Welcome to the latest BriefingsDirect Insights Edition, Vol. 32, a periodic discussion and dissection of software, services, SOA and compute cloud-related news and events, with a panel of IT analysts and guests.
In this episode, recorded Oct. 10, 2008, our experts examine the state of Microsoft (NASDAQ:MSFT) at the onset of the annual Professional Developers Conference. Two narratives emerge from our roundtable discussion, one that Microsoft is behind on many new IT trends and is tied to past business models. The opposing view is that Microsoft will ride pedestrian application development, business intelligence, data services, Xbox, unified communications, virtualization and cloud computing to become bigger and more pervasive than ever.
Please join noted IT industry analysts and experts Jim Kobielus, senior analyst at Forrester Research; Tony Baer, senior analyst at Ovum; Dave Linthicum, independent SOA consultant at Linthicum Group; Brad Shimmin, principal analyst at Current Analysis; Mike Meehan, a senior analyst at Current Analysis, and Joe McKendrick, independent analyst and prolific blogger. Our discussion is hosted and moderated by yours truly, Dana Gardner.
Here are some excerpts:
Kobielus: There’s some validity to the viewpoint that Microsoft's growth potential has capped on the business side, when you consider packaged applications, and software- and application-development tools, in the sense that the entire product niche of the service-oriented architecture (SOA) universe is rapidly maturing.
The vendors in this space -- the SOA vendors, the business-intelligence (BI) vendors, the master data management ((MDM)) vendors -- are going to realize revenue growth and profitability. Those who survive this economic downturn and thrive in the next uptick, will be those who very much focus on providing verticalized and customized applications on a consulting or professional services basis.
In that regard, Microsoft is a bit behind the eight ball. They don’t really have the strength on the consulting, professional services, and verticalization side, that an SAP (NYSE:SAP), Oracle (NYSE:ORCL), or an IBM (NYSE:IBM) can bring to the table.
Microsoft, if they want to continue to grow in the whole platform and application space and in the whole SOA universe, needs to put a greater focus on consulting services.
McKendrick: Microsoft has its own economy. No matter what happens to the economy at large, Microsoft has its own economy going, and just seems to get through all this.
What’s driven Microsoft from day one, and continues to do so, is that Microsoft is the software company for Joe the Plumber. That’s their constituency, not necessarily Joe the Developer. They cater to Joe the Developer, Joe the CIO, and Joe the Analyst certainly likes to check in on what they are doing. It's this whole idea of disruptive technology. They have always targeted the under-served and un-served parts of the marketplace and move up from there.
... The base of Microsoft, these companies that are using Microsoft technology, don’t necessarily get virtualization or cloud computing. They just want a solution installed on their premises and want it to work.
Linthicum: I think they are behind the eight ball. A lot of the strategy I’ve seen coming out of Microsoft over the last few years, especially as it relates to cloud computing, SOA, and virtualization, has been inherently flawed. They get into very proprietary things very quickly. It really comes down to how are they going to sell an additional million desktop operating systems.
Ultimately, they just don’t get where this whole area is going. ... We’re heading into an area where they may not be as influential as they think they should be. They may be not only behind the eight ball, but lots of other organizations that are better at doing cloud computing, virtualization, and things like that, and have a good track record there, are going to end up owning a lot of the space.
Microsoft isn’t going to go away, but I think they’re going to find that their market has changed around them. The desktop isn't as significant as it once was. People aren’t going to want to upgrade Office every year. They’re not going to want to upgrade their desktop operating systems every year. Apple (NASDAQ:AAPL) Macs are making big inroads into their market space, and it’s going to be a very tough fight for them. I think they’re going to be a lot smaller company in five years than they are today.
Meehan: Dave is absolutely right in that the one area that Microsoft never really conquered that it needed to conquer, given its strength in the desktop, is the handheld. If they are not going to be there with the handheld long-term, that’s a major growth area that they are going to miss out on. That’s where a lot of the business is going to shift to. ... On the SOA side, as I said before, Microsoft is just trying to be as service-oriented as they can for users who are trying to be not SOA-driven, but "As Service-Oriented As Possible" (ASOAP).
In fact, make that an acronym, ASOAP. There are going to be a number of users who are not going to go fully into SOA, because they have an enterprise architecture. It’s too hard to do, too hard to maintain. They’re never going to quite figure that out. They are just going to try to be tactical and ASOAP. Microsoft will try to service them and hold that part of their business.
What’s the next big thing they’re going to do? Joe referred to Microsoft having come up with that in previous downturns. I don’t see where they have got that right yet, and so I think that leads to them being smaller long-term.
Shimmin: [Microsoft is going to have an opportunity to change this perception] and simply because they don’t have to. I think back to a number of points that’s been made here that to be successful Microsoft doesn’t need to convince the world. It just needs to convince the people that attend the PDC. They have such an expansive and well-established channel, with all the little plumber-developers running around building software with their code, that just as 40 is the new 30, Microsoft is really kind of the new Apple, in a way.
They don’t need to be Oracle to succeed, they really need to have control over their environment and provide the best sort of tooling, management, deployment, and execution software that they can for those people who have signed on to the Microsoft bandwagon and are taking the ride with them. ... (Microsoft) is kind of capped out in many ways relative to the consumer market. But, gosh, they have shown that with things like SharePoint, for example, Microsoft is able to virally infest an organization successfully with their software without having to even lift a finger.
They’ll continue to do that, because they have this Visual Basic mentality. I hate to say it, but they have the mentality of “Let’s make it as simple as possible” for the people that are doing ASOAP, as Mike said, that don’t need to go all the way, but really just need to get the job done. I think they’ll be successful at that.
Kobielus: I think Microsoft will be larger, and they will be larger for the simple reason that they do own the desktop, but the desktop is becoming less relevant. But now, what’s new is that they do own the browser, in terms of predominant market share or installed base. They do own the spreadsheet. They do own the portal. As Brad indicated, SharePoint is everywhere.
One of the issues that many of our customers at Forrester have hit on -- CIO, CTO, that level -- is that SharePoint is everywhere. How do they manage SharePoint? It's a fait accompli, and enterprises have to somehow deal with it. It’s the de-facto standard portal for a large swath of the corporate world. Microsoft, to a great degree, owns the mid-market database with SQL Server.
So owning so many important components of the SOA stack, in terms of predominant market share, means that Microsoft has great clout to go in any number of directions. One direction in which they’re clearly going in a very forceful way that brings all this together is in BI and online analytical processing (OLAP)). The announcements they made a few weeks ago at the BI conferenceshow where Microsoft clearly is heading. They very much want to become and remain a predominant BI vendor in the long run.
Gardner: ... On the total cost perspective, I think what I am hearing from you is that if you go all Microsoft all the time, there are going to be efficiencies, productivity, and cost savings. Is that the mantra? Is that the vision?
Shimmin: That‘s exactly right, Dana. That’s what they’re banking on, and that’s why I think they are the next Apple, in a way, because they are downtrodden, compared to some of the other big guns we’re talking about with Oracle, SAP, and IBM inside the middleware space. But that doesn’t matter, because they have a loyal following, which, if you guys have ever attended these shows of theirs, you’d see that they are just as rabid as Mac fans in many ways.
Microsoft is going to do their best job to make their customers lives as easy as possible, so that they remain loyal subjects. That’s a key to success. That’s how you succeed in keeping your customers.
Linthicum: Ultimately, people are looking for open solutions that are a lot more scalable than this stuff that Microsoft has to offer. The point that was just made, there are a bunch of huge Microsoft fans that will buy anything that they sell, that’s the way the shops are. But the number of companies that are doing that right now are shrinking.
People are looking for open, scalable, enterprise-ready solutions, they understand that Microsoft is going to own the desktop, at least for the time being, and they are going to keep them there. But, as far as their back office things and some of the things that Microsoft has put up as these huge enterprise class solutions, people are going to opt for other things right now.
It's just a buying pattern. It may be a perception issue or a technological issue. I think it’s a matter of openness or their insistence that everything be proprietary and come back to them. I heard the previous comment that looking at all Microsoft all the time will provide the best bang for the buck. I think people are very suspicious of that.
Gardner: We’ve heard quite a bit on this cloud operating system from Red Hat, Citrix, VMware, IBM, and HP talked it up a little bit. No one’s really come out with a lot of detail, but clearly this seems to be of interest to some of the major vendors. What is the nature of this operating system for the cloud, and does it have the same winner-take-all advantage for a vendor that the operating system on the desktop and departmental server had?
Linthicum: I think it does in virtualization. Once one vendor gets that right, people understand it, there are good standards around it, there are good use cases around it, and there’s a good business case around it, that particular vendor is going to own that space.
I’m not sure it’s going to be Microsoft. They’re very good about building operating systems, but in understanding my Vista crashes that are happening once a day, they are not that good.
Also, there are lots of guys out there who understand the virtualization space and the patterns for use there. The technology they’re going to use, the enabling standards, are going to be very different than what you are going to use on a desktop or even a small enterprise departmental kind of problem domain. Ultimately, a large player is going to step into this game and get a large share of this marketplace pretty quickly, because the cost and ease of moving to that particular vendor is very low.
... These virtualization operating systems that are enterprise bound or even in a gray area with the cloud are going to come from somebody else besides Microsoft.