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October 2, 2000 |
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Too Big For Its Own Good
Breaking up is hard to do, but it might be the wise thing for Microsoft
By Stuart J. Johnston
he U.S. Supreme Court's decision not to hear the direct appeal of Microsoft's antitrust case significantly lowers the probability that the company will be broken up. But Microsoft executives might think about selectively breaking the company apart anyway, and dropping some old ideas.
Why? Because the company has finally grown too big and unwieldy for its own good.
Microsoft's .Net initiative is a clear acknowledgment that the company can't dominate all markets. But if that's so, why does the company cling to outmoded concepts like Windows Everywhere?
Adopted in the late 1980s, the idea was that by having a single set of programming interfaces for all versions of Windows, from Windows CE to 9x to NT and 2000, code would be more portable. Windows would scale from handheld devices all the way up to network servers and supercomputers. The common user interface would simplify user training.
It seemed like a good idea at the time, but turned out to be more marketing slogan than reality. Last month, Microsoft rolled out the high-end version of its Windows Everywhere promise--Windows 2000 Datacenter Server. The company also just rolled out two new versions of Windows CE--one for the Pocket PC and another for embedded devices such as TV set top-boxes. If you hadn't noticed, that means that CE is fragmenting into multiple systems.
Almost simultaneously, it leaked out that Microsoft is so far behind in delivering CE-based set-top box software that a major European cable TV provider and AT&T are looking at competitors' systems. Microsoft recently said it would use Windows 2000 in set-top boxes as well, further fragmenting that market segment.
Despite Windows Everywhere, Microsoft still has only a small share of the market for personal digital assistants. And it has all but struck out on cell phones.
Finally, with the new focus on pushing .Net, Microsoft executives have almost forgotten to mention Windows 2000. With Windows 2000, Datacenter Server, SQL Server 2000, and Exchange Server 2000 all shipping, Microsoft is finally achieving the levels of performance and reliability that it has always promised. But users and analysts find the company's virtual shrug at a system six years in the making jarring.
Then there's the X-box. After 25 years of assiduously focusing only on software and staying out of the PC hardware business (mice and keyboards excepted), Microsoft is going to sell its own PC--masquerading as a game machine, smart-home controller, and TV set-top box all in one. There's also the Microsoft Network, which is still tiny compared to America Online.
Microsoft's attempts to be all things to all customers and to cling to Windows Everywhere are turning out to be a collective dead end. The company is still growing and profits remain impressive. But it needs to sustain historically mammoth growth rates to continue pleasing investors, not the least of which are the denizens of its own "velvet sweatshop." Without stock options appreciating at 100% a year, employees are increasingly departing for greener startups.
Yet Microsoft has its fingers and toes in so many different pies that it resembles a chameleon with an identity crises.
Which brings us back to .Net. The vision of software and information delivery as services is a powerful one. But it's not at all unique to Microsoft. The .Net initiative is just more monolithic than what's going on in the Unix/Linux, Java, and Open Source communities. The whole industry is heading in the same direction at a gallop. Jumping on the lead horse doesn't mean Microsoft is leading the charge. In fact, company execs say it will be three years before the whole .Net plan is fleshed out. Meanwhile, smaller, more specialized companies are moving much faster. By the time .Net is a reality, it may be just a "me, too" offering.
So the amoeba continues to expand, though ever more slowly. The bigger it gets, the more slowly it moves. The government may fail to break up Microsoft, but it looks to me like the company ought to spin off a bunch of business units as smaller companies because all those conflicting strategies are distracting it from fulfilling its main mission--survival. In the meantime, the company should ditch the Windows Everywhere concept. It's--well--so 1990s.
Stuart J. Johnston has covered Microsoft for more than 12 years. He can be reached at stuartj@halcyon.com.
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