Paul Graham, VC, and one of the many men behind Y Combinator, has pronounced that Microsoft is Dead. Well, if this isn’t one heckuva piece of linkbait. And on a quiet April weekend, its probably going to reverb until Monday, thanks to getting Techmeme’d.
I suppose its easy to hate Microsoft. There are lots of legitimate reasons to do it. You’ll find yourself in pleasant company as most of the tech community seems to have a bottomless well of hate for the blue beast out of Redmond.
But is it “dead”? Please.
Yes, yes … I recognize all of the arguments that Mr. Graham’s making, including the primacy of Google, the importance of Ajax in disencumbering applications from the desktop, the critical importance about the penetration of broadband access, and how Apple’s resurrection “proves” “people” don’t need Microsoft.
I can simply simplify these arguments for you, though: “I believe that online web applications have killed Microsoft” A little too literal? Fine. I’ll even grant you that Mr. Graham might even be saying Microsoft is “rendered impotent”, or “no longer relevant”.
Of course these sentiments are not surprising from a VC who is backing small nimble startups who are writing (or trying to create) the next great web application.
The problem, however, is that particular assertion is flawed.
Hey, I like free applications as much as the next male in the 18-34 demographic. I use Google’s Writely Docs, Gmail, and admitted yesterday that Apple’s getting me excited. But to link online applications with Microsoft’s demise is wholly premature, if for no other reason that while its true TODAY, Microsoft has so much cash and Microsoft’s Windows is the de facto standard for businesses and consumers, that it has a commodity that almost no other tech company has.
That commodity is time.
Mr. Graham’s right in one sense. If they don’t turn things around and translate the awareness of the shifting realities of technology (because they surely are aware of these changes) into real changes, then Microsoft WILL die.
But that will only happen when people and businesses are no longer using Office and Windows. If left to its current state of change, when do you think that will be? 5 years? 10? 15?
Prognosticating is best left to psychics, but I think that the time frame that its being measured is in *years*. While we can debate how successful Microsoft has (or not) been in its non-core businesses, there is still time to turn things around, and Microsoft has more time today than any other company.
Furthermore, they have the cash to do desperate things to buy themselves more time. Like discounting their latest OS or core products to ridiculously low prices. Of course, tactics like that will be shortlived attempts at best, however, and clearly a better strategic change in its course is what’s needed.
So, Microsoft has Time. And time will ultimately tell what they do with it, and if they have the internal will to make the necessary changes to right their current course, no matter how bloody, dramatic, or even cannabalistic they might be.
April 7th, 2007 at 2:59 pm | Permalink
@Tony: good points, but you should consider Paul’s comparison of Microsoft to IBM. IBM is of course nowhere near dead; hell, many an IT guy would love to work for the Big Blue. They’re still making tons of money. They’re still a very, very serious company.
But they’re not that IBM from the 60ies and 70ies which seemed to be able to buy the whole world. It seemed like computers were the business to be in, and it seemed that IBM owned that business.
But things have changed. And Paul just may be right when thinking that Microsoft may be where IBM is now in a couple of years.
April 7th, 2007 at 3:06 pm | Permalink
Maybe … like I said in my original post, its not that Paul Graham’s comments were totally wrong. I think everyone can agree that Microsoft must change — all I’m saying is that they just have the luxury of some time to do it.
If you want to use the IBM analogy, you could argue that Paul Graham is right and wrong about that one as well. Right in that IBM isn’t the same IBM of the 60’s, but on the other hand, wrong in that its far from dead, as its found new life as a services and consulting company. Is it as successful as it once was? No. But is it “dead”? Absolutely not.
So, is Microsoft like IBM? I would say “maybe”, in that it still has time to evolve like IBM did.
t @ dji
April 7th, 2007 at 3:13 pm | Permalink
[...] how it is dead. As my friend Tony Hung points out over at Deep Jive Interests, this is a wonderful piece of linkbait from the noted programmer and angel investor behind Y Combinator and Startup Camp. But I still [...]
April 7th, 2007 at 3:19 pm | Permalink
@Tony: oh, no doubt about it. You should hear comments from my friends who are working in the IT analytics end of the business when I try to proclaim that Microsoft is going downhill. There are tens of thousands of companies dependent on Microsoft software, and I don’t mean just windows. What end users do isn’t always crucial. Most end users don’t have any idea who SAP is, and yet they’re the second biggest software company in the world.
So, it would definitely take a lot of time for Microsoft to loose grasp of all those companies. They would have to really screw up one thing after another and keep at it for a long time.
But, I can’t help it. I like the idea of Microsoft being dead - not in the ‘lying at the bottom of the ocean and eaten by fishes’ kind of way, but as a trend-setter, bossing-everyone-around, we-can-outbuy-anything kind of company.
April 7th, 2007 at 4:08 pm | Permalink
[...] Tony’s right to suggest that MS has plenty of life left. [...]
April 7th, 2007 at 4:12 pm | Permalink
I think Microsoft should buy http://www.peepel.com and change the product name to “Office Online”. And finally make its debut to the 2.0 Business…
Another thing they should do is creating an open channel of comunication to its costumers, like Dells cretaed.
OBS.: Sorry about the bad english… Im from Brazil (and we speak only portuguese in here!)
April 7th, 2007 at 4:28 pm | Permalink
If you’re saying that time is Microsoft’s weapon (which I believe you are) - it doesn’t matter. Paul and people like him, people who CREATE the things you WRITE about, have moved on. Sure people will continue to use Office and Windows, just like people drive crappy cars into the ground. But the real innovators, the people who make tomorrow a reality, no longer fear MS, use their tools or deem them relevant. Just like IBM, now Microsoft, one day Google. It’s the curse of success.
April 7th, 2007 at 4:34 pm | Permalink
Matt,
First of all, Microsoft has time to consider their next move, which may be to do any number of things. Maybe it will be to start buying start ups, or take the time to reboot their own culture, or any number of things. It might even be to do the very things that Paul and the Y combinators are doing right now.
Unlikely, but its possible.
The point is, time + cash and resources == a formidable force which only the foolish would discount.
Lastly, I’ll grant you the issue of “relevancy” *now*, which is what I did in the post. But to announce their “death”? Come on. That borders on the melodramatic.
t @ dji
April 7th, 2007 at 5:06 pm | Permalink
>>>But the real innovators, the people who make tomorrow a reality
You overestimate the importance of this minority, and underestimate the importance of the teeming masses, when it comes to the future success of a company like Microsoft.
April 7th, 2007 at 5:32 pm | Permalink
Hey tard, what’s “I can simply these arguments for you, though” don’t you mean “I can simplify these arguments for you, though”?
April 7th, 2007 at 5:46 pm | Permalink
Badger — my thanks in correcting that, and thank YOU for reaffirming my belief that there will always be anonymous yahoos who like to take potshots behind fake names and addresses. There’s nothing more collegial than addressing someone else with the name “tard”, right?
April 7th, 2007 at 7:36 pm | Permalink
I agree with you Tony, MS is clearly not dead. The gaping void in his argument completely missed your (accurate) point that corporate America is built on MS applications.
The other thing that jumps out of Paul’s post is his clear bias of being a VC guy investing in small software startups in Silicon Valley and Boston. Were he from a VC firm in Minneapolis, his conclusions and his post would likely have been quite different.
Either way, he has sparked a lot of discussion which wouldn’t be possible without all the non-MS Web 2.0 software on the ‘net which is of course populated with hundred of millions of people using (mostly) MS based computers based on IBM architecture.
April 7th, 2007 at 8:05 pm | Permalink
I can simplify your argument for you. Your issue is with the word death. You agree Microsoft has become irrelevant but that it could make a come back.
In my experience tech companies never regain the high ground. They may take a new hill but they will never be back in power again and all the cash in the world won’t help.
I like strong arguments and I like Paul’s irrelevant equals death argument. Sorry you don’t.
April 7th, 2007 at 8:25 pm | Permalink
What annoyed me most about that post was when he said that “no one who cares about computers uses Microsoft’s [desktop OS] anyway”. That simply isn’t true. If you took gaming and business out of the equation, then you’d probably see a lot more power users shift away from Windows (I’d probably be running Ubuntu at home for web development if not for my games).
April 7th, 2007 at 11:52 pm | Permalink
No they are not dead. People just wish they were. Which is a problem which no spin will easily solve.
As for having time on their hands, I take it this means habit. Time? How about how long it took google to come out of nowhere?
Why should I buy virus protection each year, and service my computer every year and a half - when I can a trouble free computing experience, for free, with Ubuntu and Firefox and Google docs and OpenOffice and use Crossover for other apps?
Microsoft is best used offline for things like EA games. Not exactly Corporate America’s territory. But Corporate America still uses msn.com as their home page; those steep license fees for (now) substandard MS products, as well the requisite MS certified Sys Admins can be replaced by one talented Linux ninja…
So go ahead, slash and burn, Microsoft, reducing prices to 90% of current prices may buy you more time. Not sure how much though.
April 8th, 2007 at 1:01 am | Permalink
[...] document while you’re flying across the country to see PG.) This illustrates what Tony Hung suggests: what Microsoft can buy with its warchest of billions is time. It has time to play around and wait [...]
April 8th, 2007 at 3:00 am | Permalink
Any argument based on the idea that web applications will supplant desktop applications is fundamentally flawed. This is never going to happen. There is an Achilles heel to this technology. It doesn’t work without a monthly fee and a cord attached. And scale as far into the future you want — it will never be as fast as a WELL-designed (i.e. not Office) desktop app.
Web apps are great tools and I hope they will integrate into desktop apps so that almost every desktop productivity app has an integrated ‘web layer’ for document sharing and the best of both worlds in general.
But the idea that desktop apps will be *supplanted* by a fundamentally inferior execution model, just because it sounds sexier even though it can’t possibly (ever, BTW) compete on baseline speed and responsiveness, and overall reduced complexity (again — coded correctly, not like Office)?
When people say that the web is killing the desktop — they mean Office. Office is an easy target. It’s the sick and weak and overloaded of the pack. Try writing a web app that can kill TextEdit or iMovie. Good luck!
April 8th, 2007 at 3:10 am | Permalink
To anyone over 35-40 MS, seems to be all pervasive and they remember but if you look at it from a semi distance - MS is pretty much dead - and yea, it’s an oversimplification but they are dead in the sense that they have moved into the ‘maturing’ companies category and while still generating cash, they are out of ideas - why? the ONLY people left are bureaucrats and/or if you have fresh ideas, you will be gone soon because of the bureaucrats (look at all the senior people who have left in the past year). It is ancedotal but there it is - because they are a company now generating cash from maintenance contracts, packages & OEM contracts - who cares about those things - lawyers & bureacrats.
The problem is also that MS only knows hgow to throw money at a problem - $6 BILLION For Vista? REally? Honestly, it costs less to design a car from scratch and retool an entire auto plant and the auto industry other than Toyota is no bastion of nimble movement - the new INTEL fab in China costs $2 BILLION - you telling me Vista is really worth THREE times the cost of a chip plant?
What the hell are they doing?
AND it took 6 years. There are countries that are formed and collapse in less time. While everyone else is on internet time, they are on MS time.
Or the 114,000 intrusions to their OS - they are not the least bit embarassed?
And MS is always focused on trying to take the entire cake because it’s the only thing they know. Look at their idiotic file format change for Office 2007 - it’s almost embarassing they can shill that with a straight face - as the “new” standard because they say so … but it’s not 1993 anymore. They are an old general fighting on horseback charging at us with muskets while we look down at our laser cannon and wonder if we’re hallucinating.
It wouldn’t be so bad if Ms just kept at what they are great at - selling to enterprise and gov’t agencies. But they seem to think consumers love them. It would be like Halliburton deciding to sell toothpaste. Whether we like or loathe Hallibutron and MS - they are making plenty of money but should stick to what they know best but instead, MS wants to be “loved.” They never just want to sell something, they want to dominate but they are befuddled when it fails like home media PC or Talking Barney’s or watches or MSN or webTV. What other company has literally failed at EVERY consumer venture since 1995? And spending $10-$15? BILLION at i? For a return of what? And that’s NOt counting XBox. What other company has essentially given away a $400 product for 6-7 years? They have sold about 30 millon XBoxes and have spent about $15-$20 BILLION dollars and for what? They essentially swapped out PC gamers for Xbox gamers - no “average” consumer is interested in the Xbox to put next to their TV. Who older than the age of 22 brags they have an Xbox?
Or the Zune? They bragged 30,000 stores would be selling it - the latet NPD data broken out makes monthly sales at around 30,000 a month - or about ONE per store. (the ipod averages around 180,000 sold A DAY) but they “have to be in that business.” WHY? Because someone else is successful, they have to throw $500 to $1 BILLION dollars away when their DNA tells us they are not an ocean going animal but they isist on trying to swim to hawaii?
That is why MS is dead - because they seem to believe if they show up and throw money at something, they’ll be successful - well, that’s true when you’re trying to sell servers but not at all when you’re trying to sell talking barney’s or mp3 players.
Now as Google & linux cut into their bread and butter and instead of properly focusing R&D on the future, they keep trying to sell us consumers products - the shareholders have to ask - how long can they keep this up? MS has essentially come up with ZERO products since 1995 that generate ANY actual earnings - they are 100% reliant on the OS, servers & Office but yet, they have spent/squandered away $60 BILLION? On what exactly?
That is why MS is dead.
April 8th, 2007 at 3:11 am | Permalink
[...] Deep Jive Interests » Microsoft “Dead”? Please. [...]
April 8th, 2007 at 4:08 am | Permalink
@jbelkin
You contradict yourself when you say “MS has essentially come up with ZERO products since 1995…they are 100% reliant on the OS, servers & Office ”
In 95, Microsoft didn’t sell any Servers worth talking about. SQL Server, Exchange and SharePoint have come around since then and are now generating $10 billion+ in revenues and a good bit of profit since then.
April 8th, 2007 at 12:44 pm | Permalink
[...] Deep Jive Interests » Microsoft “Dead”? Please. [...]
April 8th, 2007 at 7:32 pm | Permalink
@Jbelkin … I like your points. Microsoft throw money at problems … but remember that being a cash cow, with tons of cash is representative of companies in their twilight too.
But do you throw money at the old way, or the new way?
What is clear that things are changing, and all the arguments in favour of Microsoft, seem to suggest that change is not required. Who really believes that changes is not required?
April 8th, 2007 at 9:28 pm | Permalink
Microsoft is not dead. The Microsoft of TODAY is dead. With all the cash they still have, combined with the immense level of dependancy most of the businesses in the world have on them, they won’t be going anywhere soon. However, Microsoft is in need of severe change if they want to stay relevant 5 or 10 years down the line. So far, based on my obversations, that isn’t happening. Gates and Balmer need to move on first. With Gates slowly fading himself out, maybe Balmer will be next. If these two things happen, then maybe Microsoft can begin to lay down ta good, solid foundation for the next 5-10 years.
April 9th, 2007 at 6:43 am | Permalink
Hi!
If Microsoft doesn’t change/act fast on its business line of thinking, it might not be the leader anymore in the KNOWLEDGE/DIGITAL era that we are stepping into. They were all brilliant in the industrial era, but not anymore now.
Users requires a comprehensive and cognitive eWorking facility in this age.
Rgds,
Sushant Madhab
http://www.workace.com
April 9th, 2007 at 7:45 pm | Permalink
Dead, ok — PG’s argument is that once a tech company loses its momentum, it never gets it back. Unless you’re Apple, but that was a special case. And there are two ways to look at momentum:
1. Developers, developers, developers
There are of course armies of C# and VB.Net code-slaves on the loose, and plenty of IT folk who have MS-only certifications, but those aren’t the people PG is concerned about. They’re not going to start the next Google. The most advanced young hackers, the ones Y-Combinator is looking at for startups, have zero interest in developing on a Microsoft platform. It feels condescending, arbitrary and restrictive — nothing about that is going to change in the foreseeable future.
And so, the IT monopoly that we all lived in the shadow of throughout the 1990s is now essentially broken. Discerning programmers now expect “write once, run anywhere” to work, and so they’re not going to require IE or Windows to run their work anymore. That’s a step down for Microsoft, and there’s no way back up from it.
2. Look at the damn stock prices
Nobody has more invested in the outcome of this more than… well, the investors. MSFT has been holding flat in the $20-$30 range since the tech crash at end of 2000 — no even keeping up with inflation. The Russel 3000 index has nearly doubled over the past 4 years (and GOOG and AAPL blow that out of the water). MSFT is raking in cash, just released a new operating system, and is pumping money into R&D and new online ventures, but its Price/Earnings ratio is half that of GOOG or AAPL, and closer to 1/3 that of YHOO. It’s sitting at 23, slightly about Disney and General Electric. IBM is around 16.
Investors, those who have $280 billion tied up in MSFT’s future, quantitatively say Microsoft now has slightly more innovative vigor than “Meet the Robinsons.”
April 13th, 2007 at 8:41 am | Permalink
[...] Deep Jive Interests » Microsoft “Dead”? Please. [...]
April 13th, 2007 at 2:02 pm | Permalink
[...] Microsoft “Dead”? Please. By Tony Paul Graham, VC, and one of the many men behind Y Combinator, has pronounced that Microsoft is Dead. Well, if this isn’t one heckuva piece of linkbait. And on a quiet April weekend, its probably going to reverb until Monday, … Deep Jive Interests - http://www.deepjiveinterests.com [...]
April 13th, 2007 at 4:07 pm | Permalink
Not dead, just sleeping. The simplest strategy Microsoft can do is drop their prices. At $10 for Windows they’d still make billions, and force Linux to compete on user experience.
Secondly, I can’t believe the future of the PC is to be a glorified terminal. Too much horsepower there. PC apps, which is Microsoft’s home turf, will be developed for years to come.
April 16th, 2007 at 3:23 pm | Permalink
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April 19th, 2007 at 5:42 am | Permalink
[...] responses? “Please.” “Feh.” “Since When?“and “Kind of Like Paul McCartney in the [...]
September 14th, 2008 at 10:20 pm | Permalink
[...] Internet and AJAX are contributors to Microsoft’s "reduced relevance". In response Tony Hung points out that cash and time are on Microsoft’s side. Just to enliven an otherwise quiet Easter [...]