A memo from Bill Gates and Microsoft’s Chief Technical Officer highlights that the company is facing significant threats from the “online services wave” represented by companies like Google and Research In Motion.
This memo, published in the Wall Street Journal, places web services on par with trends that have previously threatened to undermine Microsoft’s business model. These include the rise of the web since 1995 and the “Internet-centric” software movement that emerged five years ago.
Gates asserts that new Internet services have the potential to push Microsoft out of the market, favoring its competitors. “A significant change is weighing heavily on us“, Gates writes. “Companies are focusing on expanding into online services; however, the opportunity for us to continue leading remains very clear“.
Internet services have been around for many years, and various companies have found ways to increase revenue through advertising and subscriptions. Meanwhile, Microsoft’s profits have still largely depended on traditional software licensing sales. “The new business model based on services and ad-supported software will be challenging, yet it presents the greatest opportunity for us“, Microsoft CTO Ray Ozzie writes. “This type will fundamentally impact how we and other developers build, distribute, and monetize“.
Ozzie also outlined several missed opportunities for Microsoft in recent years, including services like those offered by Google, Salesforce.com, Skype, and Research In Motion (the maker of the BlackBerry wireless device).
“Google has established an almost unbeatable position, and some of their programs may threaten our products“, Ozzie writes. “While MSN Messenger has VoIP features, Skype has been the company that made Internet telephony popular and opened up an entirely new field“. Furthermore, while Microsoft has undertaken projects like Windows Mobile, BlackBerry remains a persistent “thorn“. The success of the PDF format (Adobe) is also seen as a “significant loss” for Microsoft. The software giant hopes that the situation will change with the Metro format, which will be released in the upcoming Windows Vista version.
P.T. (according to TechWorld)
