Security woes hit Microsoft balance sheet

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Microsoft is creating a new model...

... for how to sell software.

They can do this because of their predominance in the industry. They also have the largest market capitalization of any company, ahead of GE and WalMart. Any disagreement they're an 800 pound gorilla?

The problem Microsoft has to face is not competition from Open Source, which is still chewing through Unix and hasn't gotten to them yet, as we know. The problem is old versions of Microsoft software; they're competing against themselves.

Software licensing means that people are definitely going to pay for new software, doing so before they see it. (I don't think any company but Microsoft could get away with this kind of an approach; cf the 800 lb gorilla observation.) Why would any company agree to go along with Microsoft? Aside from any cost savings, because if Microsoft does something new that older versions of the software cannot match, then a company is behind competitors who do have the new capability.
It's a bet on Microsoft's ability to innovate over itself.

I can't imagine companies like being in this position. The only way for them to strike back is to keep Microsoft in suspense. How do they do that? By not committing to pay money until they have to. This also gives them more chance to find out whether what Microsoft is changing is substantial, necessary to invest in.
Microsoft is also adding new (for them) software categories, in addition to upgrading older products. If companies have an interest in the new stuff, and many do, they gain by waiting to see what's on Microsoft's agenda.

So, companies want to be in a standoff with Microsoft, maybe even put on pressure to lower prices, too. They have to give an excuse, and they know Microsoft is worried about security, so they mention it. Microsoft has to find that a good reason, and treat companies cautiously. The tactic works.

So, when you hear about security, it's not just a real concern, it's also a bargaining position. This is going to be a very interesting season for Microsoft's business people.
Sounds like fun, doesn't it?!

Posted by: Anton Philidor   Posted on: 10/23/03 You are currently: a Guest | Members login | Terms of Use

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