But then how does this presage its demise? Why wouldn't it get away with
doing just that?
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Well I don't think Microsoft's *competing with itself* problem leads to its demise but to something different: the slow erosion of market dominance and, as important (indeed, a linked effect) the loss of ever more hearts and minds.
Those of us who live in the Linux or Solaris or Mac or FreeBSD or what have you worlds may be shocked and dismayed to know this but there are quite a few people (especially in the management circles of businesses of various sizes) who cherish very positive impressions of MSFT -- who believe Redmond's producing a top notch product and providing sterling support.
But there are limits to this faithfulness.
Imagine, for a moment, that you're the CFO for a mid-size company. You're using Windows NT 4.0 and Windows 2000 server for file and print services, application hosting, and other *back office* biz functions. On the client side, you use a mixture of Windows 98, Windows 2000 Pro and Win XP Pro (it came pre-installed on some of the new laptops you ordered for the sales force and desktops for VPs who scarcely use them).
Office 2000 is the standard productivity suite.
Your IT staff and your users are comfortable with this infrastructure; it works most of the time. The problems that do come up have workarounds. You've developed an institution-wide body of knowledge -- at both the techie and experienced user level -- of how to keep this system going. There's also an immense amount of troubleshooting knowledge available for free via smart Google searching.
Like most companies, you hold onto your PC desktop and server hardware for years and years -- as long as possible really -- and, therefore, have no need to change the OSes running on them (*upgrades* are often made necessary by moving to very new hardware platforms that are not fully *understood* by or optimized for older operating systems - try running Win 98 on a P4 for example; yes, you can do it but you wouldn't want to).
In the fullness of time, Microsoft comes a calling - either directly if you're large enough or through its slick ad campaigns that are in the air - and suggests you move from Windows NT 4.0 Server and Windows 2000 server on the back end to Windows Server 2003. And, that you perform a complete upgrade on your client side from the goulash of Windows versions you currently run to all Win XP Pro everywhere. And that you upgrade to Exchange 2003 and so on and so on...
You, clever CFO, have faith in MSFT, you like their products but you project the costs:
* new hardware * new operating system software * new applications software * time in training staff on new stuff * MSFT's software assurance licensing fees -- <http://www.microsoft.com/licensing/programs/sa/default.mspx >
Of all the items on this list, the 'software assurance' thing is what starts to bother you the most. You do the numbers: it will be very expensive indeed -- a huge, eternal funds transfer funnel from your accounts to Redmond's.
And this is where the cracks begin to appear and Microsoft's previous products create problems for its revenue model. Because, you decide to continue running what you have for however long you can (which may be as long as ten years or more). You may purchase a few new servers running Win 2003 -- those will be licensed of course -- and whatever new PCs you buy will have copies of Win XP Pro. So Microsoft does make a good amount of money from you.
But the volume of change and, therefore, new purchasing and licensing fee exposure you're able to tolerate is limited. You're not willing, in short, to support MSFT's aggressive yearly sales targets and ironically, it's your mastery of previous versions of Microsoft software that makes this resistance possible. Add to this the fact that your IT staff has recently introduced a Linux box or two into the environment to perform several demanding tasks and have been pestering you to consider alternatives to Microsoft for some time for various, *mission-critical* functions.
In the past, you dismissed this as geek chatter but you're now quietly reconsidering that opinion (all those glowing articles in Business Week and even WSJ about Linux haven't hurt either).
...
None of this means the end of Microsoft, which has an immense war chest of cash (a hedge against several years of even zero growth) and still commands a vast revenue intake system. But it does suggest the process by which its market dominance begins to fade, slowly but surely, into history. No one is more alert to this possibility than Gates and co. who, at various moments, have more or less openly stated their concerns about losing dominance by growing lazy and not staying aware of customer's actions.
So they know, but I believe the responses they have at their disposal to halt this process are limited by the exacting demands of their business model. And they can't force you to give up old versions of their products. They can and will, in time, withdraw technical and hotfix support from older iterations, but a huge percentage of customers don't care about that.
.d.