Microsoft’s Core Strategy

November 3, 2005 |

Microsoft and its cheerleaders are all running around giving each other high-fives and throwing their hands up in the air and shouting “Hooray for us!” following the announcement of the company’s Live initiative. But what, exactly, are they congratulating themselves for? So far, the Live initiative is a big ol’ bucket of vaporware, combined with technology, products and service that were already available or announced quite some time ago, and are just being repackaged.

And when Microsoft talks about its future plans, they’re describing a change in business model so broad and sweeping that it’s completely unprecedented. I suspect Microsoft has no idea what it’s letting itself in for.

Now, if he’d talked about the stuff in the first paragraph, I’d have no problem. It’s the second paragraph, which makes up most of the column, that’s a problem. Here’s the thing: Microsoft doesn’t care how it makes money from the Live stuff.

Microsoft’s strategy has been in place since Day One, and it’s not likely to change. That strategy made Bill Gates who he is, and he’s just following it here. It goes like this:

Look for new technology markets.
Identify the leader who is getting all the buzz.
Find a competitor to that leader who has a product that’s almost as good.
Buy them.
Pump cash into the new acquisition until it becomes the leader.

There are minor variations on this process. Occasionally MS develops a competitive product in-house. Once, at the beginning, it got IBM to pony up the cash for its acquisition. But basically that, along with Embrace and Extend, is it. Microsoft runs on the assumption that some of these markets will fail, and some will succeed, and the successes will pay for the failures. What they really dread is being left behind–they are terrified that someone will do to them what they did to IBM. Microsoft would prefer to stick with the desktop computing model, and will probably do their best to help that model to win out. But if the world moves to Software as a Service, by God, Microsoft will be there too.