Microsoft has the edge in the race towards online services
EVEN as the media loudly - and rival technology companies quietly - declared that the (prospective) passing of the Bill Gates era signalled an end to Microsoft's halcyon days, a series of low-key moves have underlined the firm's determination to reinvent itself.
The past few days saw Microsoft finally begin to flesh out its Windows Live strategy, which is its set of internet-delivered services such as email, instant messaging, collaboration, search, and classified ads.
Several of these are rebranded versions of standard features that Microsoft's MSN internet unit - which trails a poor third behind Google and Yahoo in terms of audience and earnings - has long offered to consumers, while others are new and not yet fully baked.
These services are being built, or updated, to provide Microsoft with a platform to win a larger share of the growing online advertising spend currently dominated by Google and Yahoo, and to integrate more tightly with Microsoft's existing PC and server software.
To do that, Microsoft is using several historically successful strategies from its playbook.
First, it is making it easy for third-party software developers and vendors to quickly build programs or services of their own on top of Windows Live by providing "building blocks" and hooks into its own software.
This is a similar strategy to Microsoft's push in the 1990s to help third-party software players build and sell applications that were complementary to Windows or Office. By helping these small developers, Microsoft ensured that its core offerings became the centre of an ecosystem that provided the broadest possible range of products and services to end users.
The markets for operating system software and productivity software both turned out to display strong network externalities - the more users who standardised on a given product, the more value it provided to them, and the greater the incentives for third parties to complement and support the emerging standard.
This positive feedback eventually helped ratchet up Microsoft's share in both markets north of 90 per cent.
The markets for many online services also display strong network externalities, but Microsoft's rivals are much more aware of these this time around - witness the tussle in recent years between AOL, Yahoo and MSN over instant messaging inter-operability.
This, along with the anti-trust concerns which continue to dog Microsoft around the globe, means it needs to take a more subtle approach this time. So this week, it announced it would be leveraging open standards that allow computers and software to communicate with each other more heavily as it develops core Live services.
But no company has been as successful as Microsoft at developing and marketing the toolkits, platforms (and economic opportunities) to attract complementary players, and entrench its own technologies.
Google has made some early moves in this area by offering interfaces to its system to other firms, as has eBay's Skype, but both face a steep learning and experience curve.
A second strategy that was hugely successful for Microsoft in the past - so much so that it triggered the key US and EU anti-trust cases against it - was bundling and integration: extending the boundaries of Windows and Office to include "free" features that rivals offered as stand-alone products.
Those cases, focused on features such as web browsers and media players, place a practical limit on how much Microsoft can extend its desktop software - hence the company's recent caution in areas such as anti-virus and multimedia software.
But the Windows Live services are shaping up to use a different sort of bundling - rather than lumping features into Microsoft's desktop (or cellphone or media centre) software products, Live will extend their capabilities.
For example, Windows Live Contacts will keep lists of names and addresses synchronised between multiple locations and devices, and Windows Live ID, the successor to MSN Passport, will offer integrated online authentication for Windows users.
By calling these capabilities "online services" Microsoft dodges the anti-trust issues, and by tightly integrating them with desktop PCs, it ensures it will be able to offer consumers and businesses features that rivals - who want to replace traditional "client" software functions with browser-based services, rather than hooking the two together - cannot as easily replicate.
This week, the company unveiled the next version of its instant messaging communications software, which starts down this path by integrating IM with PC videoconferencing (which its Windows software on a PC knows about and manages) and with other types of communication, including voice.
Microsoft also appears to be focused more heavily than before on the "plumbing" needed to make online services happen - the basic security and authentication, communications and transaction flows that everything else will be built upon. Again, ownership of the Windows and Office install base gives it an advantage in setting standards here.
As Google's success has been dissected, much has been made of the inability of either Microsoft or Yahoo to come up with a better way to search the internet, and most coverage of emerging competitors also focuses on search.
But Google's real business is selling ads - search just happens to be how it attracts eyeballs to see them. Similarly, for Microsoft, if the objective of Windows Live is to capture more online ad revenue, then it will need to both capture eyeballs with its services, and then get them to look at ads.
The Windows Live push, after being ridiculed, is starting to look more likely than before to do the first. Microsoft already has a big audience: 240 million Hotmail and 230 million IM users.
Gates or not, Microsoft is still better placed than any other firm to identify some of those avenues, and use its immense reach and resources to exploit them.
credit: http://www.theaustralian.news.com.au/story/0,20867,19547085-643,00.html
EVEN as the media loudly - and rival technology companies quietly - declared that the (prospective) passing of the Bill Gates era signalled an end to Microsoft's halcyon days, a series of low-key moves have underlined the firm's determination to reinvent itself.
The past few days saw Microsoft finally begin to flesh out its Windows Live strategy, which is its set of internet-delivered services such as email, instant messaging, collaboration, search, and classified ads.
Several of these are rebranded versions of standard features that Microsoft's MSN internet unit - which trails a poor third behind Google and Yahoo in terms of audience and earnings - has long offered to consumers, while others are new and not yet fully baked.
These services are being built, or updated, to provide Microsoft with a platform to win a larger share of the growing online advertising spend currently dominated by Google and Yahoo, and to integrate more tightly with Microsoft's existing PC and server software.
To do that, Microsoft is using several historically successful strategies from its playbook.
First, it is making it easy for third-party software developers and vendors to quickly build programs or services of their own on top of Windows Live by providing "building blocks" and hooks into its own software.
This is a similar strategy to Microsoft's push in the 1990s to help third-party software players build and sell applications that were complementary to Windows or Office. By helping these small developers, Microsoft ensured that its core offerings became the centre of an ecosystem that provided the broadest possible range of products and services to end users.
The markets for operating system software and productivity software both turned out to display strong network externalities - the more users who standardised on a given product, the more value it provided to them, and the greater the incentives for third parties to complement and support the emerging standard.
This positive feedback eventually helped ratchet up Microsoft's share in both markets north of 90 per cent.
The markets for many online services also display strong network externalities, but Microsoft's rivals are much more aware of these this time around - witness the tussle in recent years between AOL, Yahoo and MSN over instant messaging inter-operability.
This, along with the anti-trust concerns which continue to dog Microsoft around the globe, means it needs to take a more subtle approach this time. So this week, it announced it would be leveraging open standards that allow computers and software to communicate with each other more heavily as it develops core Live services.
But no company has been as successful as Microsoft at developing and marketing the toolkits, platforms (and economic opportunities) to attract complementary players, and entrench its own technologies.
Google has made some early moves in this area by offering interfaces to its system to other firms, as has eBay's Skype, but both face a steep learning and experience curve.
A second strategy that was hugely successful for Microsoft in the past - so much so that it triggered the key US and EU anti-trust cases against it - was bundling and integration: extending the boundaries of Windows and Office to include "free" features that rivals offered as stand-alone products.
Those cases, focused on features such as web browsers and media players, place a practical limit on how much Microsoft can extend its desktop software - hence the company's recent caution in areas such as anti-virus and multimedia software.
But the Windows Live services are shaping up to use a different sort of bundling - rather than lumping features into Microsoft's desktop (or cellphone or media centre) software products, Live will extend their capabilities.
For example, Windows Live Contacts will keep lists of names and addresses synchronised between multiple locations and devices, and Windows Live ID, the successor to MSN Passport, will offer integrated online authentication for Windows users.
By calling these capabilities "online services" Microsoft dodges the anti-trust issues, and by tightly integrating them with desktop PCs, it ensures it will be able to offer consumers and businesses features that rivals - who want to replace traditional "client" software functions with browser-based services, rather than hooking the two together - cannot as easily replicate.
This week, the company unveiled the next version of its instant messaging communications software, which starts down this path by integrating IM with PC videoconferencing (which its Windows software on a PC knows about and manages) and with other types of communication, including voice.
Microsoft also appears to be focused more heavily than before on the "plumbing" needed to make online services happen - the basic security and authentication, communications and transaction flows that everything else will be built upon. Again, ownership of the Windows and Office install base gives it an advantage in setting standards here.
As Google's success has been dissected, much has been made of the inability of either Microsoft or Yahoo to come up with a better way to search the internet, and most coverage of emerging competitors also focuses on search.
But Google's real business is selling ads - search just happens to be how it attracts eyeballs to see them. Similarly, for Microsoft, if the objective of Windows Live is to capture more online ad revenue, then it will need to both capture eyeballs with its services, and then get them to look at ads.
The Windows Live push, after being ridiculed, is starting to look more likely than before to do the first. Microsoft already has a big audience: 240 million Hotmail and 230 million IM users.
Gates or not, Microsoft is still better placed than any other firm to identify some of those avenues, and use its immense reach and resources to exploit them.
credit: http://www.theaustralian.news.com.au/story/0,20867,19547085-643,00.html
