without consulting them first.  Other cities like Miami and Houston have acquired drones.  There use however has been under fire.  Civil Liberties Unions are already starting a grassroots movement to try to get this issue more towards the forefront of the American conscience.

In the Obama administrations memo the fear is that Al-Qaeda, once feared and targeted only on foreign soil, could now be feared and targeted on US soil.  If you stop and pause and think about that, what that means fundamentally, is a drone in the sky carrying weapons.  Is that much different from today?  Yes we do have police helicopters in the sky.  Are they armed with guns and missiles?  Could be.  But as I have outlined above for all the benefits of technology there could be and will be a cost.  These type of capabilities could be and will be abused.  The irony is some people may hate their government, but the government is not the only one enabling this; Silicon Valley is.  Our academic institutions are enabling this.  We are at the beginning of the robotics revolution. The FAA already estimates there could be 30,000 drones in the air by 2020, but is that too conservative?  You can actually get some interesting information on this topic at the Association for Unmanned Vehicle Systems International website (yes..apparently there is such an organization).  Go to the useful links section and you can spend the better part of a month reading about the topic.

The frightening thing is we could be evolving to a society where we are all under surveillance 24/7.  Who has not received a traffic ticket by camera? If you have not, you are probably in the minority.  But those are just camera’s attached to the traffic light.  Now imagine they are in the sky with video and radar.  They are mobile, not stationary.   Nothing says they need to be limited to flight.  They also continually are getting smaller.  We could enter an era where it will be difficult to differentiate between the insects and the drones.    The smallest drone today is the Raven, which measures about 3 feet in length, but researchers are hard at work at making drones that’s motions would be mimicking insect wings, so you get the idea of where this is headed.  Like Moor’s law where microprocessors double in speed every 18 months, Hans’ law says drones shrink in size by half every 18 months.

Can you regulate all this?  Can the law move as fast as the technology advances?  This will be a big challenge to both the federal government and state governments.  At the center of the debate is what is useful about drones and what is not useful about drones.  They can help find criminals.  They can do traffic reports.  They can do surveillance of the land for farmers.  They can do a lot of good stuff for society.  The challenge  as was mentioned in the previous paragraph was when doing all this surveillance what else do they capture and what happens to that data?  Where is the data held? Who owns the data?  Am I as an individual entitled to know?  There are a lot of unanswered questions.  This is just at the state and federal level.  What about international laws?  International espionage is undergoing fundamental change with these technology advances, pretty soon foreign competitors will not have to be on the wire to get at sensitive data, when they can simply launch a few thousand insect drones.  How do you stop those crossing borders?

Technology has become unbound from physical constraints   No longer tied to the mainframe or PC, not even by the wires that make up the internet.  Thanks to the wireless revolution we will have a range of stationary and mobile devices performing a wide range of tasks that used to be constrained to science fiction.  The air will be lit up with flying devices ranging in all forms and in all sizes.  Some we ill see but others will be nearly invisible to us, capturing information of our daily lives, no matter how mundane and insignificant it may be.  We may fight these intrusions in our courts.  We will fight with bright woman and men clad in the highest of quality of suits.  Perhaps in a fight of futility.  The war of the drones is upon us, where it will lead and what the benefits and consequences are,only the future knows.

Good Night and Good Luck

Hans Henrik Hoffmann  March 2, 2013

Categories Uncategorized