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(Editor’s note: Silicon Valley techies have argued before that Microsoft’s days of dominance are numbered, as open source and other cheaper software make headway. Satish Dharmaraj, of open source messaging company Zimbra, writes that Microsoft’s most recent efforts, with Office Live and Windows Live, aren’t going to help. Don’t worry, we’ll get Microsoft’s views on this later.)
There is a massive shift going on in our industry and its transforming the way money flows through the value chain in the computer industry. Scott McNealy predicted the era of network computers and Larry Ellison quickly followed up with a spin off to pursue that vision. However, timing is everything – they were both at least 10 years too early. Today everything from photos to music including all data and applications for both consumers and businesses are available at some URL. As this evolves further – the only thing relevant on a desktop is a browser, the memory and the CPU on the desktop. More importantly – what is completely irrelevant are applications on the desktop, disks and the operating system that the desktop is running.
Obviously, the company that will be most impacted because of this shift will be Microsoft. Over years, the desktop operating system – windows vista or otherwise – will become largely swappable. While creative designers and massive data crunchers (Like CFOs) might require a heavy operating system and fat applications – most other people (like all consumers and most employees in a business) will be more than happy with a thin client – that is a whole lot cheaper to maintain (not to buy). A consumer can manipulate their mail, music, photos, videos and rich applications – all via the browser. And you can use any thin client to get to all your data – be it your documents on the web (including word, slideshows and spreadsheet like documents) or your personal contacts. MSN, GOOG and Yahoo hope that its their portal and their account password that is the key to all your data. This so-called search war is not about search but about being the place where you and I store our data. With GCAL, GMAIL, the acquisition of Writely and introduction of the GOOG spreadsheet – Google has made several clear strategic moves to own a users data rather than just index the Internet.
Obviously MSFT’s much hyped Office Live and Windows Live services are Redmond’s way of dealing with this shift in application delivery and access models. They will have a challenging time with these because its so unintuitive to their traditional enterprise sales business culture and because the application infrastructure needed to support such services is dramatically different than traditional fat desktop applications that Microsoft excels at. Yahoo! has a large suite of apps that is much better integrated and a good momentum lead on the Internet but Google has the lethal combination of a cash cow that generates R&D budgets one could only dream of combined with an intellectual power that is envious. Although Google is coming from behind, having that much recurring revenue and IQ in a shifting market will keep everyone else chasing them. To compete in this new era of web delivered applications, a radical shift in architecture and an even more radical shift in business model is needed. Will the traditional desktop application companies cannibalize their own revenue and architecture to place a bet on the future? If they don’t, someone else will :-).