What would life be like without Microsoft? Say Sir Bill Gates had abandoned his early attempts at software and became an accountant instead. Not too hard to imagine, is it? ExtremeTech did a useful spoof on this pretend scenario a while ago. I wrote it up at the time and repeat it here as it impacts on the topics we cover.

In the original piece, Loyd Case imagines his day without the Beast of Redmond :

Interestingly, it’s not as wonderful as some might suppose. Software prices are very high ~ they’ve still got Wordstar, would you believe? Commodore remains a big player in the market, as does Amiga. Text-based solutions are what people want, Apple believes.

I sometimes wonder why anyone would be interested in owning a PC. It’s not so much the hardware, which has steadily gotten cheaper. You can buy a decent 32-bit system based on an Intel, Motorola, or Zilog processor for only a couple thousand dollars these days. But the software costs are stunning. WordStar 2005 still runs several hundred dollars, though WordPerfect’s pricing strategies since Borland bought the company has helped keep it more affordable. Lotus still has a lock on the spreadsheet market, and $695 is too much for most users.

Finally, Loyd hears the doorbell : “this time it’s FedEx, with a small package that was apparently shipped from somewhere in the Seattle area. I open it up, and a ziplock bag spills out with a CD in it. Handwritten on the CD is the text ‘MS-BASIC, version 11.0.’ I sigh. Those Microsoft guys again, still trying to sell BASIC. Hasn’t anyone told them no one uses BASIC any more?”

It reminds me of the story of a medium-sized town that had an ugly high-rise office block right in the center. Everyone complained about it. Then one night it burned to the ground and half the population became unemployed. Folk would gaze wistfully at the big, black hole in the middle of town. “Those were the days,” they sighed.

[Source: Extreme Tech]

By all accounts the new Office 12, just released in Technical Beta, is a massive portfolio of applications which will make “thick” clients even thicker, if not elephantine. Ten-thousand customers and partners will preview the most important release of the office productivity suite in more than a decade.

And yet, there has been a significant move away from word processors, like Word, to simple text editors, like Notepad, as more people publish directly onto the Web, either through blogging, or sending email. Will this be the last hurrah of gigantism in computer software as companies like Google lead the way in Web-based services?

Much, if not all, of Office’s functionality can now be obtained free, through subscription, or ad-supported, on the Internet. And Microsoft itself has recently been though a Damascene conversion to the joys of all things Webbery.

The new user interface (UI) in Office 12 is designed to guide users through the tangled undergrowth of legacy code and thousands of functions, many of which are unused by most customers. Each application in the suite (Word, Excel, Powerpoint etc) will have its own intuitive navigation system. In some cases the taskbar and familiar buttons have been replaced by a “Ribbon” system.

Some users have feared that a lengthy training program will be necessary to master the changes. Microsoft has reassured customers that the timescale is less than many have imagined.

[Source: Office 12 Watch]

Microsoft’s Desktop and Cisco’s Network are on collision course. The two giants of Web 1.0 are increasingly bumping into each other like tectonic plates as PC and Web converge.

Business Week’s Peter Burrows and Olga Kharif comment : “What’s at the root of the increasingly complex relationship between Microsoft, the world’s largest software maker, and Cisco, the No. 1 maker of computer-networking gear? Chalk it up to a megashift in technology’s center of gravity ~ from the PC, where Microsoft has ruled, to the network, where Cisco is dominant.”

Bruce Claflin, 3Com (COMS) CEO, said, “It’s a fascinating discussion, Cisco’s whole strategy has been to move intelligence to the core of the network. Microsoft wants the intelligence to be in the clients, at the edge of the network.”

And there’s increasing rivalry on other fronts :

… namely security software and voice over Internet protocol (VoIP) phone services ~ two critical growth markets for the behemoths, which have struggled to convince investors they can still be hot growth stocks. “You have two Goliaths that need to find bigger pieces of new spending, and they’re going to bump heads,” says JMP Securities analyst Sam Wilson. “If you put the two of them in the same room, it could get rough and nasty.”

Zig Serafin, General Manager of Real-time Collaboration at Microsoft. says the company is developing tools for Windows users to work together over a network. “It’s a very strategic area for us, and the investments we’re making are similar, if not greater, than the investments we made around Office.”

The result: These two leaders of their respective worlds ~ networking gear and software ~ appear to headed for some significant collisions. While they compete only in pockets today, researcher Gartner thinks the overlap will expand to $20 billion in six years.

“They’re infringing on each other’s territory in a variety of ways,” says Simon Khalaf, CEO of Vernier Networks, a network-security company that competes with Cisco and is partnering with Microsoft. “If they can find a way to work together, it would be great for the industry. If there’s war, it’s going to be ugly.”

[Source: Business Week]

A general consensus is beginning to emerge in the wake of the leaked memos from Microsoft and the announcements of Windows and Office Live Web services.

Gartner researcher Tim Bittman recently said that Microsoft will end up cannibalizing Windows and Office in an attempt to attack Google on its own turf, the open internet. “It’s not so much about how you’re going to beat Google. It’s more about how you are going to beat the Google model. Microsoft is going to be forced to compete with Google, forced to compete with its own business model.”

Can high-volume, high-margin software compete against high-volume, low-margin advertising? It depends on the size and expectations of the business.

Google began small and used guerrilla tactics to pick off the enemy’s weak points. It still does. Its Desktop search in some ways filled the gap left by the dropping of WinFS from Windows Vista. Google is disruptive. It had to be to make its way in the market.

If Microsoft gets disruptive, who will it disrupt? The guys who hold 90 percent of the most lucrative market : Microsoft. There’s an incestuous, backfiring, autoimmune reaction going on here. A kind of turning-in, like someone arguing against himself in a debate. You can sniff it in the air, like cordite.

Google has one-eighth of Microsoft’s income with one-twentieth of the workforce. Its growth is in the 90s percent, compared to Microsoft’s 6 or 7.

Cringely make the point that advertising will never match Microsoft’s current revenues :

Gates and Ozzie HUGELY over-estimate the role of advertising. This is intentional because it distracts with enthusiasm and plays into current Internet hype. Advertising alone will not be able to support these services, especially if Microsoft benefits from them only tangentially as Ozzie suggests. Remember that for Gates and Ballmer to be happy, Microsoft will have to maintain $2.5 billion per month in revenue and $1.5 billion per month in profit. That’s FIVE TIMES the size of Google without Google’s ad expertise or ad infrastructure. It simply won’t happen.

And the end result? “Once the developers are committed and have made their Microsoft-centric technology investments, Microsoft won’t gain much further, so it will be time for those third parties to start to die. Microsoft will buy 3-4 top players and then introduce knock-off services to kill the rest. The company’s incessant need for revenue growth practically mandates this. It’s this maw against which Microsoft, itself, is powerless.”

Scott Johnson of Feedster believes Microsoft will have to buy up the best Open Source developers to slow down the server-side growth of OSS software. He thinks there’s still some mileage in the Redmond model of the desktop. A positive message could help there, he says.

Maybe Mini-Microsoft is right. Slim it down, break it up and go for innovation and quick turnaround. But didn’t IBM do that after posting the biggest loss in corporate history? Look at them now, contracting by 8 percent a year.

If Microsoft has to adopt the guerrilla tactics of its perceived rival, its returns will be negligible compared to current revenues. In the 1960s the British army faced a massive insurgency in Indonesia. Had they adopted their own guerrilla tactics against an enemy that knew the terrain, they would surely have perished. Instead they calculated that a 15 to 1 numerical superiority was the answer. They drafted in the forces and won.

Lesson for Microsoft : don’t copy the methods of your competitors, do what you do, but do it better.