Has Microsoft lost its edge?

Stan Beer
Sunday, 16 October 2005 22:13

Opinion and Analysis

Increasingly there is a buzz making its way around the traps of the IT world that Microsoft is starting to lose its grip and is looking a little frayed around the edges.

Those of us, who are old enough, remember a time when IBM was undisputed king of the hill in the IT industry – seven times as large as its nearest competitor. Then along came this upstart little non-entity called Microsoft run by two computer nerds, Bill Gates and Paul Allen, whose sole product was a primitive little 16-bit operating system that could fit on a single 1.2 MB, 5.25 inch floppy disk. The idea of this tiny company, that didn’t even make computers, breaking the dominance of a technology colossus that made the most sophisticated computers and software in the world was unthinkable. Yet it happened.

The emergence of a little search engine company called Google has forced Microsoft into a reactive rather than proactive stance in the internet space. Microsoft's instant messaging alliance with Yahoo! announced last week is one example. Google is no Netscape. It won its position through a simple idea combined with superior technology and has now grown to a size where it can’t be killed off.

However, Google is just one part of Microsoft’s problems. The main problem for Microsoft is the same one that faced the IBM of the 1980s. The company has become big and clunky and its software business model is becoming increasingly less relevant in an age of internet services and open source software. Powerful desktop and notebook computers have now dropped to prices approaching what Microsoft expects consumers and business clients to pay for its Office suite – and increasingly they won’t wear it.

Needless to say, businesses and government agencies are starting to question the wisdom of continuing to shell out big bucks for proprietary office software. Open source versions with a high level of backward compatibility, similar functionality and the same look and feel can be had for a fraction of the cost. Consumers will not be far behind business in questioning whether they want to spend a few hundred dollars for software similar to a product that can be downloaded for free.

The Microsoft Office suite is responsible for about half of the company’s annual revenues. That’s why Microsoft is so vulnerable. Almost exactly five years ago, one of Microsoft’s biggest detractors, Sun Microsystems, donated its own office suite StarOffice to the open source community. The result was a project called OpenOffice.org, an office productivity suite, which has been sponsored by a range of vendors supporting the open source community, including Sun, Red Hat, Novell, Intel, Debian and a host of others.

An advanced stable working version of OpenOffice.org, which is compatible with Microsoft Office and has a similar look and feel, can be downloaded for absolutely free. A more advanced buggier version, with greater functionality than Microsoft’s current product, can also be downloaded for free. Knowing this, would you pay hundreds of dollars to upgrade to a new version of Microsoft Office?

It’s not as if Microsoft doesn’t realise all of this. The company is certainly not sitting on its hands doing nothing. Microsoft promises that the next version of its product, Office 12, will be nothing like the previous versions. It will be much easier to use and a lot less clunky, we are told. The problem is, many of us have spent the past dozen years or so getting used to the old clunky Microsoft Office. It may be clunky but it works and OpenOffice.org is giving us something less clunky, with better functionality and the same look and feel for free. If Microsoft wants us to switch to Office 12, then it had better be pretty damned special for us to pay the usual high premium and to take between 2 days and 2 weeks (Microsoft’s estimates) to learn how to use it. Being fairly set in my ways, I don’t think I would bother. Younger people may feel differently.

For Microsoft, a lot rides on the success of Office 12. When the new product comes out it has to be absolutely brilliant. Microsoft can’t hold off the Office 12 release for too long because if OpenOffice.org gains enough momentum among the user community, no-one will ever want to pay for office productivity software again. If that happens, Microsoft loses its dominance on the desktop. It will still have Windows of course. However, when you buy your next PC, would there be any reason to pay a premium for a pre-loaded Windows, when you could have a PC pre-loaded with a good Linux distribution, OpenOffice.org and, say, the Firefox  web browser all at little or no extra charge on top of the hardware? The answer’s pretty obvious and, for Microsoft, the answer’s not pretty.