On June 27, 2011, USA Today ran an article headlined, “FTC Probe Puts Google On Guard”. In it, Scott Martin, the author, said that “The Federal Trade Commission has formally begun its investigation into Google's search and advertising businesses, examining whether the company has unfairly used its monopoly. ... Legal experts say the FTC inquiry marks a turning point for the company as it will come under heightened regulatory scrutiny.” History does not offer great hope for those companies under that heightened regulatory scrutiny. When IBM faced off against the FTC in the 80s, it marked the beginning of what most analysts considered IBM's slide into mediocrity, and arguments can easily be made that Microsoft's day in court against the FTC in the last 90s has led to a similar sort of decline. Given Google's current status as one of Microsoft's chief rivals, it would seem that for the Microsoft-allied section of the industry, this would be great news.

After all, for a time, anything Google touched turned to gold: after the search engine itself became ubiquitous (and even its name became a common household term, much as “Kleenex” and “Xerox” did, even turning into verbs in the latter case), Google released GMail, which quickly became a staple for the technical professional seeking an email address not tied to an employer or regional ISP. GoogleDocs came out, offering what free, cloud-hosted alternative to Microsoft Office, clearly a shot at Microsoft's hold on the corporate desktop computing market. And with Google App Engine, Google became one of the earliest cloud players, offering them the opportunity to define the nascent industry in some ways. In fact, to some pundits, Microsoft Azure was a “me, too” follow-up to Google App Engine.

Perhaps more importantly to the developer world, Google seemed to capture “developer mojo” in a way that hadn't really been done in a while, arguably-and ironically-not since Microsoft was “the” place for software developers to work back in the 90s. Top-name developers gathered under Google's umbrella, sucked in by cryptic highway billboards and an environment that easily put Microsoft's “every developer gets an office” perk to shame. Video tours emerged of Google's facilities, including a brand-new building in Switzerland that included fireman's poles as a quick way to get from floor to floor, converted telephone booths inside the building for private cellphone call conversations, 5-star restaurant cafeterias, “open-source Fridays” where developers could work on anything they chose, and more.

Clearly, anything that throws a few roadblocks in front of the Google bus would seem to be a good thing for those who make a living from the Microsoft ecosystem. But despite whatever headaches the FTC inquiry causes Google and slows down the Google juggernaut, Microsoft advocates (and employees and management) shouldn't rush to pop the cork on the champagne and start the celebrations.

What have you done for me lately?

FTC probes generally create wonderful examples of the Law of Unintended Consequences, and there are several points to consider when thinking about how an FTC inquiry or lawsuit against Google will affect those who use the Microsoft stack.

“What does your thing do, again?”

First, there's no getting around the fact that Google has, in many ways, made it far easier for “average computer users” to use the Internet. Old-timers like me remember the early days of the web, when “search engines” meant navigating a scores-deep hierarchy of categories and topics, browsing through thousands-deep collections of links trying to find our way to the information we were interested in. The simplicity of the Google home page and search engine set a new standard for average-user discoverability of things in an infinite medium; this made it not only possible, but reasonable, for those users to discover the web applications that make the Internet such fertile ground for startups and new ventures (or old firms trying out new business models, or new extensions to their existing business models, or…).

This easy discoverability stems from the public's faith in the efficacy of Google's search, and without a clear successor to the search engine throne (and I'm sorry, Bing team, but you're not there yet), any damage to the public's perception of that efficacy could hurt users' willingness to use it or trust the results. More importantly, damage to Google's reputation could curtail venture capitalists' willingness to fund new startups, for whom easy discoverability is critical to early-phase success. If the startup can't count search engines to point potential customers its way (and let's be honest, can anybody really tell us what the name “Yelp” has to do with restaurants?), then the startup's chances of success are slimmer. VCs are generally less-enthusiastic about startups that look to fail (and thus never pay back the VC seed money), and thus become tighter-fisted with the money. That hurts us all.

“Ha! Not dead yet!”

Secondly, FTC probes, even those that are “fast-tracked” by government officials, move at a pace that make glaciers positively speedy by comparison. Microsoft wrestled with their lawsuit for half a decade; IBM's for over a decade. Any ramifications from the FTC inquiry could be postponed until the latter half of this decade before they are spelled out and actually applied, and the resulting changes to the software development ecosystem wouldn't be felt until the middle of next decade at the earliest. (Remember, it's really only now that we're starting to feel the impact of the Microsoft-DOJ wrangling.)

More importantly, the results of the FTC inquiry could very well turn out to be passive or negligible. Google has already reportedly set aside a hefty chunk of cash to be ready with monetary reparations if necessary, so if the FTC decides that Google owes somebody or somebodies millions of dollars, Google simply writes the check and moves on with business-as-usual. (In many respects, this was exactly what happened with the Microsoft case.)

“It's not me, it's you”

Thirdly, Google's legal issues do nothing to address the structural problems that currently plague Microsoft. Google wasn't responsible for the disaster of Titanic-like proportions that was the Kin. Google wasn't the one that killed the Courier from Microsoft Research. Google wasn't responsible for the marketing campaign around Office (dinosaurs?) or Azure ("To the cloud!") in recent years. And Google wasn't holding Microsoft back with respect to slates and tablets; in fact, as the readers (and particularly the publishers) of this magazine well know, Microsoft was long ago the first to market with “tablet computing”, and found it a market that remained depressingly empty of customers.

Even as they face challenges in the markets they've chosen to enter, like mobile, console gaming and cloud, Microsoft also finds that traditionally rock-steady moneymakers like Office and Windows are facing successful challenges of their own in Google Docs and Apple Mac OS. This jeopardizes a core Microsoft business strategy we've seen repeated over the last two decades: use the profits from Windows and Office to bankroll entry into new markets and industries, at a loss if necessary, until Microsoft products in those new markets and industries have made a solid reputation for themselves and can carry themselves.

It would be tempting to lay the blame at Steve Ballmer's feet, since these problems emerged at roughly the same time as his partner Bill's retirement. But in fact, the problem rests somewhat deeper within the company.

The problem, broadly speaking, is because Microsoft spends too much time listening to their customers.

The Innovator's Dilemma

In his ground-breaking book, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, Clayton Christensen noted, “Those who study genetics avoid studying humans. Because new generations come along only every thirty years or so, it takes a long time to understand the cause and effect of any changes. Instead, they study fruit flies, because they are conceived, born, mature, and die all within a single day. If you want to understand why something happens in business, study the disk drive industry. Those companies are the closest things to fruit flies that the business world will ever see.”

What, you ask, does the disk drive industry have to do with Microsoft? The disk drive industry is one of the fastest-moving industries (if not the fastest) within a fast-moving industry, and it gives us a number of success/fail cycles to study. And it's a fascinating study: "Simply put, when the best firms succeeded, they did so because they listened responsively to their customers and invested aggressively in the technology, products, and manufacturing capabilities that satisfied their customers' next-generation needs. But, paradoxically, when the best firms subsequently failed, it was for the same reasons - they listened responsively to their customers and invested aggressively in the technology, products, and manufacturing capabilities that satisfied their customers' next-generation needs. This is one of the innovator's dilemmas: Blindly following the maxim that good managers should keep close to their customers can sometimes be a fatal mistake*."* (Emphasis mine)

In other words, for nigh on a decade now, Microsoft has been listening to their customers (their partners, actually) for what needs to be built and enhanced, and losing sight of the fact that sometimes customers and partners are too close to the problem to see the best solutions out of it. As Henry Ford is said to have remarked, “If I'd listened to my customers, I'd have built a faster horse.”

Microsoft's dilemma stems from a couple of core problems:

Customers want the computer to be invisible. Customers don't really want an “operating system” or a “computer” anymore; they want devices that “just work”. Witness the huge success of the iPad and the iPhone compared to all the devices that came before them. Palm and WinMobile both failed against the iPhone for the same reason: they were essentially tiny computers, when in fact most customers find computers way too hard to use. (Read The Inmates are Running the Asylum if you're not convinced of this.) Similarly, despite having “tablet” computers out a half-decade before the iPad ever saw the light of day, Microsoft now finds itself scrambling to catch up in that very market. Worse, Microsoft's response is to put Windows 7 on a Dell machine of roughly the same form factor as the iPad, and it's a disaster. Microsoft needs to be willing to surrender its Windows-centric focus. (Ironically, Microsoft seems to have figured this out for XBox, and then promptly forgotten it for everything else again.)

Office is finished. Businesses are finding that the features coming out in latest versions of Office are just not all that compelling. Word, Excel, PowerPoint, Outlook, and Visio are all basically “done.” Feature complete. Not really lacking in anything. When people gripe and complain about them, it's that Microsoft keeps changing the UI, not that it's missing any particular feature. What's left to add? Anybody? And when there's nothing left to add, why should businesses keep buying the latest version? Microsoft needs to find a new cash cow, and fast, if it wants to keep to its corporate strategy of making version 3.0 of anything the successful one.

The cheese has moved. The money used to be in corporate computing: give the corporations what they want, and money would flow into your bank account like water. Despite what IBM used to say about the “personal computer” it was always principally a business device first. But that balance has tipped, and now it's the millions of customers toting iPhones and iPads and Androids that are writing the checks. If Microsoft wants to start seeing some of that new cash, it needs to start thinking like consumers, not business folks.

We either hang together, or hang separately. Bill's and Steve's early decisions to structure the company as a dog-eat-dog internal political warzone may have helped ensure that “only the strong (products) survive,” but that day is done. Microsoft is too large, and its product suite too confusing, to continue with this highly internecine warfare. SQL Server has a messaging product (Service Broker); so does the Developer Division (MSMQ, now buried in WCF). Developers looking to use Microsoft products are finding it hard to figure out when to use which products, particularly when the active life of such products sometimes come in at less than three years. Steve (or his replacement) needs to step in, stop the civil wars, and start leading.

These are not easy shifts to make.


Microsoft, for decades, has prided itself on being the place where smart developers wanted to go and make a difference in the world. Outsiders looked on in equal parts horrified fascination and silent envy at the Microsoft development teams that put in 60, 70, or even 80 hours a week on various products, and were rewarded with stock, cash, and most of all, kudos. Being a developer at Microsoft meant you were king of the hill, as it were, and commanded a certain respect from your peers as a result.

That seems to be shifting, as was inevitable. This doesn't signal Microsoft's eventual failure as certain by any means, but it does mean the company needs to change its approach and its target market. After all, while IBM doesn't really gather much “developer love” from the software developers using its products, it continues to churn out product, and its partners continue to profit.

If Mr. Ballmer sees the best path forward for Microsoft to be the one in which Microsoft-ecosystem developers continue to build battleship-steel-gray business applications, then he should come out and simply say as much, rather than trying to convince us all that he is somehow “on top” of building consumer devices and applications as well. Silverlight should be shut down-there is really no call for it in the business world-and HTML5 and JavaScript embraced in its place. XBox should be spun off and/or sold. .NET should ship as an add-on SDK to Office and SQL Server. Windows Azure should have pre-existing images of SharePoint ready to go with just a few mouse clicks and some branding images uploaded. And so on. Doing this would at least bring some clarity to what kinds of things Microsoft wants to focus on, and give us all an idea of the direction Microsoft will take in the future.

But somehow, I don't think that's what he wants. Or, rather, what he wants is to have his cake and eat it too: to continue to offer what corporations want, without having to give up the consumer side of things. Aesop once told the tale of the monkey made vulnerable to a predator because it is trapped with its fist caught in a bottle, because it refuses to let go of the grapes therein; Aesop would have a field day with Microsoft's inability to let go of any of its investments, thus running the risk of being run over by the Apple juggernaut in the consumer space, the Google bus in the corporate world, and who knows who else in the gaming and entertainment world. (Anybody want to make a bet on Nintendo?)

Microsoft needs a leader who is unafraid to step away from the things that have “always worked” and deal with the disruptive changes that snuck up on them. Barring that, the “cool kid” developers who have been a significant part of the Microsoft ecosystem will find other places to play: Ruby, Java, HTML5, iOS and Android are all beckoning. Bops on the head from the FTC won't change any of that, as IBM learned the hard way, back when it had Microsoft in the crosshairs.

An Aside

By the way, in a previous column I challenged readers to name the original name of the .NET framework. In his response, David Kennedy wrote in with his response, “Next Generation Windows Services”, which was, in fact, correct. Correct answers also would have included “COM3”, and (in my more snarky moments) "Visual J++". For his trouble, David gets kudos, a hearty handclasp, and possibly a beer (if we ever find ourselves in the same bar at the same time) from me.