You may not have realised it, but last week marked an important shift in the direction of one of the biggest technology companies on the planet. Last Tuesday Microsoft’s CEO Steve Ballmer sent public open letter to his company’s shareholders. In the letter Ballmer said his company is undergoing a change from its previous 35-year-focus on licensing and selling software such as Windows and MS Office, to a business based on devices and services.
“Over time, the full value of our software will be seen and felt in how people use devices and services at work and in their personal lives,” wrote Ballmer, who took over the CEO spot from Bill Gates in 2000. “This is a significant shift, both in what we do and how we see ourselves – as a devices and services company. It impacts how we run the company, how we develop new experiences, and how we take products to market for both consumers and businesses. The work we have accomplished in the past year and the roadmap in front of us brings this to life.”
Apple has won
This is a very big shift for Microsoft and it’s a shift that carries a big message for the wider consumer technology market. Ballmer is essentially admitting that the era of Windows and Microsoft’s dominance over the home computing market is over. The business model of licensing software to third party vendors is over. The idea of home computing as a commodity market is also over. In other words, Apple – with its closed eco-system and focus on speciality products and services – has won.
Where did it go wrong? It all started with the rise of mobile technology and a change in how we consume content. Microsoft simply failed to anticipate the importance of mobile devices. It’s Windows Mobile operating system had a big head start over the iPhone, but it was a massive failure because it approached the mobile experience in the same way as the desktop. When Apple release the iPhone – which revolutionised how we interact with mobile devices – and Google followed with Android, Microsoft was left in the dust.
Content is king
Apple realised very early that content was king and ensured a steady flow of quality apps, music, films and books via iTunes and the App Store – and Google followed with Google Play. Microsoft’s business model of licensing its operating system to PC manufacturers is now old hat. The consumer tech market, from mobile, to tablets, and to desktop machines, is now about eco-systems and devices.
This is why Microsoft is releasing own branded tablet ‘The Surface’ and why its next desktop OS Windows 8 – which runs across tablets and PCs – features its own app store (just like the Mac App Store). Of course, Microsoft’s change in approach will have a big impact on its largest customers – i.e. other manufacturers who license Windows software. Now that Microsoft is building its own devices, it’s become a direct competitor to loyal clients such as Dell, Asus, HTC and Nokia to mention a few. What will happen to those guys in the long run is anyone’s guess. We’re now looking at a ‘winner takes all’ business.
Late to the party?
However, Microsoft’s shift in strategy may well be too little too late. The press reaction to Windows 8 has been rather lukewarm so far and while Windows Phone has been very well received its market share still trails tremendously behind Android and iPhone (below 5% of the global smartphone market). Ballmer wants Microsoft to be the new Apple. Maybe he’s already been granted that wish, but instead of being Apple circa 2012, his company may be heading for Apple circa 1992 when the company began its painful decade-long decline.
What do you think? The Microsoft Apple war has waged since the start of the personal computer. Apple certainly lost the first round back in the 90′s but have Microsoft finally conceded power to Apple for at least the immediate future? Let us know via the comments.
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