Seven Steps for Microsoft to Regain Tech Leadership

Microsoft without Ballmer and Gates. This seems unthinkable. Its a new era, but Microsoft does not have to become irrelevant. There are seven steps they can take to still be a tech leader. I will give you the steps one day at a time. Feel free to forward them to the incoming CEO.

Step 1: Get Out of the Smartphone and Tablet business.

I mean completely out. Just shut it down.  The tablets, the operating system, the Nokia partnership. Shut it down. Don’t listen to all those people that tell you you have to be in this space because it is the fastest growing segment. I know it is, but Microsoft can’t win, so why invest in this segment. When I say it can’t win, I may be overreaching. Microsoft can win if an asteroid hits Mountainview or Cupertino. But thats about it. Don’t listen to all that crap that  the market is still early and that there is time to recover. The market is not early. Developed countries are at smartphone penetration rates of 50% and more. The market will slow down from here and the winners have been chosen. Developing countries still offer rapid growth, but these markets will require low prices and thin margins. Is that what you want to win, the low margin countries? Don’t worry, you can’t win there either.

Asteroid Strategy?

Not convinced. Do you want another reason to get out the business? Ok, here is the big one. Smartphones and tablets are dependent on developers building apps for them, and no developer want to see a third platform emerge in this space. Let me say that again. NO DEVELOPER WANTS TO SEE A THIRD PLATFORM EMERGE. It is bad enough that they need to develop on iOS and Android and do some modifications to make them fit the various screen sizes. The last thing the development community wants is another platform. So, try as you might, you will never get the cool and new apps on Windows Phone. Uber is a great example. Awesome App and service. Press a button on your iPhone or Android and a town car picks you up. If you have a Windows Phone, you have to use some unofficial app that doesn’t really work. Worse than that. Windows phones don’t get Google’s popular mobile apps. No Google Maps? Yikes. No Native Gmail. Consistent problems with the Youtube app. No Google Search.  Please tell me what idiot buys a phone or tablet that guarantees that they will be a second class citizen on apps.

Still not convinced. Ask yourself this. And be honest. Give me one good reason to buy a Windows phone or Surface tablet over market leaders iOS or Android. ------------------- I can’t think of one. I went to Windows Phone website and it appears you are hanging your hat of some pretty thin differentiation. The Nokia phone takes a slightly better picture...maybe...depending on the conditions. There are some active tile things that some people might like, but I have never had an Android or iPhone user complain about their interfaces. The differentiation is frighteningly thin.  The Surface campaign was a joke. The commercials were nice and all with all that dancing and keyboard snapping. They seemed to say: "It’s Tablet and a PC" because its got a keyboard. Do Microsoft people not realize that you can get a keyboard for an iPAD????

OK, there is one reason that you might buy a Windows Tablet. It can run a full version of Windows Office. But really that is it. And its not enough. Period.

iOS and Android have won this space. If a third platform develops it will be some kind of Android variant, like the Amazon one. It will not be Windows Phone, It will not be Blackberry. There will be Android and iOS and maybe an Android variant. And thats it!

So, I guess the Windows smartphone and tablet strategy is down to the “Asteroid hitting Mountianview or Cupertino” thing. If you have some forecasts that say that is likely, then you are golden. If not, get out. And Get Out Fast.

Stay tuned for Step 2 tomorrow.

Battling Ballmer

Google Apps could not decisively beats Steve Ballmer, but Andy Rubin and Android did.

I know a lot of people are bashing Ballmer right now and despite the fierce competition I waged with him, you won’t find me criticizing him this morning. Ballmer is a ultra competitive guy and I love competitors. And lets face it, his record is incredible. He Won. And he won a lot. Windows over OS2. Excel over Lotus. Word over Wordperfect. WindowsServer. SQLServer. Sharepoint. Exchange. And when he did not win he finished second: Internet Explorer, Microsoft Dynamics, Azure…..do I need to go on.

If he was a golfer, he would be Jack Nicklaus. Ok, maybe not as well liked as Jack, but he’d have Jack’s record.

I know how good he is because I helped start a business, Google Apps, that aimed at beating him.  He fought and fought and fought. He fought when he had no product. He fought when he had a bad product and he fought when he made a good product. And for those bashing him today, they never saw the work that he and his teams did.

So here is my unique perspective on Steve Ballmer- on my competition with him and more importantly on the one big battle he did not win.

On February 22, 2007, Dave Girouard, Matt Glotzbach and I helped launch Google Apps. Our goal was pretty big.  We prepared a plan to disrupt and replace Steve Ballmer’s office systems empire that included Exchange, Sharepoint and the crown jewel – Microsoft Office. We figured if we could pull it off, we could own the office systems space and Microsoft’s $20B division that was making $15B in profits would be seriously wounded.

Over the next 6 years, we battled Ballmer and team in hand to hand combat in the Office Systems Cloud War.  We were pitching low cost, collaborative  always up to date, secure cloud based office apps- Gmail, Calendar, Google Docs et all.  Ballmer was first scaring people away from the cloud. And then battled with us when he introduced cloud based BPOS  (I am not kidding you about this product name) and later Offcie365. I used to joke that I was battling Ballmer in accounts where he flew his private jet, while my Google Apps team and I team flew coach.

While the fight is still ongoing, the results are showing the battle was not the decisive one. We won some – City of LA, Department of Interior, Genentech-Roche, Seagate, Motorola and we did some damage in small business. But Ballmer and team won some big ones too – Hyatt, Lowes, TRW, JC Penny and of course General Motors. In the end Steve was able to defend a majority of his turf and while Google has built a big business here, it has mostly been at the expense of legacy systems like Lotus Notes. Google has not yet made a significant dent in Micrsoft Office systems cash juggernaut.

But while Steve was able to battle one Google unit to a draw, another business unit housed a couple of buildings down attacked in a different way and with much more damaging results.  Mobile genius Andy Rubin beat Steve and Microsoft at it own game and they didn’t just dent the Microsoft's business, they laid waste to the Windows monopoly and made Android the most popular operating system on the planet.

Ballmer as CEO presided over a $55B increase in revenues and yet the stock never moved. Why? Because the market knew that Microsoft was loosing the big battle in smartphones and tablets. Microsoft and Ballmer must have figured that they would run the same play against Apple in phones and tablets as it had in PC’s. Apple makes a great personal computer with integrated hardware and software, but MSFT builds an operating system that is used by a bunch of PC manufacturers who offer a broader and more diverse product line at a lower price. MSFT watches the hardware companies’ battle it out while it reaps in license revenue. Then it extends it operating systems into applications and beats Lotus123, Wordpefect and the others.

Without Andy Rubin and Android, I think the PC plan would have worked in smartphones and tablets. But Andy Rubin’s strategy and outstanding product execution kicked the crap out of Microsoft. Andy built a great operating system and he quickly and relentlessly improved it. Android not Microsoft signed up all the manufacturers to build phones and tablets to compete with Apple. And most importantly Andy had the strategic chops to sell his company to Google before the big war started. Why was that so important? Because when Android was part of Google, he did not have to charge for his operating system. He could be content with some modest revenue streams from the Android store. Android under Google did not have to generate revenue. Android simply had to secure that Google’s Search, YouTube et al would be front and center to the mobile industry. These applications are so profitable, Google can afford to run Android at a loss. Android lets people get to the Internet and Google makes gobs of money when people get to the internet.

Andy Rubins’s strategy, product and execution were damn near perfect.  Ballmer would not admit it, but it was checkmate before Windows Phone operating systems ever hit the market.  How was Steve going to beat Andy. Steve had to charge for his operating systems because Microsoft does not make any money when smartphones let people access the Internet. In fact Microsofts’s Bing and other Internet properties lose about $2B per year. And since Andy beat Steve to market by several years, the hardware manufacturers and mobile application developers were in Andy’s camp long before Windows Phone was ready. Steve doing a “Developers, Developers. Developers” pogo dance was not going to work in mobile.

Steve tried a long shot with Windows8. He took a PC based OS and tried to stretch it to tablets and do a product line extension to Windows phones. But it was too late and lets face it, it never really had a chance. A $900M write down is pretty freaking incredible isn’t it?

Think about what Steve Ballmer record is if Andy Rubin did not enter the picture. In my humble opinion, Google does not likely make Android the run away success that it is now. Apple would have remained dominant for longer, but Windows Phone likely becomes the #2 platform and then inherits the worldwide crown as Apple fails to win worldwide share at the high prices it charges.  Windows Phones and tablets gets a killer version of Microsoft Office that Apple does not have and they start winning tablet share. Don’t laugh, this likely would have happened if Andy Rubin had ben hit by a bus in 2007.

So Microsoft and Steve Ballmer have beaten a lot of people, but Andy Rubin and Android kicked their ass and now the technology leaders for the foreseeable future are Apple and Google and probably Salesforce.com

So as Steve steps down, he’s not cursing Apple or Oracle or Facebook. He is still upset about Google Search versus Bing and Google Apps. But he must really be cursing Andy Rubin. I would venture that the mention of his name should generate a chair toss or two.

From a personal perspective, I’d like to think that Google Apps has contributed to customers and to the office systems environment. We forced Microsoft to the cloud in this area, improved functionality and drastically lowered the cost of running office systems. But Google Apps was not the decisive Google/Microsoft battle that I had thought it would be. In fact Google Apps turned out to more of a diversion while Android stabbed Microsoft and Ballmer in the heart.

But what the hell, I will take that.

And maybe some time in the future, I will find a moment to blog or write about my Google Apps/Microsoft competition – I will be called: Battling Ballmer. Seems fitting.

Cars of the Future - Open Systems will make them Better and Safer

Everyone should really check out this GigaOM article about GM creating open systems within their future cars. It is really important because if GM or others can pull it off, our cars will be much better and safer in the future.

The automotive industry has done a great job with automation within the vehicle – collision avoidance, camera based parking, navigation systems, entertainment systems. But the cars computers are like early 1990’s PCs. They are powerful, but not connected to the internet.  As such the car only takes advantages of local computing power and data. It gets no benefits from the cloud. Another problem with this is that smartphones can’t be easily integrated into car and this has led to some pretty massive safety problems as drivers try to connect to cloud based systems. Its not just texting and driving. We check Twitter and Facebook and email or use Google Maps which generally provides better navigation than the $3000 standlone system in your luxury car.

GM’s bold plan can change all that.  If car manufacturers open up their telematics systems to developers, a wide range on cloud based apps could be connected through the driver's smartphone and be integrated into the car’s telematics and onboard infotainment systems. These apps can be disabled or voice enabled to ensure that driver distraction is minimized when the car is moving.

The car has to be the last sophisticated computing environment that does not connect to the Internet. This vision can change all that.

During my eight years at Google, I had the chance to do a lot of neat things and while everyone equates Google Enterprise with Google Apps, we also built a very good business licensing the Google Maps API to companies.  It was in that capacity that I found myself with Eric Schmidt at GM headquarters with their executive team. The conversation was wide ranging, but when it turned to in car systems, Eric’s advice was simple. Open up the telematics operating system to developers! My recollection was that the advice was not met with universal applause and I understand why. The traditional approach for the company, who makes the most vehicles in the world, would be to stay closed and try to do everything by themselves. Opening up takes courage and guts. If this article by GigaOM is correct, then GM is taking the right path. Open always beats closed.

If GM can get this right, I think they can produce better and safer cars.  I have only ever owned one GM car in my life, but if they pull this off, I will be buying more.

Armonk, NY is a sleepy town. It rubbed off on IBM.

Life takes you in curious circles sometimes. I am writing this from Armonk, New York - home of IBM. Just dropped my son off with a bunch of college bound baseball players who are on their way to Europe to play for a couple of weeks.

This is not how I expected to make my first trip to Armonk. Twenty-Eight years ago, I started my first job out of college at IBM and every manager dreamed of working in Armonk or at least White Plains - the headquarters and mecca of the most admired company in the world.  Don’t laugh, you can look it up! IBM was Fortune’s most admired company in the mid 80’s.

So, I visited the corporate headquarters. You can’t get close because there is a big security gate, but here is a picture of the little sign.

It’s a beautiful place, Armonk – picturesque lake, beautiful trees, scenic views, deer roaming over the property. I am not kidding!! I drove up to the entrance and three deer walked across the road. Here is the photo evidence taken with my awesome Samsung Galaxy Note II.

While nature is alive and well in Armonk, innovation does not appear to be so. I know IBM is a great company with over $200B in market cap, but when is that the last time IBM did something in tech that mattered?  When I worked for them in the 80’s, we still made the best hardware and integrated software and while Gerstner saved the company and steered them towards services, its hard to think of them as a powerful tech company anymore.

I can forgive IBM for missing the internet, mobile and tablets. These were consumer based driven revolutions and IBM has never had a feel for the consumer side of the business. After all the “B” in IBM is for Business and they correctly jettisoned the PC business long ago.

What I can’t forgive IBM for is “missing the cloud”. The cloud is nothing but a bunch of massive data centers connected by really fast telecommunications. This is a business that IBM knows very well. Big datacenters, raised floors, thick cable, cooling, energy efficiency…these are things that IBM knows. It knows about tightly coupled processors and virtual machines ( don’t forget VM/370 long before VMWare). It knows about reliability, availability , scalability and security. And yet it has let Google, Amazon,  Salesforce and others own the cloud. Even Microsoft whose DNA is on-premise smaller systems has lept ahead of IBM with Azure and Offcie365.

To me, this is an unpardonable sin. It not easy to predict the future and sometimes you get sideswiped by trends or business models that you don’t understand. But for IBM to miss the cloud, someone was really sleeping. Apple got its second chance and they didn't miss, the cloud was IBM's second chance and they appear to have slept through it.

And after visiting the little town of Armonk with its lake and wildlife and deer, I guess I now know why.

Why won't Jeff Smisek put Wifi on United Planes?

Warning, Rant coming. I missed watching Game 7 of the NBA finals.

I just do not understand why United does not broadly add wifi to its fleet. I just flew back on United Flight 1532 from Newark to SFO. Idiotically, I chose to fly at the exact time of Game 7 of the NBA finals.

But wait, before you label be as a lunatic, I did check to see if  DirectTV would be on this flight. Turns out that it did have DirectTV, so I figured I would be good. Full day of work in New York, race to airport, watch game, back at office in San Francisco for Friday morning company meeting. What could be simpler?

As I got on plane, the flight attendant was excitedly announcing how we would be able to watch the game on the DirectTV systems on United. For the low price of $7.99 we could all sign up. The fact that Jetblue has had this service for 14 years and does offer it free of charge, did not seem to dampen the enthusiasm of the DirecTV pimping.

But alas, the game was not available on the flight!!!! For some unexplained reason the airlines version of DirectTV does not carry ABC! It has just about every other channel, but one of the three major networks is somehow excluded from the service that airlines offer. I was able to watch a 2012 Michigan- Penn State football replay. Excellent consolation prize! Big Ten football between a down year Wolverine squad a team on probation. L

And because Jeff Smisek refuses to make put wifi on his planes, there was no way we could watch the game. If he had wifi, I could have used my slingbox app to the watch the game. If the connection was too thin, we could have used out NBA Mobile Apps to listen to the game on radio and use their gamecast application to follow closely. But no, we were forced to get updates from the captain like we lived in the stoneage.

So, this is just the final straw for me on United. I actually flew on a flight with Jeff Smisek about 9 months ago and I asked him about this. He told be he was waiting to get better technology and faster wifi and that I should just wait. Really, Jeff! Really, I should wait! I know lots of silicon valley frequent flyers who purposely avoid United because its really hard to do productive work without connectivity. But United seems not to care! I just do not understand. I am sure Jeff has lots of very difficult challenges and decisions to make in a tough situation, but this one seems like a no brainer.

Jeff, are you listening?  Do you know how often there is a Game 7 in the NBA finals? About once every 7 years!

Put wifi only your planes! Until then this customer is going elsewhere.

Graduation Advice - 5 books

Its been a while since I posted here. I am making a resolution to do it more .

My eldest son graduated from high school yesterday and it made me realize that he will really be leaving for college this fall. I wondered whether I had given him enough advice in the past 18 years. I am sure he thinks I have given him way too much, but there are not likely many fathers who feel they have completed their task.

As such, I decided to give him a few of my favorite books, since he is likely more receptive to third party advice at this point. :-)

Here were my selections:

Free to Choose. Milton Friedman. More than just a book about economics. If you are  ever confused about how the world works, you should consult this book.

The Last Lecture. Randy Pausch.  A powerful message. Read it more than once. Especially when you are at a crossroads.

The Startup is You. Reid Hoffman.  Essential for a 18 year old with his own business. I am pretty sure SFSoleSurvivor will not be your last venture.

Atlas Shrugged. Ayn Rand. You will probably hate this one, but it is your fathers's favorite book.

The New Digital Age. Eric Schmidt and Jared Cohen. Technology will shape your world. This book provides a good roadmap.


To others who follow me, What great books did I miss?