<nettime> Advice to Microsoft regarding commodity software by David Stutz

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Advice to Microsoft regarding commodity software

(c) 2003 David Stutz

The market for shrink-wrap PC software began its slow upmarket ooze into
Christensen obsolescence right around the time that Microsoft really hit its
stride. That was also the time of the Internet wave, a phenomenon that Microsoft
co-opted without ever really internalizing into product wisdom. While those
qualified to move the state of the art forward went down in the millennial
flames of the dotcom crash, Microsoft's rigorous belief in the physics of
business reality saved both the day and the profits. But the tide had turned, and
a realization that "the net" was a far more interesting place than "the PC"
began to creep into the heads of consumers and enterprises alike. 

During this period, most core Microsoft products missed the Internet wave,
even while claiming to be leading the parade. Office has yet to move past the
document abstraction, despite the world's widespread understanding that
websites (HTML, HTTP, various embedded content types, and Apache mods) are very
useful things. Windows has yet to move past its PC-centric roots to capture a
significant part of the larger network space, although it makes a hell of a
good client. Microsoft developer tools have yet to embrace the loosely coupled
mindset that today's leading edge developers apply to work and play. 

Microsoft's reluctance to adopt networked ways is understandable. Their
advantaged position has been built over the years by adhering to the tenet that
software running on a PC is the natural point at which to integrate hardware
and applications. Unfortunately, network protocols have turned out to be a far
better fit for this middleman role, and Microsoft, intent on propping up the
PC franchise, has had to resist fully embracing the network integration
model. This corporate case of denial has left a vacuum, of course, into which
hardware companies, enterprises, and disgruntled Microsoft wannabes have poured
huge quantities of often inferior, but nonetheless requirements-driven, open
source software. Microsoft still builds the world's best client software, but
the biggest opportunity is no longer the client. It still commands the
biggest margin, but networked software will eventually eclipse client-only
software. 

As networked computing infrastructure matures, the PC client business will
remain important in the same way that automotive manufacturers, rail carriers,
and phone companies remained important while their own networks matured. The
PC form factor will push forward; the Pocket PC, the Tablet PC, and other
forms will emerge. But automakers, railroads, and phone companies actually
manufacture their products, rather than selling intangible bits on a CD to
hardware partners. Will Microsoft continue to convince its partners that software
is distinctly valuable by itself? Or will the commodity nature of software
turn the industry on its head? The hardware companies, who actually manufacture
the machines, smell blood in the water, and the open source software movement
is the result. 

Especially in a maturing market, software expertise still matters, and
Microsoft may very well be able to sidestep irrelevance as it has in the past. The
term "PC franchise" is not just a soundbite; the number of programs written
for the PC that do something useful (drive a loom, control a milling machine,
create a spreadsheet template, edit a recording...) is tremendous. But to
continue leading the pack, Microsoft must innovate quickly. If the PC is all
that the future holds, then growth prospects are bleak. I've spent a lot of
time during the last few years participating in damage-control of various sorts,
and I respect the need for serious adult supervision. Recovering from
current external perceptions of Microsoft as a paranoid, untrustworthy, greedy,
petty, and politically inept organization will take years. Being the lowest cost
commodity producer during such a recovery will be arduous, and will have the
side-effect of changing Microsoft into a place where creative managers and
accountants, rather than visionaries, will call the shots. 

If Microsoft is unable to innovate quickly enough, or to adapt to embrace
network-based integration, the threat that it faces is the erosion of the
economic value of software being caused by the open source software movement. This
is not just Linux. Linux is certainly a threat to Microsoft's
less-than-perfect server software right now (and to its desktop in the not-too-distant
future), but open source software in general, running especially on the Windows
operating system, is a much bigger threat. As the quality of this software
improves, there will be less and less reason to pay for core software-only
assets that have become stylized categories over the years: Microsoft sells OFFICE
(the suite) while people may only need a small part of Word or a bit of
Access. Microsoft sells WINDOWS (the platform) but a small org might just need a
website, or a fileserver. It no longer fits Microsoft's business model to
have many individual offerings and to innovate with new application software.
Unfortunately, this is exactly where free software excels and is making
inroads. One-size-fits-all, one-app-is-all-you-need, one-api-and-damn-the-torpedoes
has turned out to be an imperfect strategy for the long haul. 
Digging in against open source commoditization won't work - it would be like
digging in against the Internet, which Microsoft tried for a while before
getting wise. Any move towards cutting off alternatives by limiting
interoperability or integration options would be fraught with danger, since it would
enrage customers, accelerate the divergence of the open source platform, and
have other undesirable results. Despite this, Microsoft is at risk of following
this path, due to the corporate delusion that goes by many names: "better
together," "unified platform," and "integrated software." There is false hope in
Redmond that these outmoded approaches to software integration will attract
and keep international markets, governments, academics, and most importantly,
innovators, safely within the Microsoft sphere of influence. But they won't
. 

Exciting new networked applications are being written. Time is not standing
still. Microsoft must survive and prosper by learning from the open source
software movement and by borrowing from and improving its techniques. Open
source software is as large and powerful a wave as the Internet was, and is
rapidly accreting into a legitimate alternative to Windows. It can and should be
harnessed. To avoid dire consequences, Microsoft should favor an approach that
tolerates and embraces the diversity of the open source approach, especially
when network-based integration is involved. There are many clever and
motivated people out there, who have many different reasons to avoid buying
directly into a Microsoft proprietary stack. Microsoft must employ diplomacy to woo
these accounts; stubborn insistence will be both counterproductive and
ineffective. Microsoft cannot prosper during the open source wave as an island,
with a defenses built out of litigation and proprietary protocols. 

Why be distracted into looking backwards by the commodity cloners of open
source? Useful as cloning may be for price-sensitive consumers, the commodity
business is low-margin and high-risk. There is a new frontier, where software
"collectives" are being built with ad hoc protocols and with clustered
devices. Robotics and automation of all sorts is exposing a demand for
sophisticated new ways of thinking. Consumers have an unslakable thirst for new forms of
entertainment. And hardware vendors continue to push towards architectures
that will fundamentally change the way that software is built by introducing
fine-grained concurrency that simply cannot be ignored. There is no clear
consensus on systems or application models for these areas. Useful software
written above the level of the single device will command high margins for a long
time to come. 

Stop looking over your shoulder and invent something! 

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