On MicroSoft

BusinessWeek features an interesting cover story on its 09/26/2005 issue about Microsoft: "Troubling Exits At Microsoft - Once the dream workplace of tech's highest achievers, it is suffering key defections to Google and elsewhere. What's behind the losses?"

Amid all changes in the marketplace, Microsoft's stagnant stock price and increasing attrition rate make for a troubled picture. The BusinessWeek article seems to suggest that Microsoft was different in the '90s, and only now, with Ballmer at the top and Google/Yahoo becoming better professional destinations, things take a while to come out of Redmond. However, one should recall that after shipping MS-Windows 95, it took Microsoft a long time to come out with MS-Office--a suite that was made up of various pieces, built or acquired.

Obviously, Microsoft is facing a fork on its road. On one hand, enterprise software needs to come out to the market in lockstep. Thus, most efforts to transform the Company into a mature business ought to be in areas dealing with large enterprise software. There are many models one could think of, yet one has to start from one's own premises. On the other hand, in the consumer space, where the innovation pace has been set by Google, Yahoo, and Apple, Microsoft would do well to think of ways to stay nimble and flat! In any case, there are always some who wonder: "When has Microsoft stood for (product) innovation?" pointing to the Company's long string of acquisitions. On the enterprise side, Microsoft should look at ways of getting better than IBM, on the consumer side it's got Google and Yahoo to worry about. Accordingly, there could be at least two different corporate entities, one targeting enterprises, the other consumers. No matter what the answer may ultimately be, trying to cut it into a size that fits all is just a dream, and no other entity has managed to be all things to all markets.


Forbes also has an article in its 09/13/2005 Business Strategy section: "Microsoft's Midlife Crisis"

This article goes into some of the details about daily life at Microsoft. The reader learns about a number of management initiatives launched by Ballmer, such as everything-reviews, or the dismissal of "6.5% of the workforce every year for inadequate performance." While these initiatives could make all the sense in the world, the reader is not given the context, either organizational or historical, in which they occur. This, together with the scattered complaints of its employees, leave the reader bewildered as to what the diagnostic and solution might be for Microsoft (culture) ills.

In fact, for the student of corporate culture, a better place to start thinking about Microsoft's situation would be to look at Mini-Microsoft, a blog where people with all Microsoft-related affiliations vent out about the Company. From there, I quote an anonyous reply that puts the employees' complaints in a better industry perspective:

Hopefully sites like this will add value to the discussions around the problems that MSFT faces and what can be done to address those problems.

But the fact of the matter is if anyone thinks MSFT is in poor shape in terms of innovation, morale, etc... take a look at the rest of the industry, and just the economy in general.

You want to be really depressed, talk to folks who work in the auto industry... or let's look into what ails the airlines... two bankruptcies in one day, and who's accountable? No one knows for sure, but a lot of pilots, flight attendants, mechanics, etc will be paying the price for management mis-steps...

Even in the hi-tech industry, think MSFT is bad? Try working for IBM, HPQ, Sun, SGI, Intel, or if services is your thing, try EDS, Accenture, etc. Talk about endless meetings, lack of passion, regular quarterly headcount reductions to cut costs, missing the innovation that made some of these companies great... MSFT isn't so bad by comparison.

However... just because MSFT isn't as bad off as these stalwart companies, I also can't deny that MSFT isn't as passionate, innovative, and hip a place to work as companies like Google, Yahoo, and other darlings of Wall Street and the media are. But they'll all end up in the same place as MSFT eventually (with the same BW or Forbes articles written about them), and those same passionate, innovative, A-Type personalities will move on to the next big thing.

It's part company growth and part Wall Street. Get big enough, get successful enough, and God forbid, go PUBLIC, and you can flush long-term innovation and employee morale right down the toilet. Bill and Steve are just as beholden to Wall Street these days as Immelt and Palmisano and Hurd... cost cutting, earnings, and stock price trump innovation, employee morale, and benefits every time.

Upset about having to pay $40 for a prescription or no longer having towels for your after-workout wipedown during lunch? Would you trade that for what other competitors and other industries offer? Probably not.

As I mentioned, just because MSFT isn't as BAD as the majority of companies, that doesn't mean it's as GOOD as Google, et al, in terms of passionate workforce, excellent benefits, stock options, innovation, etc. There is significant room for improvement.

But at the end of the day, I'm not certain any publicly traded company in America can sustain the entrepreneurial spirit that got them going in the first place, once investors become the key stakeholders. Just look at what happened to the HP Way... it got laid off and put to pasture... Gerstner made quick work of the IBM family, and the "Think" mantra morphed into making the elephant dance... on the backs of tens of thousands of layoffs.

Microsoft has the talent and people and money to re-invent itself and compete. And most likely, change will need to start at the top with Ballmer. Often times, executive shakeups produce near and mid-term results. But ultimately, MSFT's situation is more a function of the influence Wall Street has on good companies, than anything else.

In other news: This site is fantastic and I just saved a lot of money on car insurance by switching to GEICO. ;>

In the end, here's Goldman Sachs' position about the current situation at Microsoft:

Goldman Sachs maintained an "outperform" rating on Microsoft despite employee morale issues.

The research firm cited recent reports about a decline in morale among Microsoft employees. "Microsoft has never been the most innovative company," Goldman said. The rapid pace of innovation by competitors including Google has been a lingering employee concern, according to Goldman.

Moreover, the maturity of Microsoft's products has been a damper on growth, on the stock and on employee compensation, according to the research firm.

Goldman remains convinced that Microsoft still has "a lot of smart and highly motivated people," and that the product pipeline remains strong.

"The new product flow and innovation is impressive and increases our conviction that there are robust new product cycles upcoming that will be beneficial to the stock and a boost to morale," Goldman said.

So, all will be well when MicroSoft will have played all its cards (i.e. products on the pipeline). Until then, a cautious "outperform"...