The pressure Microsoft is facing in its core businesses is similar to one confronted by IBM—another firm that was once synonymous with computing. At the beginning of the 1990s IBM had to face up to the shift from a computing world dominated by mainframes to one dotted by personal computers. In this new world hardware became a low-margin commodity and Microsoft's operating system took the privileged position. Today, Microsoft still dominates the PC market. But like IBM before it, today's giant knows that its position is under threat.
So Microsoft now plans to graft subscriptions, downloadable add-ons and advertisements on to its core products. Again, it portrays this as an opportunity to open up new revenue streams, rather than a defensive tactic. “There are three ways to pay for anything in this business: ads, transactions and subscriptions,” says Craig Mundie, one of Microsoft's chief technology officers. “You'll see the company offer a full range of different ways to buy our product.” The difficulty will be getting the timing right, so that new products do not undermine existing cash cows.
For now, however, too many Microsoft managers are still measured by their success with yesterday's business model—selling boxes of software. Microsoft is still formulating its response to the rise of online software. As one former Microsoft executive explains: the company's problems are not just technical but organisational. “It has a vision but not a roadmap; it can see the peaks but doesn't know how to cross the foothills to get there.”
C'mon Gates! Show us what MS can do - get funky! You guys are too big, too top-driven, too reactive... Unleash your employees! Start leading! Let's see some disruptive innovation from within...