Or is that a ridiculous question to ask? How can we question the vitality of the world’s largest software company when it is still hugely profitable and surely as dominant as ever?
The first point to make is that we’ve been here before in the early ‘80s (and the author is old enough to have firsthand experience of those days), IBM dominated the computer world. The new PC market was very much in its infancy, Apple PC’s were available, in the UK we even had Apricots, but the word on the street was that when IBM launched their own PC the “fruit machines” would fold. It was foolish even to consider investment into the PC market, once the Big Blue made their mind up they would dominate, manage and own it, as they had with the rest of the computer world throughout its time to date, what chance did anyone else have.
The launch of the IBM PC did have an impact, Apple and others suffered noticeably, but fast forward just 10 years to the 90s.The PC World would be dominated by Microsoft and IBM, the companythat couldn’t fail would be laying people off faster than the printers of the day could churn out the P45’s. The computing world would have embraced all things Windows and Office, and Microsoft the new mega-company was set to dominate the computing world.
So what happened? What caused journalists to write of IBM in the early 90s? “The company’s failure to recognise the movement away from mainframes into smaller computers was an error, the results of which the manufacturer is still reeling from today”. Well the world turned, as it does, and whilst previous computer usage had been restricted to vast monoliths housed in air-conditioned basements suddenly, everybody had a PC on their desk. A new environment had been born, one which IBM was poorly placed to participate in let alone dominate. On the other hand, the new kid on the block (Microsoft) was perfectly placed to exploit this emerging market, having developed the PC DOS operating system for IBM, they were well set to rebrand it as MS DOS and dominate operating system development (hence the PC market place) for years to come.
So what’s next, well the world has continued to turn and a new environment has emerged, away from the PC desktop or laptop for that matter, the new world is the Internet or Cloud and this is an environment which Microsoft is poorly placed to exploit. You don’t need to have much on your PC if all you’re going to use it for is to connect to the Internet. Microsoft still has a strong foothold in the world of desktop and server applications, but the world needed to compete with such dominance and open source “free to use” desktop and server software emerged, there’s no point buying the latest version of Office, if competitor products are available online for free!
So we have a new environment, Cyberspace, The Cloud, call it what you will, and a mega-company struggling to drag its technology away from the desktop and into the new arena. Where waiting for it are groups of established players who have never really had to migrate from the desktop because in truth, the Internet is where they have always lived.
Companies like Wikipedia (open source and free to use), Facebook (free to use), Amazon (now offering cloud services on demand), but at the heart they will find a company that is currently ranked the second largest software company in the world, that is of course Google. Already profitable, already hugely dominant in the search sector and increasingly more sectors such as mobile, Google is set to rule the roost for many years to come.
The parallels are eerie, IBM inadvertently gave Microsoft a huge leg up by inviting them to write the operating system for their own PC (and allowing them to keep the licence rights themselves) and how many of us were first introduced to Google via a Windows PC? For those of us using Apple devices to access the Internet Microsoft are already out of the equation.
I firmly believe that any investment in Microsoft-based technology has to be viewed as a short-term strategy. Both medium and long-term Investment needs to be in the Cloud.