The Gathering Storm: Waiting For the Microsoft Beat Down

If you’ve ever moved away from your hometown and delayed your return for ten or so years there is a little apprehension when you finally make the long homecoming trip. Your high school friends have long since become mostly vague memories and, honestly, you’ve become a stranger. Inevitably you’ll be milling around marveling at either the rapid pace or lack of changes when you’ll spot one of the few people you remember, the golden boy. Every high school has one, all star athlete, wildly popular musician, what have you. He won’t recognize you but his face is indelibly etched in your memory so you’ll spot him right away. Oddly enough he’ll start the conversation, asking questions positively dripping with forced sincerity. When you give your answer you might decide to let him know that you recognize him from the old days, why not rub the old boy’s ego? So you’ll say “Hi Jimbo, man I remember you from high school! Oh, and yes, I would like fries with that.”

Microsoft seems like that fallen high school idol right about now. Longhorn has been denuded, delayed and derided, MSN search is a pitiful attempt to capture a small wedge of the search market, the iPod and iTunes still reign supreme in the online music arena, Intel bigwigs are saying odd things and the public regards the company as a whole with disdain usually reserved for cable providers (a necessary evil to be tolerated). All this adds up to a tense Redmond campus where corporate Officers deviate from their presentations to take worthless swipes at the competition and employees post less than enthusiastic blogs about working at Microsoft.

The negative feelings about Microsoft and within Microsoft have many people thinking that this is the moment in time where the giant will finally crumble. Apple will own the media market, Google will become synonymous with the internet, Linux will power all servers and the Xbox 360 will be stillborn in anticipation of the more powerful PS3. Microsoft will be left collecting scraps, eking out a few billion here and there, still profitable, but no longer the ultra powerful corporate monolith it once was.

If we revisit our friend Jimbo from earlier we note that things look fairly bleak for him as well. Yet this is the moment when Jimbo looks up and says: “Oh, hey man, were you in my high school or something?…That’s been a while, I haven’t had much sleep since I started this chain of restaurants, we’re up to four hundred stores. I never would have had the capital if I hadn’t invented a new open heart surgery protocol.” Microsoft is at the same moment in time. Everybody may be scoffing at the ineptness that typifies Microsoft of late but they are making a mistake when they expect that trend to continue. Microsoft has far too large of a head start, too many resources and a market position that is so advantageous that it is just a matter of time before every little thing starts breaking Microsoft’s way again.

Taking the operating system arena first we’ll note that the only two semi viable challengers are Linux and OS X. Linux, one supposes, will rule the computing world when the average citizen in India and China are computer owners but that day is still in the future. For first world residents paying the “Microsoft tax” is not considered a burden. You get to keep your old software, the interface retains some familiarity with each new upgrade and your peripherals just keep chugging along. Switching from Windows to Linux, for most people, seems ridiculously wasteful (what about all that software they pirat…errr purchased) and hopelessly difficult. Making the move to the Mac is less difficult technically but more costly in terms of hardware and software. And, truth be told, even if people started switching en masse to the Macintosh Apple wouldn’t be able to make enough computers to make a serious dent in the Windows for quite some time.

Of course OSes aren’t the only story, Microsoft would like to dominate the ‘net and Google is standing in their way. The easy thing to say is that Google has beaten Microsoft by being everything Microsoft isn’t. Google seems public friendly (they never ask for a dime directly), is a stock market darling and seems to come up with something radically cool and new every third Tuesday of the month. Unfortunately it just isn’t quite enough. While Google has become a verb computer users are a fickle lot and will gladly abandon Google like rats off a sinking ship if something a little better or more convenient rolls around. So displacing Google will be no real trick for Microsoft, make MSN search very accessible in IE 7 and Longhorn, improve the algorithms so the results are roughly equivalent to Google’s and suddenly Microsoft is moving customers from Google to their services with record speed. If we remember that Google is very heavily tied to advertising revenue and lacks the monster cash reserves of Microsoft it is easy to see how quickly Google can be significantly damaged with a seemingly small change in search patterns.

The same factors hold true with digital media delivery. Right now the iPod and iTunes hold the top spot. It is easy to see why: the two integrate seamlessly, the DRM is nearly translucent and the whole package offers consumer’s a great deal of convenience.  Add to those advantages the cachet that the iPod is simply cool and you’ve got a hard to beat combination. Still when Longhorn rolls out (at this rate it will be right around the time the iPod’s cool has worn off) and Microsoft makes other players easier and more convenient to use than the iPod and iTunes one might expect the market to begin slowly shifting. iPod sales will likely always represent a significant chunk of the .mp3 player market but others will start getting a bigger slice of the pie.

Which leaves us with console gaming. Here it is easy to think that Microsoft has lost the war. The PS3 seems more impressive than the Xbox 360 so one would expect Microsoft to get soundly thumped in this arena. That will probably be the case for this generation of consoles but expecting Microsoft to lose the consoles wars long term is wishful thinking by the Microsoft haters out there. Consider how incredibly fast console makers can rise and fade, Atari once ruled that particular domain but they fell swiftly when Nintendo offered a superior product. Nintendo battled Sega for quite some time and then both were suddenly trumped by Sony. Clearly, in the console market, all it takes is one system and a few exclusive must have games for a console maker to dethrone the current king of the hill. Microsoft is still honing their game (so to speak) in this area and one supposes that it will be only a matter of persistence until they rule this market (however briefly).

None of this is written in stone (it is actually written Microsoft Word for interested parties). Microsoft may live in perpetual fear of another anti trust lawsuit and thus eschew using any of their inherent advantages to try and dismantle iTunes and Google. They may tire of the console wars and choose to get back to their core businesses. One suspects it will be more like an all out zombie attack. Sure one zombie is no problem, you can either take three steps to the left to avoid the thing or bash it in the head (or jog a block) but when they just keep coming sooner or later the zombies get what they want (brains if movies are to be believed). In short Apple, Sony, and Google might be able to dodge and club a few zombies but one suspects there is no way they can jog long enough to lose 37.5 billion of them.