Cat5bird Seat

Is Microsoft Eating Its Children?

The Redmond giant competes squarely with partners on two fronts that might have other partners shaking in their boots, wondering who'll be next.

• By Mike Gunderloy
• 12/13/2005

If you have the benefit of a good classical education, you may remember the story of Zeus and Kronos. To recap briefly, the Greek god Kronos was one of the Titans who ruled the world in the Golden Age. But he was fearful of being overthrown by one of his own children (understandably worried, since he'd killed his own father Uranus in a rather messy fashion). To prevent this, he swallowed his wife Rhea's children as they were born. But when Zeus was born, Rhea wrapped up a stone in swaddling clothes and swallowed that instead. Sure enough, Zeus later forced Kronos to regurgitate his siblings and then led them in a successful revolt against the Titans, installing himself on the throne of Olympus.

What brings this story to mind is some of Microsoft's recent moves in the system applications software space. Specifically, this fall Microsoft brought out System Center Data Protection Manager, which moves the company squarely into the backup and recovery space, and announced the beta of Microsoft Client Protection, which includes a virus protection component. It certainly seems like the company is responding to an era of slower growth in some of its traditional cash-cow products by going after markets that it has traditionally left to its partners. The back-up and virus-protection companies can't be too happy about this Kronos-like activity on Microsoft's part.

More to the point, though, is the message that these moves are sending to systems applications vendors in general. It's easy to write platitudes about how the new economy has ushered in an era of "coopetition," an ugly neologism that is supposed to refer to the benefits of cooperating in some instances with firms that are otherwise your competitors. But when one of those firms is the proverbial 800-pound gorilla and it decides to eat your banana, then life is not so cheerful. You've got to wonder at this point, if you see a chance to build up a multi-million dollar business on the systems side, do you really want to do it on Windows? What will Microsoft, having conquered and monopolized the desktop operating system and office suite markets, come along to munch next? Might it not be better to partner with a smaller vendor who's still trying to build up rather than exploit a partner ecosystem? I don't have pat answers, but I'm sure I'm not the only one asking the questions.

It's also pretty clear who's on tap to play the part of Zeus in this little bit of modern mythology. You can't skim two paragraphs of any discussion of "Web 2.0" these days without Google's name coming up as the Source Of All Things Innovative and the potential Microsoft-killer. Never mind that their stock is trading at some stratospheric multiple of earnings, or that very few partner companies are making any money at all off of Google these days (a few do sell offerings around the stand-alone search appliances). The anyone-but-Microsoft crowd has focused on Mountain View as the promised land these days, and there's no shaking their conviction that any company that causes Steve Ballmer to throw chairs across the room must be doing something right. Of course it's easy to believe that any company that hasn't announced a public roadmap for its own operating system and applications suite must have a top-secret plan for producing them.

Myths exist because they provide insights into the human condition. With that in mind, let's see how this one might play out. If we put Google into the place of Zeus, it does seem that Microsoft-Kronos has had a world of trouble in swallowing this particular offspring, no matter how much they might like to do so. (You can argue about whether Google deserves to be called one of Microsoft's children, but would it have been half as successful without those millions of Windows boxes on the Internet?). Eventually, when it reaches maturity, we should see Google rise up and smite Microsoft with the aid of other software vendors, some of whom were formerly Redmond's close allies. And then the new era of Web applications will begin, presided over by the triumphant Google.

I don't actually think this scenario is all that likely; we're still a fair ways off from most people wanting an operating system and productivity applications delivered over the Internet instead of stored locally. So to that extent, Microsoft has nothing to worry about. But it's natural for mature companies to worry about being eaten by more nimble competitors, especially if they used to be young and hungry themselves, and still vaguely remember what it was like. What I don't understand is why a company in that position (like Microsoft) would start cannibalizing its own partners' markets. This seems a mighty shortsighted way to try to shore up the business.

One last thing to think about: In Greek mythology, the Golden Age was before Zeus took over. Those hoping for a Google-led revolt against Microsoft might want to be careful what they hope for.

Losing any sleep over a possible Google OS? Or do your office chairs stay firmly on the floor? Let me know at [email protected].