Microsoft’s Brand on the Run

The Microsoft brand is getting pummeled overseas, in the music industry, and in the server market. Can you even estimate how much good will has been lost? Gates and Ballmer must get indigestion every morning as they scan the headlines on their pocket PCs:

The European Union has reaffirmed its “No” to Microsoft, siding with regulators in an antitrust case. The ruling could force Microsoft to change its business practices in Europe, but more importantly, embolden antitrust regulators to pursue Microsoft in other countries. All over the world, national and local government agencies, institutions, and corporations are considering alternatives to the Windows and Office monopolies. While its business practices are still relatively safe in the U.S. due to the U.S. Justice Dept. decision in 2002, Microsoft has had to spend vast sums to settle issues brought up at those hearings with many of the competitors (such as RealNetworks and Sun Microsystems).

Microsoft’s effort to make its Office XML format a standard has been delayed for another six months after a “no” vote in the international standards committee. Microsoft Office continues to sell at a record pace, but the freely distributed package is keeping up with the Office feature set (now at version 2.2) and increasing its market share, while online services such as Google Docs are providing a free alternative for individuals and small businesses. Office is already a has-been on the Mac platform, with Apple’s own iWork replacing it.

Microsoft’s Zune is faltering, having lost the online music war to Apple’s iPod without even a skirmish. Prior to Apple’s announcements of new iPods in early Sept., Microsoft cut the price by $50 — the 30GB Zune now sells for $199.

Vista is not as successful as the company hoped it would be. Vista in retail form is being outsold nearly 2 to 1 by the older version, Windows XP. Contrary to Microsoft’s plans, XP version will remain a standard for many years, replaced only as people buy new PCs preloaded with Vista.

Vista is also not as secure and failure-proof as Microsoft would have you believe. The company’s stealth updates and bug fixes for Vista — performed without user knowledge or approval, and even when automatic updating was turned off — have raised many more questions than Microsoft answered when it admitted doing it this week. For example, is this silent update capability a security vulnerability that could be exploited by others?

As confidence in Vista falls, Microsoft’s dominance of the computing industry is eroding slowly. Vista is seriously challenged by Linux and the Mac, and by technologies such as virtualization. With companies like VMware and XenSource leading the charge, virtualization is moving directly to the hardware — enabling a computer or server to run several operating systems simultaneously. This is a battle over the layers that control the hardware. Microsoft does not want to cede its monopoly position of providing the foundational software and is therefore trying to make virtualization a feature of the operating system — where it isn’t as effective in providing the benefits of virtualization (one of which is to be able to move an active system from one server to another without interruption). Bottom line: the virtualization technologies that map directly to hardware will win. VMware and XenSource just announced products that run from flash memory built into a server instead of being installed on the hard drive, and embedded virtualization technology is the reason why VMware has partnerships with IBM, Dell, Hewlett-Packard, NEC and Fujitsu.

The value of Microsoft Windows used to be the guarantee that you could pick and choose among standard PC components to run it. Where has that value gone, in a world where Vista only makes sense if you are buying a new, Vista-tuned PC? That value has moved to virtualization technology, where you can pick and choose among operating systems and applications. Or perhaps that value has evaporated: what people want is a consistently easy-to-manage computing experience.

For my money, the Mac provides exactly that on the desktop and laptop, while Linux provides the same on servers. Viva alternatives!

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