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11/4/2010
07:55 PM
Rob Preston
Rob Preston
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Down To Business: Give Microsoft Some Credit

It may not be on the cutting edge of most technology movements, but posting the highest quarterly revenue and profit in company history isn't tantamount to embarking on the Bataan Death March.

On A Roll

On that latest front, how many times have we heard that Microsoft is "late" to the cloud, as if being first is the be-all-and-end-all? But its Windows Azure application development platform as a service, which Microsoft worked on for four years before releasing it in February, is on an early roll, showing 40% subscriber growth last quarter compared with the previous one. Microsoft forecasts that its Business Productivity Online Services—which includes SaaS versions of its Exchange, SharePoint, and Dynamics CRM—will represent half of its revenue from those products within four years. Recent high-profile BPOS wins include DuPont, the state of California, New York City, and Godiva. As I stated in a column earlier this year, Microsoft won't dominate the cloud—no company will—"but it will be the preeminent, most profitable player there in no time."

The question always gets back to this: But is Microsoft really innovating? Getting a lot of attention back in February was a New York Times op-ed piece written by a former Microsoft executive, who argued that the company had become a "clumsy, uncompetitive innovator," mostly because of internal competition. Established product groups, the former exec wrote, often thwarted emerging products that they saw as a threat. One example he cited: When Microsoft was developing a tablet PC in 2001, the VP in charge of Office allegedly "sabotaged" that effort because Microsoft's tablet required a stylus and was therefore not a great fit for Office apps. That column threw up some serious red flags.

I'm not arguing that Microsoft is on the cutting edge of most technology and product movements. It has dropped the ball or been painfully slow in many areas. But to be successful, Microsoft doesn't have to dominate every single consumer and business technology sector from the get-go.

The evidence is mixed. We're told Microsoft has no real answer to Facebook in social media (who really does?); is a flop in gaming (even though its Xbox 360 outsold every competing console for each of the last four months) and personal entertainment devices (it should leave that market to others); is hopelessly behind Google in search (it's very late there, but its 18-month-old Bing continues to gain market share); let Apple steal the march in tablets (Microsoft must respond); let Firefox and Chrome make a dent in its dominant browser market share (but to what negative consequences?); and is losing the smartphone wars to Apple and Google (Windows Phone 7 is a make-or-break moment—Microsoft may need to acquire someone).

But when Microsoft puts its collective mind to something really important to its future, it often gets it right. SharePoint, SQL Server, BPOS, and the most recent versions of Windows and Office are prime examples. On the consumer side, Bing is very promising. In releasing Kinect, an innovative Xbox 360 controller that tracks body movements and responds to spoken directions and changes in voice tone, Microsoft last week increased its sales forecast by almost 70%, saying it now expects to sell 5 million of the units by the end of this year.

Perhaps those and other successes don't make Microsoft a first-class innovator. But with hundreds of millions of customers and revenue of $62 billion and operating income of $24 billion in its most recent fiscal year, it must be doing something right. It's certainly not headed the way of Woolworth's. So give Microsoft some credit.

Rob Preston,

VP and Editor in Chief, InformationWeek

rpreston@techweb.com

To find out more about Rob Preston, please visit his page.

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