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Microsoft’s Terrible, Horrible, No Good, Very Bad Decade

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Microsoft capped off decades of regular growth with their first down quarter in history. This news, coupled with a number of stories regarding Microsoft’s bureaucratic malaise and slow Windows Phone handset sales point to the company essentially losing the hearts and minds of their most ardent supporters.

Microsoft had many wins. The Xbox is a notable success and Windows 8 could lead to a sea change in user interface and user experience. However, given the steady stream of duds popped out by MS over the past few years – Zune, C#, Vista, and the Kin phone family (not to mention their insistent failure to capitalize on touch or web infrastructure servers) – it’s not hard to see why the bloom is off the Microsoft rose. The company is huge – 94,290 according to the official ledger – and as Kurt Eichenwald notes in Vanity Fair, the company’s strange bell curve ranking system has frustrated their best and brightest engineers. Freshly minted MBAs and CS majors have been shown, time and time again, that there is no value in going after Microsoft millions when Google and the rest of Silicon Valley is right down the coast.

I won’t go so far as to call for the Balkanization of the company into Microsoft Mobile, PC, and Enterprise companies nor will I call time of death. Instead, I think Microsoft has to rethink its entire approach towards the technology ecosystem and reassert itself. Microsoft may have lost its mojo, but it can get it back.

First, I would seriously consider removing Ballmer as CEO. Bill Gates was the beloved icon of the Altair days, at once giving hope to baby boomers who grew up slinging COBOL and GenXers who saw him as the alpha nerd who would lead them out of a life of swirlies and Prom nights spent playing NES. Ballmer, is at best, ignored and at worst some strange interface between Jim Cramer and an orangutan – he has the business savvy, but you don’t want him debugging your Windows 7 install. Microsoft doesn’t need a visionary leader, but they need something.

Second, self-Balkanization is a must. Unless the Windows group has something to say about mobile that will push the envelope, both parts of the company need to keep out each others’ way. The same goes for enterprise. I shudder to think what is happening to Yammer right now as career Microsofties slowly shamble towards fresh brains to bash out. As evidenced by Windows Mobile, Microsoft once saw itself as an ecosystem-maker, not a series of disparate fiefdoms, and this is wrong. Compete within the company, not within teams on the same project.

The need to support legacy hardware also forces a sort of sclerosis inside the company, which leads me to the third point: force consumer obsolescence. I’ve seen far too many instances of Windows CE installs running on mission critical hardware to think that industry will ever give up their miserly ways. But backwards compatibility with everything and every machine is a fool’s game. Technically Windows 8 is a step in the right direction, but there are plenty of folks who are stuck at XP and ain’t going anywhere. Those same people will complain when Windows 8 won’t run on their hardware, but it will allow them to see Windows in its full, high-end glory on a fresh machine. I’m also not condoning neophilic excess, but forcing consumers to look up from their old machines to the state-of-the-art once in a while is a valuable exercise. It works in mobile, and Apple makes it work on the desktop.

To be clear, Microsoft isn’t going the way of Palm and RIM. They still have plenty of fight and plenty of cash left. However, if they don’t want to be another IBM – eviscerated early on and subsequently respected in some circles and irrelevant in most – they need to rethink the next decade. Or they could just move to Australia.