It’s like Microsoft is watching as the train barrels towards it, but refuses to get out of the way. Even as the world moves to the cloud and open source, Microsoft’s general counsel, Brad Smith, proclaims:
No, Brad, licensing is emphatically not the path forward, for Microsoft or many other companies. Yes, you continue to make gobs of money selling licenses to Office, Windows, and such. But perhaps you’ve noticed where all the new money is going? It’s not going to buy office productivity suites at all.
It’s buying services. That run on the web. Only a tiny fraction of which are sold by Microsoft. Doesn’t this bother you?
Sure, you have managed to eke out some semblance of a mobile business by suing and/or scaring would-be licensees into paying you for Android (since almost no one is paying you for Windows Mobile). But you’re missing the point. Even Apple, proprietary in ways you never dreamed of being, doesn’t license software. That’s what we did back in the 80′s and 90′s. But it’s not where business is going, and your obsession with living on past business models is tripping you up from embracing the future.
I’ll do you a favor. There’s a book that talks about this. It’s called The Innovator’s Dilemma, and was written by Clayton Christensen Perhaps you’ve heard of it? I’ll give you a summary version from an excellent article in The New Yorker profiling Christensen (You’ll have to buy the magazine to get the full version because The New Yorker is part of your crowd, and paywalls its content):
Christensen didn’t blame big companies for moving upmarket. They had to grow a certain amount every year, so selling bad products at low margins (like rebar) was never going to seem like the sensible thing for them to do.
And venturing into markets that barely existed (like teen-age radio consumers [or cloud computing or that newfangled Internet thing or tablets that aren't clunky and simply tired renditions of your desktop Windows experience]) didn’t seem sensible, either, because, without the benefit of hindsight, how could you tell the difference between a bad product poised to take over the nation and just a bad product? You couldn’t invest in every dumb thing that came along — you’d go bankrupt. The sensible thing for big companies to do was to pursue higher margins, or to wait until a new product’s market became visible enough to be analyzed and large enough to be interesting–but by then it was too late.
Meanwhile, the big companies kept doing what they were supposed to, listening to their customers and improving their products in ways that mattered to those customers, until they had improved them too much, climbed so far upmarket that they sailed right off the upper-right-hand corner of the graph, adding more features and power and degrees of perfection than anyone could possibly use, and by that time the bad, cheap, low-end product had improved to the point where it could finally appeal to the big companies’ customers, and the big companies failed.
Kind of like what happened this week with the U.S. Department of the Interior announced it would move 90,000 employees over to Google Gmail and Apps. Microsoft has been slowly embracing online services, but when virtually all of your money comes from your old-school licensing business, what can you possibly do but continue to try to force customers down that road? Think of how much easier it would be if your revenue were tied to an Office service rather than a one-off licensing event, with ongoing maintenance. I bet you think of that every day.
But then you tweet about how licensing is the future, when it is so clearly the past.
Don’t believe me? Get out of Redmond and drive down the 520 to Seattle, where you can visit Amazon, which is polishing the nails for your coffin with Amazon Web Services, which is the platform for the next 10 to 20 years of computing. Not Windows. AWS. It’s already enabling the next wave of innovative startups, as Amazon CTO Werner Vogels recently pointed out, but the shift is much deeper and broader than that. The future is not being built on Microsoft technology. Period.
And telling the world to license your mobile technology, when it’s clearly going down the Apple or Android routes, is a losing strategy. While Facebook goes public on a $100 billion valuation your world is threatening to layoff 25,000 people, and that’s just at one company. Eventually those people will find their way into companies focused on the future, but not if they heed your advice and fixate on licensing.
Unfortunately, your advice isn’t even good for Microsoft, and that’s a bad thing, as we need a competitive Microsoft again. You make great software. You just need to start distributing software the way the world has chosen for the 21st Century: think service subscriptions, not software licenses. We’ve met before at OSBC and at Stanford Law School, and I think you’re a wonderful person. I just happen to think you’re woefully misguided with this licensing fixation, and it’s hurting your company and the industry.