ike any company trying to build a healthy future, Microsoft tries to make shrewd investments in areas where it thinks the next big business opportunities lie.
The company's recent $425 million proposed acquisition of WebTV Networks Inc., its $1 billion investment in Comcast Corp. a cable-TV company, and its more than $400 million investment in MSNBC have created a lot of speculation that Microsoft will be one of the biggest media conglomerates of the next century. Microsoft has said for at least a decade that, in the long run, it
sees "content" as more lucrative than applications software.
Besides that, a number of analysts say that Microsoft's Comcast investment, as well as the money it has sunk into its Microsoft Network (MSN) are examples of how the company is buying into the distribution channels of the 21st century. Microsoft will deliver software as well as all kinds of information via those channels.
It pays, the analysts argue, to take the long view of Microsoft's future. After all, sales of new software can't expand at double-digit rates forever. And most people expect the company to be successful. Microsoft is almost always successful. Isn't it?
Well, no. It has had some spectacular failures, but it has always had deep pockets and a tenacious ability -- or perhaps a foible -- to hang in there with a technology until it finally takes off. Of course, since some failures are so recent, we still remember them. Witness Bob (or "Boob" as some wags dubbed it) and the "Tiger" interactive video server. Bob, the intel
ligent agent interface to install on top of Windows, was a disk, memory and processor hog in which users found little value. Tiger didn't go anywhere largely because all of Microsoft's "partners" in the area of interactive TV got cold feet when it became obvious that their customers weren't particularly interested in interacting with their TVs--even if the service was free.
But there have been other missteps that you may not think of right off the bat. Modular Windows, Pen Windows, and the AtWork operating system are a few. Modular Windows was a scaled-down version of Windows that was going to go into everything from television set-top boxes to VCRs to standalone electronic game machines. What happened to it? After a spate of "partnership alliance" announcements, it vanished quietly. Lack of interest once again.
Pen Windows was an overpromised technology for providing handwriting recognition additions to Windows 3.0. When Microsoft discovered that it didn't work at all well, it scaled back its promis
es, saying the technology would be able to recognize carefully-printed, discrete letters and to respond to "gestures."
Pen Windows vanished altogether when hardware manufacturers backed out of building compatible devices. The technology later resurfaced inside Microsoft in a new incarnation, code-named "WinPad," but even that slipped back beneath the surface without ever being announced.
The AtWork operating system was a plan to put another scaled-down Microsoft operating system into all kinds of business equipment from printers and fax machines to telephone switches and voicemail systems. Never mind that the people who buy and maintain fax machines and PBXs are rarely the people who buy PCs. Never mind that the purchase cycle for a phone system and the life cycle of phone equipment is three to five times longer than that of a PC.
After all the hoopla surrounding AtWork and all the slick demos, a tiny handful of low-end printers came out that supported it. But, like all of these Bride-of-Frankens
tein technologies, it, too, refused to die.
With many of these failures, most people with any real-world experience could have spotted the flaws in the plan pretty easily. This leads to the question: Why do these things keep slipping by Microsoft's market savvy types? In my opinion, it's because Microsoft is a company in which engineers dominate.
The engineers come up with something "cool" and then decide that it must be useful. But too many engineers come up with a solution first and then go looking for a problem to solve. A classic example of this at Microsoft was Windows for Workgroups. Microsoft had been unsuccessful time and again in getting companies to adopt its various network operating systems. Windows for Workgroups would solve that by incorporating peer-to-peer networking right in the box. The Windows For Workgroups idea, boldly touted by Microsoft product managers, was that Windows users would set up their own small networked workgroups and then, after enough of those had permeated a com
pany the users would join them all together using Windows NT.
Never mind that the proliferation of PC networks in large companies had always been a top-down phenomenon implemented by corporate IT, while PC proliferation had been classically a bottom-up phenomenon. Not surprisingly, Windows For Workgroups was a failure during its first year.
But Microsoft was unwilling to admit defeat. With the next release, Microsoft got most PC manufacturers to make it the basic operating system pre-installed on new PCs, while at the same time phasing out Windows 3.1. Thus, Microsoft, through a marketing maneuver, was able to say that Windows For Workgroups was selling in the volumes it had promised. However, very few ad hoc, peer-to-peer Windows For Workgroups networks were ever set up by mavericks in corporate America.
I see this same problem with so-called "digital convergence." Do you often get the urge to surf the Web while you're watching TV? Have you tried to read Web-sized text on a TV screen? That o
ne, the answer flies back, will be solved with high-definition television. Sure, but what about the cognitive dissonance problem?
While I have to assume that eventually someone will figure out how to apply interactive computing technologies to the TV and vice versa, so far, most conceptualizations just don't work. The biggest stumbling block is that the two platforms are only similar on the surface.
A PC is a "personal" computer. That is, it's a single-user device that you sit close to and interact with a lot. A TV is a multi-user device that you sit far away from and with which you interact very little. Perhaps this will change as today's teenagers grow up and join the work force. Perhaps not.
Some of the technologies that Microsoft invests in fall into the category of "hedging bets." The Windows Terminal and the NetPC are examples of this. By having a product ready in a nascent category, Microsoft is positioned to jump in if the market goes that direction. If not, there's no big loss.
B
ut the WebTV set-top boxes and the Comcast deal, which is an investment in accelerating deployment cable modems to households and businesses, are big bets -- bets that could go awry with dramatic consequences if the company has guessed wrong.
In the case of Comcast, that bet is not too scary. Even if interactive TV doesn't take off, Microsoft can still find ways to cash in on high-speed connections to homes. Users may not need or want interactive TV or phone service over their cable boxes. And even if no one successfully merges TV and PC, the same pipe could be used to supply video to the TV and software and Internet connectivity to the
PC.
The WebTV investment, on the other hand, is a lot riskier. If the digital convergence doesn't happen on schedule, then that $425 million could have been a waste of money. And that could be because Microsoft's engineering bias keeps alive technologies that should have been put down years ago. But instead, the same themes keep reemerging. Microsoft and its visiona
ries may simply believe that if they keep repackaging the technologies and pushing them back out the door, that eventually they'll take. After all, Windows CE, soon to be incorporated into everything from the WebTV set-top boxes to Windows Terminals, is the direct descendant of Modular Windows, Pen Windows, and AtWork.
Maybe Microsoft will figure out this digital convergence stuff. After all, though it came eight years later than Microsoft expected, most PCs now come with CD-ROM drives and multimedia capabilities. However, I rarely see those multimedia features widely deployed in American companies. Luckily for Microsoft, software now takes so much disk space that CD-ROMs have become an economical distribution medium. Otherwise, as the joke goes, those drive trays would start to look a lot more like cup holders.
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