OPINION

The Empire Strikes Back

Last week, Microsoft announced its embrace of the Web and software as a service (SaaS) but there might be less there than meets the eye. Rather than a bold strategy to move the company and the industry ahead, I see it as more of a hedging strategy to help the company hold on.

Microsoft Founder and Chairman Bill Gates tried to position this move as one of the company’s periodic shifts, and it is, but Microsoft is not the first into the space or leading the charge by a long shot. That distinction goes to Salesforce.com, NetSuite, RightNow, and a ton of other companies that pioneered the field.

No Such Thing as a One-Stop Shop

The move is an attempt to focus Microsoft’s competitive drive on companies as disparate as Salesforce.com, Google, and Yahoo and I question its wisdom. There have been numerous moves by software giants like Microsoft and Oracle and to a lesser extent SAP recently to protect their hegemony in the enterprise software market by attempting to be all things to all people — the one stop software/services utility. But there is so much innovation happening in the software industry today that I doubt any one company — even Microsoft or Oracle or SAP — can straddle all areas as was possible as recently as fifteen years ago “BI,” or, before the Internet.

As I have written before, the race will go to the companies that are the most open — able and willing to provide integration platforms and tools for third parties who deliver value by building innovative solutions around the periphery of the major vendor’s lemonade stand.

Nevertheless, Microsoft’s Gates ventured to San Francisco — ground zero in the SaaS world and home to the likes of Salesforce.com, and nearby NetSuite, Google, Yahoo, and a raft of other innovative young companies delivering software services over the Internet — to announce that his company would make its flagship solutions available online and rebadge them with the suffix “live.”

In a rendition of a game where boys of a certain age add “in bed” to any statement, Salesforce.com CEO and founder, Marc Benioff, suggested Microsoft’s current product line names all be appended instead with the word “dead” to signify that time has passed by the conventional business model of selling shrink-wrapped software. Benioff may have a point, but the significance of the Microsoft announcement goes beyond sophomoric sloganeering.

Is ‘Free’ Too Expensive?

One of the drivers of all this is Google’s success at offering services that are paid for through advertising. Google’s current numbers and future prospects look awfully good and make executives drool at the prospect of tapping into that business model. But the reason that the Google model works is its uniqueness. Imagine a world where advertising toll booths are set up everywhere on the information super highway. What then?

Microsoft counters with the idea that customers can opt to pay something and avoid the commercials — a good idea — but how long before TiVo-like objects hit the tiny screen? Moreover, there’s a limit to the advertising dollars — or pennies in this case — available. This is like trying to run a data center on solar power — even on a perfectly sunny day, there is a limited amount of sunlight that falls on your roof and that’s your limiting factor. Finally, and more to the point, the generation of gadget users in the cross hairs of these prospective ad budgets would much prefer to be asked rather than deduced and told, which presents a serious issue for the advertising model in general.

An even bigger issue is immediacy. Microsoft sees a big future in small devices that use its software and which are more or less embedded in our lives. But for that future to materialize the devices and our lives will need to be seamless, how will the advertising paradigm square with that? “These driving directions are brought to you by … and you just missed your exit.” Then there is the whole idea of mobility, gadgets and screen real estate. How do you get your ads to play in a meaningful way on a two-inch screen?

OK, maybe I am just a bit of a skeptic or worse — after all I was born in the analog age. But there’s a lot of social engineering to be done here in addition to all the technical hurdles. Consider this: while many of us have done a tolerable job of adopting cell phones and PDAs can the case be made, as Microsoft asserts, that we need to be connected 24/7? Would we even like it?

I understand what vendors and platform suppliers like Microsoft might get out of the deal, but what does the customer get? And at the end of the day isn’t it supposed to be about the customer?


Denis Pombriant is a well known thought leader in CRM and the founder and managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant’s latest white paper, Adding Sales to the Call Center Agenda, summarizes his recent research in the call center industry. In 2003, CRM Magazine named Pombriant one of the most influential executives in the CRM industry. Pombriant is currently working on a book to be published next year. He can be reached at denis.pombriant@beagleresearch.com


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