Google Samples Reality

A friend and former colleague had a good adage about free products - 'They are free and worth every penny'.

It used to be my mantra when selling web and videoconferencing against the likes of Microsoft who allegedly (despite making over 40% net profits at the time) gave NetMeeting away free. Sure enough they stopped developing the product but it scuppered many a sale for me.

And so Google, the masters of 'selling' free products and services, finally stepped up and brought us a touch of reality - their version of a SmartPhone, the Nexus One. Sold either as a separate item or as an airtime bundle with T-Mobile in the US it is not cheap but it is meant to be an alternative to the immensely popular Apple iPhone. In the UK, it will be sold via Vodafone or Google direct.

The trouble is that Google has always offered support of its product via anonymous email - why expect more as their products are free, after all? Not so with the Nexus One - you pay serious money to get in on the act and Google were set to make handsome profits. But the real world intervened. Phones can go wrong and customers in the US are furious - filling bulletin boards and forums with complaints about lack of service and finger pointing by Google as neither they or their airtime provider can agree who should be taking the calls to service complaining customers - and Google do not have a line you can call.

Google must have watched Microsoft, who over the years have made lack of customer service an art form. Microsoft products are not cheap - a full MS Office suite for a home user, small business or even a Corporate User sets you back a pretty big sum. But try getting some support on the product and you have the delight of being referred to your PC supplier if it was bought pre-loaded or just sit and wait for hours if you bought it direct from Microsoft. And it's not as if Microsoft products are bug-free - some of the bugs actually were put in the very first versions and reside there today like antique quirks.

Google are vying to topple the likes of Microsoft and become standard applications in the world of Cloud Computing. To do so it has to learn a lesson that customers are fed up with the arrogance of the likes of Microsoft when it comes to ropey products and poor support. To make us all change, the alternative not only has to be 'fresh and cool' but reliable and well supported.

I hope Google get it right for the UK launch.

Microsoft Wobbles Again

I am sure it has nothing to do with my recent purchase of a new laptop and downgrading it to XP from Vista Premium but little by little, the world is not at ease with Microsoft.

It has just announced that profits are down by almost a third in the last quarter. It has been a tough year with sales falling short for the first time in a long, long while and they took the unprecedented step of making redundancies in the first part of the calendar year. As the world did not look quite so rosy, they have seen an increase in competition from some of their main rivals. Last year, Google threw down the gauntlet by introducing their browser, Google Chrome which is neat, quick and works well. For many of us, browsers like Mozilla or Firefox have been good stand bys as I find an increasing number of websites display problems with Internet Explorer (IE) 8.

Google's strategy on Applications make use of the Cloud and Microsoft is significantly behind the pace here. Already some significant corporations are migrating to the Cloud concept of having their applications served from the web where they also store all the documents. Detractors say the web is still too unreliable but pro-campaigners are quick to point out how often corporate networks display similar problems while security is becoming less of a threat with arguably corporate networks at greater risk than parts of the web.

But it was Google's recent announcement that shook us all. Last month, Google announced it would be launching an operating system to rival Windows and already several PC manufacturers had signed pre-deals with them. The great core of Microsoft's business relies on the fact that just about every PC other than Apple Macs are shipped with a Microsoft operating system. It is the great 'cash cow' business that needs precious little selling resource and so the cost of sale is minimal compared to the vast returns.

It has also been the source of their greatest achievements in anti-competitive activities.

Famously, Microsoft killed NetScape and all other early browser vendors by adding Internet Explorer into the Windows operating system and so effectively shipping it for free. Of course, the astute amongst us would realise that no company that made a 40% net profit was actually shipping anything for free but Microsoft 'looked' as if it was playing the nice guy while snapping the necks of its competitors. AOL bought the pathetic husk of NetScape and only recently finally killed off any connection to the old browser. But it has not stopped a new wave of browsers as Microsoft showed once again that when it gets fat and complacent, it does not innovate. Particularly in the area of virus, hacking and malware, IE has shown to be very vulnerable.

But the Windows Operating system has also been the launch pad for the success in the suite of Office products such as Outlook, Word, Excel and PowerPoint. In each case, not one of those products was the best in breed - Excel in particular was a poor man's Lotus while CCmail and WordPerfect were arguably far better products in the email and word processor categories. The fact was that when every PC came with something from Microsoft actually running it, the leap to Microsoft's suite was too easy. Slowly, Microsoft strangled the competition and today we have the joy of running possibly the most cumbersome and ill-fitting suite of desktop applications for our everyday use - and it ain't cheap either at an entry point for around £210 for small business licences.

In reality, Microsoft is slowly losing its grip on the desktop. Today, a small business may have to buy a new PC with Microsoft Windows and get MS Office on it too. But when it comes to security, AVG have an excellent solution, back up from Acronis, PDF making for free, Accounts from Sage, Skype for Business, Yugma webconferencing and CRM from Salesforce.com or ACT and you have will not have outlaid too much for best in class products, not one of them would be Microsoft-made. In fact, recently my new Office Suite arrived with Business Contacts built in. The laugh was that there was no obvious way to load my current Outlook contacts in there en masse yet it embedded itself into my Outlook. One click could export all my Outlook contacts into a file ready for Salesforce.com or ACT which seamlessly use Outlook as its email generator. It really was a dreadful attempt to lure me to buy Microsoft, and now I can't actually find how to remove it from the Outlook interface just to make me more cheesed off!

The next two years will be crucial for Microsoft. After the disaster that has been Vista, they need to get back on track. Windows 7 needs to be inch-perfect but if IE 8 is anything to go by, Microsoft are not releasing well thought out and tested products - but many would argue that has never been their strength. Google are fast moving up on their shoulder, totally dominating the Search market from all angles and their revenues are now rivalling Microsoft's. Google's launch into the world of operating systems extends their bright faced, cool image right into the heartland of the lumbering Seattle giant. If they have got it right, then Microsoft could well have seen its zenith and is already on the slope downward.

The problem for Microsoft executives is that all those years of ill will and arrogance over users will pay a heavy price. Locally, Microsoft feel they have never had the ear of the CEOs but always the CIOs. Now this could be a massive threat as for once, the CEO may know as much about a viable competitor as the CIO and guess who outranks the other. In all the years, Microsoft never paid commissions to its sales staff and so has never had big-hitting, skilled salespeople at its fingertips but lots of people who immersed themselves in the 'Office Stack' technology and the complex world of licencing. These people have been order-takers who pre-sell massive licence deals which see customers pay for a whole load of things they never use. The only skill of the Microsoft salesperson has been to get a customer to use those items before the next licence negotiation. Little by little, thanks very much to the Vista fiasco, major corporates have played hardball and pushed back. Now there is a viable alternative to Microsoft on the horizon.

And it isn't some trumped up start-up. It's Google. You had better watch out.

Recession Hits Microsoft?

Microsoft has announced a 32% slide in quarterly profits but the shock is that for the first time since 1986, their quarterly sales slid - and by 6% at that.

We can all point to the recession as surely less PCs are being bought and therefore not requiring as much of the core operating system supplied by Microsoft - this, along with core Office applications, is where Microsoft makes most of its money. It's solid, repeatable business, with a long upgrade path.

However, can we really apportion this rather profound aberration down to the recession alone? After all, Microsoft has gone through recessions before and the overall dip in PC sales is actually not massive. While businesses are indeed making cuts, it has not adversely affected Microsoft's sales before?

The Licencing Business

I don't pretend to be a professor of how Microsoft prices it products and sells them to Corporates but I have had enough of a whiff to know that it isn't actually as clear and helpful as it should be. I also know that there was a revenue time bomb looming and in the last year Microsoft people were not talking so much about new licence sales as a phenomenon called 'Deployment'.

The issue stems from that fact that many corporates purchase 'Enterprise Licences' which cover an entire suite of Microsoft applications for all employees. It is priced in a way to tackle all needs of all people and it also includes within the suites, products which may not currently be used but are delivered as part of the package. Good examples of this may be collaborative products like Groove or another example maybe that within a business that has a call-centre function which by and large runs bespoke systems, the staff may not actually use things like Outlook or other applications but the licence is notionally paid for.

Upgrades are part of this too. Many companies choose to stay at certain levels of the applications and operating system because their IT teams have settled at a level which harmonises applications across the business and is more easy to support. Yet large customers will be paying for the upgrades which helps Microsoft pay for the development in advance.

The real problems come when customers either do not deploy all the licences they pay for generally or do not utilise all the applications included in the licence cost or do not upgrade to the new versions. What it means is that the negotiations for the annual renewals become progressively harder.

They have been made harder still by new waves of rival or ancillary technology which are leading customers down different pathways. New operating systems, browsers, search engines, applications, messaging platforms and even 'The Cloud' have come into play and eroded part of Microsoft's hitherto impregnable position. For the first time in its history, the pressure is on.

Pushing The Accelerator

Microsoft has missed out on some of the more lucrative new waves of technology and one obvious one was Search. In reality, Microsoft had killed off Netscape as a rival and had a clear run of owning the entry to the internet via the browser. From there it should have controlled the rest. Google changed that by coming from exactly the opposite way, believing it was not the entry point that was crucial but the content and how it was accessed. Google's land-grab and technological advantages have made it a serious rival to Microsoft and they own 90% of the search market and with it, a large portion of the online advertising market.

Google is now advancing ambitiously down the pathway of applications with its own approach which makes it operating system agnostic by placing all the resources on the web, within 'The Cloud'. We are perhaps seeing the first major wobble of the mighty Microsoft and to some extent, Google has yet to even get a real grip of the market - the next 2-3 years could be crucial for both companies.

An added problem for Microsoft is that it is a company that has avoided the 'hard-nosed' sales types within its business. They have a mixture of evangelising people who just get so absorbed in the technology that they cannot see beyond their noses, and commercial people who just milk the base they have at corporations. Life has been very easy for them as you only have to show a product, make the client pay for it in the 'Stack' in advance, wait for them to upgrade, then hit them again. And again, ad nauseum.

Life has been so easy that there has never been a commission or heavy bonus culture at Microsoft. Stock options were plenty enough to reward the long servers and today Microsoft still has the highest proportion of millionaire employees than any other company in the world. That could change fairly soon but what that has arguably done is that everyone has been convinced by their own Bull. Like IBM in the 80's, managers are rated by who 'gives good slide' and bad news is not coped with well as no one has had to deal with it before, so generally it is not given. Positive attitudes in the face of issues are the order of the day - say it enough times and the customer will agree and everything will be ok.

The Steve Ballmer mantra is always, 'Microsoft is right - now what was the question?'.

The world is changing for everyone and even Microsoft. The recession is playing its part to exaggerate what may be underlying issues, but there was always a hole in the revenue just one step ahead on their way of working. Some day, someone would wake up and ask, 'Why are we paying for that if we do not use it?' or 'If I do not upgrade, why do I still pay?'

For Microsoft's sycophantic salesforce, reality may well bite. The question is, will the management have the fortitude to change?