Is Microsoft like the renewed IBM?

In 2007 I wrote a blog that posed the question whether Microsoft was becoming like the old IBM. I used a number of cases that made Microsoft look like the IBM of the late 1980s and early 1990s – before IBM’s near demise and subsequent revival.

Now I see a blog post by James Governor who reckons Microsoft’s new CEO Satya Nadella is like IBM’s saviour Lou Gertner.

CEO Satya Nadella is increasingly looking like Microsoft’s Louis Gerstner – that is, an executive who can look at things from the customer perspective, with a truly outside-in view, and drive the cultural change needed to revitalise a company from the ground up. Nadella has a relaxed, confident demeanor that makes you want to lean in and engage, and now by extension, so does Microsoft. In terms of its corporate evolution Microsoft currently looks like IBM in the late 1990s, supporting whatever environments customers choose, but with Azure playing the role of Global Services, and the key customer being the modern software developer rather than the CIO. In other news Microsoft’s timing is pretty much perfect.

In the end time will tell, but I do believe Governor might be right.

 

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Other companies becoming like IBM

technologyA number of years ago I wrote a blog post about the possibility of Microsoft turning into the ‘old’ IBM. Now it seems there are other similarities, but another company looks to be doing the same thing. Looking back at what I wrote in 2007, a few points now seem strangely familiar.

  • reliance on a monopoly cash-cow; IBM with mainframe hardware and operating systems, Microsoft with Windows and Office
  • branching out into all sorts of different systems and applications; being good in some areas and terrible in others, but still continued in the terrible areas
  • being a symbol of conventionality; Microsoft is now even old-fashioned to the millennial crowd
  • thinking that they might take over the world; in their heyday there were concerns that they might get too much influence, how quickly that fear can change

Nearly eight years later I think the points I made above confirm Microsoft has become like IBM, even as far as experiencing a downturn in business as new competitors and business models emerge.

Something else though has appeared that makes them similar to my mind – a knight in shining armour coming to the rescue. In the IBM story it was Lou Gerstner who saved IBM from a serious predicament. For Microsoft, it’s new CEO Satya Nadella’s change of business model. Nadella has introduced a number of initiatives which indicate a significant change in attitude, a recent one being the acquisition of email app Accompli; who would have thought that Microsoft would support other email platforms.

There’s another vendor whose business model has changed from what it set out originally, Oracle. Starting out purely in the enterprise software arena, in the last few years the number of acquisitions and the broadening of focus make it look like another IBM. But in this case, it’s because Oracle wants to own the whole stack. In comparing Digital Equipment Corp and Oracle, I commented in 2009:

There was a belief about Digital that it became too difficult to manage so many different technologies, and that contributed to the company’s demise. So I can’t help wondering how Oracle will manage.

Oracle seems to be doing OK. So far. Although Larry Ellison stepped down as CEO earlier this year, I bet he is still in control. The test will come when he leaves the company completely.

So perhaps it will have to wait another seven years before I can write again about how tech companies become like IBM.

Update: Gartner’s Merv Adrian published a quadrant-style picture that shows where Microsoft products are on the Gartner Magic Quadrant. Look at the range of products, and those that are not in the leader quadrant.

Is Microsoft losing the ISV plot?

microsoft partner logoVia my work email I received an invitation from Microsoft to session called “Ignite your marketing potential with Microsoft”. The agenda for the session was:

  1. An Overview of the Microsoft Marketing strategy in a world of Devices and Services
  2. Campaign Priority – Cloud OS: Azure, Windows Server and SQL
  3. Campaign Priority – Your Complete Office in the Cloud: Office 365
  4. Campaign Priority – Flexible Workstyles : Windows 8, Office & Devices
  5. The value of these campaigns to you?
    • What is the potential deal size?
    • How can Microsoft help you save on producing the assets? A look at brand tools.

This was sent to a representative (me) of an ISV (independent software vendor) that develops enterprise software.

Item 1 might be somewhat relevant to gauge where Microsoft wants to go, but it’s not really that relevant to an ERP company.

Items 2 is relevant, but as I said to a Microsoft VP recently, “if you want your partners to transition to the cloud, what kind of investment are you prepared to make to help us move?”

Items 3 to 5 are basically irrelevant to us.

So my question is, as the title of this blog, “Is Microsoft losing the ISV plot?”  because it seems as though they have become almost entirely B2C and cloud oriented, and have forgotten the B2B aspect.

Where are the big tech companies going?

competitionWhat I would call the “old tech companies” – SAP, Oracle, and to some extent Microsoft – seem to be getting further away from the core where they started, and are beginning to look more like IBM and HP.

This notion was kicked off by Vinnie Mirchandani’s question ‘What happened to the SAP I knew?

It used to be in tune with business process leadership … Its (reduced) attention to apps has been diffused even more by years of seemingly wasted BYD investment and digesting acquisitions like SuccessFactors.

Oracle has strayed from the software path into hardware, and competes against ‘former’ partners IBM and HP. It seems like the company wants to own not only the vertical stack – from base hardware up to the software applications – but also wants to have a piece of the entire software value chain, for example, buying market automation maker Eloqua and content vendor Compendium. Apparently, the reason for this is to build a portfolio of applications to compete against Salesforce.

When it comes to Microsoft, they now wants to focus on “high value” activities that consumers and business users prioritize. Is that code of owning more of the customer’s wallet? The new Microsoft strategy is discussed further here and here. In some cases, Microsoft’s strategy seems quite different, but it also seems to be doing much the same as the others.

The situation that SAP and Oracle are putting themselves into was nicely described as being ‘too big to succeed.’

… anyone visiting Oracle OpenWorld this year would have seen a company teetering under the sheer bulk of the steroid-drip of acquisitions it has made over the years …
… SAP has also bulked up its product and customer base, and there’s a genuine risk that, at least when it comes to the SAP field sales team, it has become increasingly difficult for anyone outside to top echelons of the company to articulate the full value of SAP’s vast portfolio to customers and prospects …
… I think it’s time to admit that economies of scale work well in industrial companies with industrial processes, but sheer size is no advantage in a service economy. In a service economy, or any economy that depends on getting people to come together in order to provide innovative services to customers, doing more with less – the mantra of the economies of scale mavens – simply doesn’t work.

What really gets me about the strategies these companies are pursuing is that it seems to show they are more worried and more focused on growing revenues for shareholders, than what their customers want.

Any comments?

How does Microsoft’s re-org impact partners?

On 11th July there was an announcement of a major re-organisation and strategy change at Microsoft. I have been waiting to see what analysis would be about the impact of the re-org on the Microsoft partner base, but the comments I have seen related mainly to the Dynamics (ERP and CRM) partners -for example, here and here . The sector of the partner base I am interested in is the Application Development (AppDev) partners, what used to be called ISVs (Independent Software Vendors).

Firstly, let’s agree that Microsoft is not what it used to be. As one journalist has noted:

Microsoft’s glory days are behind it [although] it remains enormously important to the entire technology industry …

Secondly, as an analyst commented, the announcement showed that Microsoft’s CEO Steve Ballmer believes the company needs to shift focus:

from a software company to a company that builds software powered devices (e.g. the Windows tablets) and software powered services (e.g. Azure) …  trying to become a platform company, that brings together all the different pieces of the large Microsoft product family

What I have not seen yet is the recognition that one of  the challenges is going to be getting Microsoft’s partners to buy into the strategy change. Microsoft has a large partner base and derives much of its business via its partners, who in turn generate revenue from selling and implementing Microsoft products (IDC). According to a report from the recent Microsoft Worldwide Partner Conference (WPC), the buy-in from partners is not happening to the extent Microsoft wants it – only about 3 percent of the partners have got involved in cloud services business (20,000 out of 650,000). Another report notes that Microsoft customers have not bought into the cloud either – 89 percent are not using any of Microsoft’s cloud products.

The scary question to partners at WPC from Microsoft’s COO Kevin Turner was “where’s the other 630,000 we have? What do you need?”. It’s scary on a number of grounds.

  • Microsoft seems to have accepted the hype that everyone wants to switch to the cloud, and therefore its partners should be moving in that direction. That does not recognise what a huge disruption that will be for partners, like the App Dev ones. My response to Mr Turner would be “How much are you willing to pay us to move?”
  • It may indicate that innovation from Microsoft is going to be focused on the cloud, and that for “on-premise Windows networks, your days are numbered.”
  • There is an apparent inability to differentiate between between the needs and buying decisions of the enterprise and consumer markets. For a consumer, moving to the cloud can be accomplished quickly and without much disruption, although there are still concerns about privacy and security. For the enterprise, the ramifications can be much greater, and the process more complex and with significant disruption.

Against the view that the cloud is the new way to go, a survey of solutions providers showed that conventional software sales are still the biggest segment of the market, and still growing. Also, customers may be interested to hear about cloud solutions, but when the decision comes they opt for a conventional sale.

Some years ago I wrote “Is Microsoft like ‘old’ IBM? and made this comment:

IBM had 20-30 years as ‘master of the universe’ until the early 1990s. I wonder how long Microsoft’s good times will last?

Microsoft’s good times may now have ended, and they are going through the same upheavals that IBM had to go through in the 1990s to stay relevant. It took IBM a long time to change, and for Microsoft it is still probably early days. Even before the WPC event and the re-org announcement, David Chappell remarked after Microsoft Build (the developers’ conference) that:

The level of change we’re seeing right now is extraordinary. Both servers and clients are changing at the same time

And although he was referring to Windows 8, this comment could apply more broadly:

Given the magnitude of the change, though, it’s going to take everybody a while to work out how that change should look

Microsoft has given its partners the company’s new vision, but it is not going to be easy for either Microsoft or its partners to make the changes to achieve the vision, nor will it be easy to persuade customers to agree to them. Who knows where we will be in 3-5 years time?

If you are a partner, is this change threatening or promising? Do you now need to re-evaluate your Microsoft partnership status and objectives?

Is Windows 8 to Microsoft like OS/2 was to IBM?

Back in 2007 I wrote a blog that asked “Is Microsoft like ‘old’ IBM?” That was in the days when the mighty Redmond software factory seemed unable to do wrong. At the end of the blog, I asked:

I wonder how long Microsoft’s good times will last?

I thought it would last much longer than it has. Microsoft is now looking distinctly less mighty and infallible than it used to, that is because it missed the new markets of smartphone operating systems and tablets until they were well established by other companies.

Now I am beginning to wonder whether Microsoft is tracing the same steps with Windows 8 as IBM did in the 1980s when it released the OS/2 operating system?

Remember, IBM brought out OS/2 to try and win back its PC operating system market share from the growing Windows operating system. By that time, IBM had also lost its dominance of the PC hardware market, and it tried to counter that by introducing the PS/2. Both these initiatives followed the tried-and-trusted IBM approach to dominate a market with its own proprietary products.

What do I see now? Microsoft losing the Windows-based PC hardware platform to tablets and smartphones running Android or iOS, and struggling to become significant in the smartphone operating system. What does Microsoft do? Bring out Windows 8 as a touch–oriented operating system, to run on PCs, tablets, and smartphones.

Some people are already writing off Windows 8 as a failure; and a respectable tech journalist has commented:

… consumers don’t appear to be warming to Windows 8 …

Recent statistics paint a stark picture of the health of the PC industry: in April, analyst firm Gartner said that 79,2m PCs were shipped in the first quarter of 2013, an 11,2% decline over the same quarter in 2012 and the first time the number had fallen below 80m since the second quarter of 2009.

The same journalist observed:

 The problem Microsoft faces is far deeper than a simple change in the formula of its software. The entire structure of the computer industry has changed.

Doesn’t that sound like the situation IBM faced in the 1980s and 1990s when the computing paradigm changed from mainframes to PCs?

As I also wrote at the time:

IBM went from being a great tech-oriented company to one run by bean counters; the more I deal as a partner with Microsoft the more I feel that way about them as well.

I believe that still to be true. However, they obviously do have some good techies as the recent Xbox One announcement has shown.

IBM managed to change its fortunes under the leadership of Lou Gerstner. I hope Microsoft do the same.

Microsoft Partner Summit and the new economic landscape

Mteto NyatiI attended the Microsoft Partner Summit Africa, and heard some interesting points in the keynote address made by the two executives who run Microsoft’s business for most of Africa – Nteto Nyati, Managing Director of Microsoft South Africa, and Hennie Loubser, Regional General Manager for Microsoft WECA (West, East and Central Africa).

HennieLoubser

  • The BRICS (Brazil, Russia, India, China, South Africa) are now areas where most growth is projected;
  • 6 of the 10 fastest growing economies are in Africa;
  • a number of Microsoft employees from Africa who have been working abroad are repatriating from Europe and the US back to Africa;
  • there are 1300 large and mid-market companies in Africa from which Microsoft gets 75% of its revenue in this region;
  • Africa has become a continent of hope and opportunity;
  • on the African continent, the community expects companies to become an integrated part of the society – profitable returns to company owners must also accompany returns to society.

This led me to these thoughts:

  1. the focus of economic growth in the world has moved from developed economies (the so-called North) to the emerging and developing economies (the South);
  2. this change should have some impact on the issues and location of technology innovation;
  3. a good deal of technology innovation focuses on mostly ‘northern’ business, consumer and societal issues;
  4. there is an expectation, particularly in the North, that the source of technology innovation should still occur in certain ‘northern’ locations;
  5. Points 1 and 2 do not agree with Points 3 and 4

It makes me proud therefore to say that SYSPRO is an African company that supports the real issues of small and medium businesses throughout the world. Comments of “how can innovation come from Africa?” should now be discarded for the irrelevant and arrogant rubbish that they are.


Some other information from the keynote

Microsoft SA’s FY2011 growth areas:

Public sector 43%
Entertainment and devices 32%
Enterprise services 28%
Enterprise group 22%
Small & medium business group 20%

Microsoft SA’s FY2011 market share changes:

Web browser + 11 pts
Email, calendaring + 17 pts
Unified communications + 7 pts
Database server – 2 pts
Smartphone – 7 pts

Some Microsoft Africa stats (via IDC):

PC shipment growth 15%
Serve shipment growth 6%
Software piracy rate > 80% (US $785 mill) in 2010