A memo from Bill Gates and Microsoft’s Chief Technical Officer highlights the significant risks the corporation faces from the “wave of online services” similar to those of Google and Research In Motion.
This memo, published in the Wall Street Journal, positions web services alongside trends that have previously threatened to disrupt Microsoft’s business model. These include the rise of the web since 1995 and the development trend towards “Internet-centric” software five years ago.
Gates asserts that new Internet services have the potential to push Microsoft out of the game, benefiting its competitors. “A significant change is weighing heavily on our shoulders,” Gates wrote. “Companies are focusing on expanding toward online services; however, the opportunity for us to maintain our leadership is still very clear.”
Internet services have been around for years, and many companies have found ways to increase revenue through advertising and subscriptions. Meanwhile, Microsoft’s profits continue to rely heavily on traditional software licensing sales. “The new business model based on services and ad-supported software will pose challenges, but it also represents our biggest opportunity,” wrote Microsoft CTO Ray Ozzie. “This model will fundamentally affect how we and other developers build, distribute, and monetize products.”
Ozzie also outlined several missed opportunities for Microsoft in recent years, including services offered by Google, Salesforce.com, Skype, and Research In Motion (the company behind the BlackBerry wireless device).
“Google has established an unbeatable position, and some of their programs could undermine our products,” Ozzie wrote. “While MSN Messenger has VoIP features, Skype is the company that has popularized Internet telephony and opened up a whole new field.” Additionally, while Microsoft has projects like Windows Mobile, BlackBerry remains a persistent “thorn.” The success of the PDF format (Adobe) has also been a significant “loss” for Microsoft. The software giant hopes that the situation will change with the introduction of the Metro format, set to debut in the upcoming Windows Vista release.
P.T. (according to TechWorld)