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Microsoft's Strategic Position Microsoft executives are examining the company's marketing strategy for enterprise products to ensure that they address customer needs in changing computer environments. The company's Windows XP operating system mirrors its focus on reliability and scalability and serves as the foundation for Microsoft's electronic commerce and knowledge management initiatives. The focus on software product development that brought the company so much success in the past is being reevaluated to address its perceived inability to understand its customers' business needs. The Microsoft Perceptions survey of IT professionals found that 54 percent of respondents perceive the company as arrogant. Microsoft's reorganization in Mar 1999 created four business units addressing the needs of developers, other IT professionals, business users and consumers.
Microsoft Pres Steve Ballmer says the company is working to improve support for 'named' business accounts, and it may make Windows source code available to business developers. A recent survey indicates that businesses are anxious to implement Windows XP, and Microsoft is expected to release many new products and upgrades soon after Windows XP ships. (Gavin, 2004). Why, he wants to know, do IT managers think Microsoft is arrogant? It's a tough question-and not the only one on the minds at Microsoft.
Across the company, executives and product managers are asking their own hard questions: Are the company's enterprise products packaged correctly? Is its marketing message clear? Is the software powerhouse tuned in to the needs of its customers? What does Microsoft have to do to stay relevant in a business environment where a constantly shifting landscape results in new demands from its customers, and unexpected competitors, virtually every day? (Gavin, 2004). Microsoft has a simple strategy for dominating client-server computing: to establish Windows as firmly on the server as it has on the client. With the disarming bluntness typical of Microsoft's top mangers, Ballmer says: "Big theme No. 1 for long-term strategy is that Windows sits everywhere. " (Dole, 2004).
The battle to control the server is undecided. Microsoft's gladiator is Windows XP (XP stands for new technology). The product has not figured in the past year's debate about the company's allegedly monopolistic behavior, but if XP succeeds, Microsoft could get a hammerlock on corporate computing. It could also potentially help achieve another of Gates' goals -- to become the biggest wheel on the information superhighway. Microsoft will try to use its position as operating system supplier to expand into server applications. This is the same strategy it used on the desktop.
It bundled together its word processor, spreadsheet, and other applications into the Microsoft Office suite, and sold it to customers who bought Windows. Now it is building a client-server bundle, called Microsoft BackOffice that contains Exchange (Microsoft's E-mail and groupware product), programs for managing and supervising a network, and a database. This last is critical because many of today's most popular client-server applications, from companies like PeopleSoft and SAP, require a database to function. Microsoft will price its combination of NT and a database, called SQL Server, lower than Unix and a database from Oracle or another company.
Allchin, supervisor of NT and also BackOffice, says he is creating an environment for developing client-server programs that is far better than any alternative system, including Lotus Notes. The company's software strategy has always involved bundling more features, technology, and products into its core components to boost function and drive down price. Some customers see the advantages of software bundles in terms of price and product integration, but others see it as a short-term gain that may turn into a long-term problem. Microsoft's bundling strategy often has a profound impact on the software marketplace. Over the years, the company has subsumed entire categories of utilities, such as disk compression and memory management, into its operating systems. Microsoft's practice of "bundling" new technology into its core products used to be at the center of the antitrust suits filed.
The suits are a direct assault on Microsoft's software strategy, which has always involved bundling more features, technology, and products into its core components-Windows and Windows NT, the SQL Server database, and the E-mail server Exchange-to boost function and drive down price. (Manes, 2003). Microsoft announced two significant bundling efforts concerning its flagship development tools and emerging middleware. Microsoft debuted the next version of its integrated developer toolkit, Visual Studio. The new version added support through Microsoft's OLE-DB database interface technology for connecting to major third-party host database systems, including AS/ 400, DB 2, Oracle, and VSAM. Visual Studio also bundled Microsoft's SNA Server host-connectivity product.
This let developers design, manage, query, and update enterprise databases using the standard visual database design tools integrated in the Visual Studio tools suite. It also lets developers treat both large-scale relational and flat-file databases as objects in Microsoft's Component Object Model (COM), using the company's Active Data Objects technology on the client side. "This is going to make developers successful in integrating enterprise data sources into objects they can run on NT, Windows, or the Web, " says a user source that has tested a beta version of the technology. Microsoft also integrated the Microsoft Transaction Server (MTS) transaction-processing monitor into its evolving middleware technology, code-named COM+. That technology, which also included load balancing among application objects, is essentially the next generation of COM, and became Microsoft's architecture for building distributed enterprise applications. Microsoft has been a provider of Xbox, keyboards, mice, joysticks, and game pads for quite some time, but Microsoft, after entering the home networking hardware market in 2003, swiftly became the second largest provider in the market.
Microsoft declared $ 1. 33 billion in revenue in 4 Q 2002 from its Home and Entertainment business, which includes peripherals, networking hardware, and the Xbox, along with gaming and consumer software titles. On an annual basis, therefore, Microsoft could be selling $ 5 billion a year in hardware-related revenue. Topics covered include why Microsoft is moving into hardware; how Microsoft became so successful; where Microsoft will take its hardware business in the future; and the effect of Microsoft's hardware markets on the electronics business. Microsoft's entry into game consoles and networking hardware indicates that the business wants to be a major player in the still evolving home entertainment hub market, which will control home networking, distribute digital media to client devices, and provide an online computer gaming environment.
Sony and Toshiba are currently developing prototype designs based on Linux, which Microsoft sees as a substantial threat to its Windows markets. An analyst points to Microsoft's awareness of its brand recognition among consumers. Another analyst says Microsoft might move next into branded set top boxes or Microsoft-branded cell phones. For some companies, including Microsoft's traditional partners, its hardware business represents new opportunities for partnerships. (Gavin, 2004).
Personal-computer users are facing the threat of having their computers turned into zombies with the discovery of a new security hole in several of Microsoft's operating systems. Microsoft has notified customers of the new problem, urging them to install a security patch "at the earliest opportunity" to prevent attackers from taking over their PCs. Internet security company Symantec has given the new vulnerability a high-risk rating as the consequences of exploitation are severe. (Raiment, 2003). An attacker who successfully exploited this vulnerability could take complete control of an affected system, Microsoft has warned. This includes installing programs, viewing, changing, or deleting data, and creating new accounts with full privileges. Symantec said systems running several versions of Windows XP and Windows Server 2003 could be compromised only if users followed a sequence of actions.
Every computer company today has a major Microsoft problem. The experience of an IBM senior manager illustrates why. On a recent flight, the Ibmer found himself seated next to an engineering professor, who immediately wanted to talk about Microsoft. "They seem unstoppable, " exclaimed the professor. "You guys must be worried. " A bit irritated, the Ibmer explained that IBM's revenues last year were $ 64 billion. "And how big do you suppose Microsoft's were?" he asked. "Oh, maybe $ 40 billion, $ 45 billion, " the professor guessed. Correct answer: about $ 5 billion. The professor was astounded. "In the Sixties and Seventies people talked about IBM not as a member of the industry but as the environment, " says Jim Moore, whose Geo Partners Research in Cambridge, Massachusetts, helps craft strategy for some of the biggest technology companies. "Now Microsoft has become the environment. " (DeLong, 2000). Such Microsoft environment appears to be recognized as thread to consumer freedom of choice.
Microsoft's market victory should not be allowed to minimize the underlying triumph for federal prosecutors and American consumers. The core of decision affirmed United States District Judge Thomas Penfield Jackson's ruling that Microsoft had illegally maintained its monopoly in the market for computer operating systems. In avoiding earlier settlement, Microsoft bet that it could convince the D. C. Circuit's more conservative judges that the government's case was little more than harassment of a successful company.
The company's confidence on this point was presumptuous, and the court did not reward it. It held, rather, that Microsoft was -- as U. S. District Judge Thomas Penfield Jackson had earlier found -- a monopolist that had serially violated the law, including through acts that the company deemed improvements to its products. The opinion, assuming the Supreme Court does not intervene, will now force the company to consider seriously the antitrust implications of future design changes that may serve to inhibit competition. Such antitrust pressures create a major thread to Microsoft.
Gates has made no secret of his desire to keep Microsoft growing by developing ongoing revenues from transactions, as opposed to one-time product sales. NT dovetails with this strategy. If it becomes entrenched in corporate computing networks, it could help Microsoft negotiate a cut of any business done across the networks. Such transactions could include very common activities -- like routing phone calls -- that today generate lots of money for Microsoft's rivals. Gates downplays this possibility. "Capturing transaction revenue requires a lot more than selling an operating system, " he says. But Allchin, the guy who's actually in charge of NT, mentions projects that could lead to royalties for Microsoft when, say, voice or video messages pass through an NT system. (Raiment, 2003).
Where does this leave the rest of the computer industry? Scrambling, except for Compaq and Digital Equipment. Compaq can go with the Microsoft flow because it has proved it can thrive building hardware systems many see as a commodity. Digital fell far behind in the Unix market, so it too has intertwined itself with Microsoft. Although it competes with Compaq to...
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