

Microsoft's New Business Plan - mef
http://www.zdnet.com/microsofts-radical-new-business-plan-is-hidden-in-plain-sight-7000001750/

======
jonnathanson
The article makes a lot of reference to the importance of an integrated
hardware/software platform for Win8. But XBox Live is the elephant in the room
here.

Quietly -- or not so quielty, depending on your perspective -- the XBox has
become a behemoth in the entertainment world. Not just with video games, but
with all forms of entertainment content (aside from music, which MSFT has
never really been able to nail). Take, for instance, the interesting stat that
over 60% of all Netflix streaming users stream via a gaming console. Or that
close to half of all XBox owners watch one hour or more of TV or movie content
per day through their consoles. Though it has formidable competitors in
Amazon, Apple, and to some extent Google, Microsoft has a pretty impressive
strategic position in the battle for the living room.

The only chink in the armor has been mobile. That's why MSFT kept investing so
heavily in Windows Phone, and why it's going to fight as hard as possible in
the tablet space. Not owning mobile means not owning the total entertainment
experience, which means not having a ubiquitous ecosystem. So mobile is pretty
darned crucial here.

~~~
podperson
I'm guessing your 60% figure is (a) accurate, and (b) from memory. If so, this
is trending in the wrong direction for Microsoft:

<http://www.statisticbrain.com/netflix-statistics/>

The figure quoted is 50%. Also bear in mind that it's not exclusive, and it's
counting all supported game consoles (e.g. including the Nintendo Wii).

My guess is that TVs with built-in Netflix streaming support and AppleTV (now
outselling XBox [http://macdailynews.com/2012/07/25/some-hobby-apple-tv-
outso...](http://macdailynews.com/2012/07/25/some-hobby-apple-tv-outsold-
xbox-360-last-quarter/)) are hurting this.

Given that XBox has been marginally successful as a business and was greatly
dependent, for its success, on the dominance of the PC gaming platform, I
don't think XBox is Microsoft's ace in the hole.

~~~
meta
Just as an anecdote: I used to stream my Netflix through my console (PS3) as
my primary usage of said console. I got so frustrated with having to do
Software Updates, seemly "every time I turn the bloody thing on!", just to
launch the Netflix app that I went out and bought an AppleTV. My console is no
longer even connected to a TV or power cable.

~~~
evilduck
I did a similar thing because I was almost exclusively using my PS3 for
Netflix, but my motivation was mainly because the AppleTV runs at ~6 watts and
my "fat" PS3 runs about 170 watts at idle and we were always leaving the damn
thing on. By my calculations, my Gen2 AppleTV paid for itself in electricity
savings about 3 months ago.

I keep it because it's my only way to play discs on my TV, but it's seldom
used, and PSN's massive security blunder left a bad taste in my mouth.

~~~
podperson
I never even considered the power consumption of AppleTV but that's a great
point. (It's also silent, and as of today supports Hulu+.)

------
kanedank
"Linux may be neutralized as a competitive threat" was his prediction based on
last years 10-k.

What world is this man living in? One where servers don't count, only direct
consumer products?

~~~
bergie
I suppose Android is not Linux in their view. But agreed that the current
generation of desktop Linux isn't much of a threat.

~~~
tluyben2
Business desktops? Or? My parents run Android (it is Linux despite what MS
thinks :) desktops; much easier to use. My business friends use bring-yourself
iPads and Macbooks. I have to think _hard_ to find someone who uses Windows.
Maybe it's different in the US, but even in the village where I live where
everyone is very non-tech and mostly poor, everyone uses Android or Ubuntu
(because it's free, not because it's easier to use in this case) on their
computers, phones and tablets. The simple reality now is (and that's why I
think Windows 8 is a good idea but not radical enough) that Android and iOS
are significantly easier to use for non-geek people. Windows is just hard; I
am a programmer and gadget geek; when I sit behind Windows to compile for WP7
it always takes me a lot of time to find things and work around it's annoying
interface. I can only imagine what people who do not have a tech background
think about it.

A simple example was a large migration I did for PwC.com in my country; that
was a real eye-opener for me and it took this long (this was 10 years ago) to
be an eye-opener for MS themselves. I interviewed people in that company and
they all said the same thing;

me: How do you start your word processor? employee: I click on Start, then 7
up (All Programs), then 3 down

If the migration would MOVE word in a different place, people would need a
course to know where to find it, and that's expensive and annoying for so many
people. It came out the interview that it was of vital operating importance to
leave all software in the same place in the start menu; the people didn't
actually READ words as they simply didn't understand the concept.

A huge button saying WORD PROCESSOR among a few program they actually USE
would have helped much, so like iOS/Android/WP7-8 have...

Another thing that came from the interviews (and from my experience with non
technical people as well); people in Windows ONLY have one window open,
fullscreen. Android/iOS/WP7-8. Not Windows <= 7; non tech people find the
actual window concept confusing and annoying, so they just close the current
window when they want to do something else.

------
qatalo
Too little, too late? While Microsoft fantasizing about an ecosystem to thrive
on; there are plenty others that have an established footing and beyond.

I have already put down my WP7 phone, not pleased that I cant upgrade to WP8.
I am sure the MILLIONS of lumia owners will never pick up one again either.

~~~
rrreese
Microsoft has demonstrated again and again that they can enter a market late
yet gain massive traction. They do this by being dogged and throwing money
behind a project until it works.

See for example I.E, XBox, and Outlook. All markets that they had no control
of, all weak early products followed by a big push and then solid market
penetration.

That's not to say that it will happen this time with phones and tablets, but
MS has a lot of money, a lot smart skilled developers and tenacity. It would
be foolish to rule them out just yet.

~~~
mythz
This was possible in Microsoft's glory days before Google, Apple, Amazon
became formidable forces - they've never seen smart and talented competitors
like this where they're effectively rendered helpless - a distant competitor
in each of these companys primary markets.

Not only can't they compete, but they can't even maintain their own lead in
these markets - as they've lost their dominant lead with Windows Mobile (which
still has 2x market share than WP7) and Internet Explorer has recently
conceded the most popular browser spot to Chrome. This is even after making
these markets primary objectives where they shell out $1B a year to Nokia to
be an exclusive WP7 Carrier.

They've achieved their dominance in the PC world thanks partly to their open
3rd party hardware ecosystem. The problem is this model doesn't seem to
translate well in the vertically integrated Smart Phone + Tablet market, and
if they price Surface too aggressively it will effectively kill all incentives
for their hardware partners to compete (and make any profit).

It also doesn't help that Microsoft isn't a consumer brand, (e.g. its logo is
dwarfed behind the XBOX moniker). All Microsoft's strength is in the
enterprise space where the 2 cash cows that have ever really made them any
money is Windows(+Server tools) & Office, effectively every other market
they've entered have had marginal profits or have been massive loss leaders.

They're stuck between the worlds most valuable company and a one of the worlds
most loved brands giving away the mobile + tablet OS for free. I give them a
small chance to be able to leverage Windows 8 to become the 2nd largest tablet
provider (after iOS), but I'd say the best they can do with Windows Phone is
#3.

I wouldn't rule them out until they've still got their cash cows to fund their
massive efforts - but take those away and they're another footnote in history.

~~~
Spearchucker
_"This was possible in Microsoft's glory days..."_

This is still eminently possible. As an aside, by implication you're
suggesting that market leaders displaced in the past
(Netscape/Sony/BlackBerry/etc) were neither smart nor talented.

 _"...model doesn't seem to translate well in the vertically integrated Smart
Phone + Tablet market..."_

If you dig into any documentation from Microsoft that speaks about their
vision you'll find that their model is based on a lot more than "Smart Phone +
Tablet". It includes phone, tablet, laptop, PC, console, TV, desktop, server,
and cloud. Think about that for a minute.

~~~
mythz
>> This is still eminently possible.

Everything is still possible, like RIM making a comeback (who still has 6x
market share than that of WP7) - it's just not likely.

>> As an aside, by implication you're suggesting that market leaders displaced
in the past (Netscape/Sony/BlackBerry/etc) were neither smart nor talented.

Nope, I'm suggesting Microsoft has never had competitors as smart, talented or
as resourceful as who they're facing right now (not that they're previous
competitors weren't smart - they're just now in a completely different
league). Somewhere in the last decade they went from being the most feared
tech company to one that is no longer even viewed as a competitive threat:

[http://www.geekwire.com/2011/googles-schmidt-microsoft-
not-d...](http://www.geekwire.com/2011/googles-schmidt-microsoft-not-driving-
consumer-revolution/)

>> In past eras of technology, one company has ruled. Microsoft and IBM, for
example. But now, Schmidt sees a “gang of four” companies providing the major
consumer technology platforms

>> — Google, Apple, Facebook and Amazon.

It also doesn't help that they've seen many high-profile employee defects -
many of whom are now working for Google. They haven't been __the place to be
__(if you're an elite hacker) for quite some time.

If you look at the past focuses of all the different companies you'll find a
pattern of Microsoft doing all the chasing - where they try to get their
finger in every new market pie and mostly failing (besides XBOX). They tried
to take on Google's Cash Cow with Bing, Apple's iPod with Zune/Kin, Amazon AWS
with Azure - now they've had a complete rewrite of their Smart Phone OS to try
compete with iOS/Android and still can only muster 1.3% Market Share (even
after shelling $1B to Nokia) <http://www.geekwire.com/2012/chart-microsoft-
nokia/>

The only hurt they've been doing lately is to their only real partner, Nokia -
after they Osbourned all of Nokia's WP7 products when announced earlier this
year that NONE of the phones Nokia is selling will be able to run WP8 - with
no release date when they have a device that will?! The only possible excuse
for this madness is to see Nokia's sales and market value crashing so they can
pick them up for a cheap buy later.

The re-imaging of Windows 8 are warning signs of desperate times for
Microsoft, as they're trying to leverage their Desktop OS Monopoly to compete
with the iPad - but at the cost of disrupting one of their primary Cash Cows
and actually providing a worse UX for Desktop users. Win 8 does look pretty
but it's frustrating to use! I'll still buy a Win8 promo licence but I'm
waiting for the first ServicePack UX with improvements before I'll even
consider the switch.

>> If you dig into any documentation from Microsoft that speaks about their
vision you'll find that their model is based on a lot more than "Smart Phone +
Tablet". It includes phone, tablet, laptop, PC, console, TV, desktop, server,
and cloud. Think about that for a minute.

They can pack as many complex and numerous features in as many devices as they
want, but if it doesn't appeal to end consumers it will be as good as their
current efforts to date. The Post-PC world is a consumer market, a place where
Microsoft's brand has no mind-share.

You can roughly measure this by looking at the popularity of some of the
brands:

<https://twitter.com/google> \- 5.1M

<https://twitter.com/facebook> \- 4.3M

Apple's too cool to have a twitter or facebook account, but they do manage
some popular brands on twitter:

<https://twitter.com/iTunesMusic> \- 2.9M

<https://twitter.com/iTunesTrailers> \- 2M

Meanwhile in enterprise land...

<http://twitter.com/microsoft> \- 267K

To conclude: smart money is not on Microsoft winning the hears and minds of
consumers in this Post-PC world.

------
mmcconnell1618
I think Azure is the sleeping giant that will allow MS to keep enterprise
customers for decades to come. Heroku got traction because they made it dead
simple for Rails developers to publish a web application. Azure has the
potential to be the same kind of solution when linked with Visual Studio for
the Microsoft stack.

Amazon, Rackspace, Google, etc. don't own the entire stack from run time to
developer tools to cloud hosting and that gives Microsoft a unique advantage.
No, Azure won't be the best cloud solution. No, it won't be the cheapest
solution. What it will be is just enough goodness to be like crack to millions
of Microsoft developers. It won't be worth their time to figure out how to get
running in any other cloud provider when Visual Studio has a "Deploy to cloud"
button available.

Microsoft will offer on-premise versions of Azure and some larger customers
will adopt it but economies of scale will soon see 3rd party web hosting
companies struggling for business. This is were the extra revenue for growth
will come from. Microsoft will be making less on license sales and SPLA
contracts in favor of locking in hosting revenue.

~~~
caller9
Google app engine for Java has an Eclipse plugin. So you get a deploy to cloud
button of sorts. I still had a distaste for the persistence layer (think
hybernate + big tables) but it was easy to use.

~~~
edwinnathaniel
The problem with GAE is that it's not quite there yet when it comes to web-app
development in Java.

1) Does not have Maven support

3rd party exist, but not from Google

2) As you said it: persistence layer/ORM mismatch with BigTable

You could use Objectify but what are we talking about here: apps that use
RDBMS or being dictate by Google what your app architecture should be?

3) Limitations imposed by GAE

There was a time where if you use Spring Framework, once in a while GAE will
throw exception due to longer bootstrapping time. Does not support all Java
classes and keeping GAE up to date to the latest spec.

What most Java developers want is to support Tomcat/TomEE/JavaEE5+6,
deployment via Maven, with RDBMS and less restriction. Up until now, no one in
the market (Heroku, CloudFoundry) do this (user-experience) well except
Jelastic. Unfortunately Jelastic does not provide infrastructure; they provide
the software and work with 3rd-party hosting provider for the infrastructure.

~~~
stickfigure
#1 has been addressed; the GAE jars are officially published to the maven
central repository.

#2 is a puzzling statement to make. Compared to an RDBMS, GAE's datastore is a
_much_ more natural fit for Java object graphs because it supports
hierarchical data and is naturally polymorphic. Hibernate makes crazy
contortions to match up the models and this complexity bleeds through to the
API. There is definitely a learning curve if you have a background in RDBMS
development, but you can say the same about MongoDB or Riak or any other NoSQL
store. Nevertheless, the benefits of an autoscaling, distributed, replicated,
zero-administration datastore are compelling.

#2a If you really really want MySQL, GAE now offers it (Cloud SQL).

#3 is a bit ambiguous - yes, there are limitations, as there are in any hosted
environment. There's a 60s deadline on startup requests, but it's not usually
hard to keep even Spring apps under this limit. The missing Java classes are
things like Swing - you won't miss them. Yes, things like the Servlet spec are
a little old, but the servlet api hasn't changed in any material way in the
last decade.

It's not perfect, but App Engine is still an awesome platform for startups. It
eliminates ops and devops roles so you spend all your time writing features.

~~~
edwinnathaniel
#2 it's not that puzzling. Plain and simple most of us want RDBMS not NoSQL.

#2a they _just_ offer this (private/invite beta since last year). And no, I
want PostgreSQL ;)

#3 In the past, JAXB doesn't work well, ditto with some of the reflection
stuff.

List of unsupported stuff:
[http://code.google.com/p/googleappengine/wiki/WillItPlayInJa...](http://code.google.com/p/googleappengine/wiki/WillItPlayInJava)

No JMX, JMS, JAX-WS (server), iText (PDF generation). Various libraries seem
to require little "tweaks" here and there, no, I want to get it from Maven and
be done with it.

The problem is keeping up to date with the latest spec fast enough.

I'm not looking for perfect though, I'm looking for standard JavaEE stuff.

~~~
stickfigure
You sound like someone who has arrived at a steakhouse and is upset because
they don't have Big Macs on the menu. Okay... you have very specific desires
and GAE isn't that. That isn't necessarily a problem with GAE.

~~~
edwinnathaniel
Can't argue with your assessment but the top parent of our thread talks about
Azure and Heroku where both platform support fully whatever their bread-and-
butter (Azure with .NET and Heroku with Rails), meanwhile GAE does not.

------
latch
TL;DR - In the _Risk Factors_ section of this years 10-K, Microsoft used the
word "service" almost twice as much.

~~~
dorian-graph
You made it up to paragraph ~ 11 out of ~ 30.

------
velodrome
I don't think OEMs should be worried about Microsoft going into hardware. At
least in the near/medium term.

Microsoft is trying to defend their turf from competitors. If they think they
can lead the way (vs OEMs)...then let them. Microsoft is willing to take a
little risk to push their platform. It is just adding a little more wood
behind that arrow.

Apple produces hardware. Google is in a position to produce hardware. Only
makes sense for MS to do the same.

Frankly, Microsoft needs the OEMs as much as the OEMs need Microsoft.

------
eostyx
Windows 7 is the last Microsoft OS I will buy. There's no way I'm supporting
Microsoft anymore with these dangerous decisions they're making. I wish them
all the best and that they see what damage they will do to everyone that
supports/supported them.

~~~
aik
Why is it bad to make big decisions, especially when an extremely flawed model
that has been in place for the past ~20 years is finally changing? (Fear of
change aside)

To compare, Apple makes big decisions like this fairly often. People complain,
get over it, and the world is usually a better place afterwards.

------
mtgx
I've never believed the theory that Microsoft is just making a "reference
design" with the Surface. No. They are in this to make money with it, and
compete heavily with their partners. If it was just a reference design, they
wouldn't have kept their partners in the dark until the launch day like that,
and piss them off.

Valve and Blizzard are right. Everyone in the "PC space", watch out. Windows 8
is coming to destroy a lot of "PC" businesses, whether it's software or
hardware related. I'm actually surprised many of their partners haven't
figured it out yet, and are actually helping Microsoft kill their business by
promoting Windows 8 heavily in the beginning.

They're digging their own grave, just like HTC and Samsung kept WP7 alive for
a year, only for Nokia to get all the credit and all the support from
Microsoft with WP7, and they are, without realizing, helping Nokia, one of
their former biggest competitors, make a comeback.

~~~
zvrba
>Windows 8 is coming to destroy a lot of "PC" businesses

Actually, this might be something positive if crapware (SW and HW) producers
take most of the blow.

~~~
floppydisk
Commodity hardware, as we know it, grew up on the back of Windows. As MS
transitions into their "lifestyle" phase, what will the effect of a reduction
in crapware have on the prices of components for everyone else?

If a significant number of component purchasers exit the market, the cost of
iterating new technology will go up and we'll see prices go up or the rate of
technological increase go down (or both).

~~~
zvrba
Hardware became commodity because of abudnance of mass-produced cheaper IBM
clones (producers of "IBM PC-AT compatibles").

Harwdware "grew up" thanks to the innovation by the big guys: IBM, Intel,
Apple, [even MS] etc, and their products have always been more expensive. But
innovation happened, even though the money didn't go to them when people
bought cheap clones.

Therefore, I believe that the "purchasers who will exit the market" _never
were_ in the market in the first place, and innovation rate won't be affected.

I think that the only thing that will happen is better HW/SW quality for
buyers of quality brand names. Windows will (hopefully) evolve much quicker
[heck, maybe even cheaper!] given that it won't have to support legacy
crapware any longer.

Windows PCs will probably become slightly more expensive, but that's the price
I'm willing to pay for not having to deal with crapware. Users unwilling to
pay the price of quality will still be able to run Linux.

I wonder whether MS is doing any research on application sandboxing and
controlling information flow, possibly from within a lightweight hypervisor.
(Singularity project may have been a step in this direction.) It is THE
missing piece in Windows infrastructure. Switching users to do different tasks
is still very cumbersome, even with a fast machine.

------
jpalomaki
Microsoft could be using Surface to not only to force the manufacturers to
create interesting products but to drive the prices down.

I believe it is Microsoft's interest to get as wide adoption to Windows 8
tablets are possible. Even if means selling them with very thin margins (as
Google seems to be doing with Nexus).

~~~
dmethvin
It's more complicated than that.

OEMs pay Microsoft for the OS, then take on the risk of trying to design and
sell a product. The $35 or whatever OEMs pay for Windows 8 becomes part of
their manufacturing costs. When Microsoft makes their own design, they
essentially don't have that cost.

Google can afford to sell at thin margins because they make most of their
money off advertising. The more Android units out there, the more ads they can
display. Microsoft hasn't yet cracked the post-sales revenue problem; once the
OS is sold it goes into the hands of the OEM who tends to make their money off
hardware upsells, crapware preinstalls, service contracts, etc. So, Microsoft
can't discount their Windows 8 licenses to near-zero without the risk of
making _nothing_ on the deal.

If you read further down into the article, I think that is what the "services"
part of the 10-K is implying. Microsoft is looking for a way to slice off some
of that post-sale revenue. An easy way to do that, obviously, is to make their
own hardware, but it will be even more interesting to see how they transition
from their OS-licensing revenue model to a post-sale-services revenue model.

------
jamesaguilar
I wonder how many times I've read "X isn't a hobby." about a company. Seems
like Microsoft and Google are the target of that phrase far more often than
most. Kinda sad what that says about the fickleness of the product management
organizations in these companies.

------
netcan
I'd like to hear what Joel Spolsky has to say about this. He seems to get MS
and their business.

------
taligent
The number one priority for MS needs to be unifying the SDKs, app and payment
platforms for Win8, WP8 and XBox Live.

If developers were able to target all three with a single codebase it would be
a game changer and I can easily see it being the number 2 development platform
behind iOS.

~~~
mariusmg

      Never gonna happen (regarding the SDKs).Sure...some things might be somehow similar (XAML) but some codebase won't run on all 3 type of devices. Different things for different hardware.
      Only thinking at how inefficiently apps are build today make me shudder at running those things on a Xbox.

~~~
delinka
Please don't format your own comments like this. It's difficult to read on
mobile devices.

~~~
freehunter
Heck, it's difficult to read on a desktop. Having horizontal scrollbars in the
middle of the page is less than ideal.

