I had a Microsoft product planning interview for an intern position this past Monday, and while I’ve not been informed of the result, I have been thinking about one of the discussion questions posed during the interview: ‘What do you see as Microsoft’s biggest threat?’
I thought about the question for a moment and came up with my answer – offline web applications. Think Google Gears, Adobe AIR, and Firefox’s local store enabling the use of centrally stored data in disconnected situations. Microsoft’s core software business could be severely affected by this new application paradigm. Applications without network capabilities would go by the way of the dodo and Microsoft would have to revamp its business model to adapt. However, as I was walking home after the interview, a new threat crept into my mind.
This year’s Computex really drove home what I believe will be Microsoft’s biggest challenge over the next 5 to 10 years: the next billion. And I don’t mean the next billion in revenues or net income. Those are easy to come by. I’m talking about the next billion internet (and computer) users and the current idea (which I really think owes its existence to the OLPC) of delivering that vision through cheap sub-notebooks is gaining significant traction.
Computer makers are seeing the potential in the low-cost ‘netbook’ market and while Windows will continue to be an option on these devices, those configurations typically occupy the higher-end portion of the market. Take a look at MSI’s Wind or HP’s offerings. The lower end is dominated by one Linux distribution or another. While Linux isn’t doing so well on fully-featured systems sold by the likes of Dell and Lenovo, the simplistic interface found on devices like the ASUS Eee PC is well suited to their typical use of web browsing, email and productivity work. When a consumer spends $1000 on a computer, they expect a certain level of functionality, comfort and application compatibility that Linux just can’t quite satisfy, yet. However when the device in question is a sub $500 mini-laptop, the requirements are quite different. Ease of use (intuitiveness) and cost become major considerations. Being able to install Photoshop isn’t likely to be a high priority.
I would challenge that for a completely new computer user, the Eee PC’s user interface is significantly more intuitive than Windows. The Eee PC’s operating system is function-based, which makes more sense to a new user than the Windows interface. Windows’ design makes the assumption that the user has either used a previous version of Windows or has at least come in contact with some version of it. This is usually a fair assumption in the developed world but certainly not for the next billion computer users, many of whom may have never seen a computer at all, much less used Windows.
Microsoft’s biggest threat is the potential loss of dominance of its Windows operating system and subsequently its whole software ecosystem built around that platform. Netbooks, outfitted with simplified Linux distributions will flood the market and find computer users, both new and existing. In many ways, Microsoft’s current operating system dominance is self-perpetuating. Many migrate along the path set out by Microsoft as it is what’s most familiar and easiest for them. But the next billion users may find the Linux operating systems outfitted on many netbooks to be sufficient and perhaps even better suited to their needs than Windows.
If you look at something like Windows Vista, it’s clear that it was not intended for the netbook market. Its features are intended to take advantage and even push the progress of computer hardware, not simple machines designed for simple functions. Even Windows XP, which will be kept around for the netbooks only, isn’t well suited to the function-orientation of the netbook market. Granted the netbook market is still young, having only recently exploded onto the front page of just about every online tech publication in existence, I think Microsoft needs to think about how it can modify what it currently has, or even start development on a new operating system altogether. To be honest, I’d be surprised if there were no prototype OSes for netbooks floating around Redmond right now. Their work on a customized version of Windows XP for the OLPC shows that the market is definitely on their to-do list.
So that’s what I would answer if I had another chance at the question – ‘What do you see as Microsoft’s biggest threat?’ I think it’s time Microsoft’s consumer operating systems were differentiated by a bit more than media centers and ultimate extras. The netbook market needs these function-oriented operating systems at a low price and currently, Linux is eating Microsoft’s lunch.