Microsoft Bares Knuckles Against Enterprise Software Competition

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Includes: CSCO, GOOG, IBM, MSFT, ORCL, VMW
by: Dennis Byron

Microsoft (NASDAQ:MSFT) took the gloves off in its July 30 Financial Analysts Meeting. The company may have been more aggressive in the past but I don't recall it. I believe the previous strategy was to pretend there was no competition, the old IBM strategy when it had to compete against the seven dwarfs.

Instead, between the opening remarks from Steve Ballmer, speaking as interim but outgoing head of the Windows division, and Kevin Turner, the COO, no competitor went unmentioned.

In the part of the Windows business that Ballmer said was 80% of the action, selling PCs with Windows, he went through five categories of competition and pointed out why each was not a threat to Windows' 90% share. If I were a Eurocrat taking notes, there was probably enough there to start another anti-competition investigation in order to fund all the great dinners next fall and winter in Brussels. Some typical Ballmerisms:

  • Thin client--when you say "thin client," you really mean a client that doesn't execute code. Everything happens on the server. And the truth of the matter is, I don't care whether you are Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG) or Microsoft or Linux, all of these constituencies are telling you are going to want to run code down on your client... don't think there is some magic technology, revolutionary thing that they believe in differently. They don't. Okay.
  • Standard clients vs. Windows--"We as a company believe in proprietary innovation and standards support. But the standards will never be able to move as fast as the sweeping innovation. So just when rich graphics comes to HTML, it will all be about touch-user interface. It will be about things that are not yet in the standard. So we need to support standards, and we will go beyond standards."
  • Linux--Linux vendors says "we have no price. We know they have a price. But they say they have no price. The problem you have with these so-called free alternatives is there's also not the incentive to do a lot of the hard work to build-out the ecosystems, to support the hardware vendors. So we maintain a fixed design point in the Windows world which the Linux community has never managed to do. So Linux still is not Linux is still not Linux. Whether we are talking about android Linux or other Linux distributions, it is hard to build ecosystem momentum with a very, let me say, chaotic design point."
  • Apple--Opposite problem to the Linux suppliers... the primary attack that comes from Apple is, "hey, at the end of the day, we have the coolest hardware."
  • Google--I don't know what Chrome OS is yet. I know what you know. I don't know what its relationship is to Android. Right now I put it on the list for competitive completeness more than anything else.

As for Turner, he formalized the game, saying it is called "something Compete." He pointed out how Microsoft is going after share because the pie is probably not going to grow as fast as investors have been used to, so the only way to grow is to take business away from competitors. He mentioned unhooking 13,000,000 IBM Notes users in the last three years ("and there's still 15,000,000 out there"), going after every single Oracle (NYSE:ORCL) Siebel seat and displacing it with Microsoft CRM, and proving to Cisco (NASDAQ:CSCO) Webex users that they are paying 2/3 more than what they will for Microsoft Live Meeting (former Placeware). Turner said:

"We will do it respectfully and lawfully and all those things. But we are really firing up this ability of the importance of market share because as this pie continues to shrink, our ability to grow is going to be completely dependent on our ability to grow our portion of the pie. And so that's why this competing to win is so important."

Point by point, he took on VMware (NYSE:VMW) and says Microsoft offers 1/6th the price, Internet Explorer vs. knockoffs--including how Javascript is handled, Office Live vs. Google Apps (just a lot of noise and "Customers don't want 100% of every piece of data for every application managed in the cloud. They simply don't."), Apple and its high pricing, and Microsoft's almost instantaneous domination of the netbook market. In the latter category, Microsoft sees piracy as a bigger competitor than Linux.

Vs. Linux as a server, Turner says,

"when we get the facts (in front of our customers) and we show them the TCO story for Windows Server, the security story for Windows Server, and you show them Linux and open source isn't free,"..

you gain share and Microsoft claims to be up 2 points year over year according to IDC against Linux "in the toughest macro economic environment of our lifetime." I don't know about that but I agree Windows is the most popular platform for both proprietary and open source software.