Tuesday, March 15, 2011

The Microsoft future according to Bill Gates

Microsoft chairman Bill Gates is proud of his latest acquisitions. A plain, steel-case watch and an extremely ordinary-looking mobile phone. The watch is not a designer model costing a million dollars and the telephone isn't studded with diamonds. So why is the world's richest man, worth over $50 billion, so excited about these products?

For a very simple reason. These products, along with several others that are on the way, will play a crucial role in defining the future of Microsoft, the world's largest software company. The watch, called a SPOT (Smart Personal Objects Technology), is fitted with Microsoft's latest software innovations and can do quite a few very smart things.

Gates's SPOT watch has a miniature central processing unit and a small but powerful FM radio antenna. These features, combined with Microsoft software, allow the wearer to access information, such as local news, weather, sports updates, personal messages and appointment reminders.

Microsoft has already tied up with various companies, including Japan's Citizen, to produce and market these watches, which will flood the US and Canadian markets in the coming months.

The Microsoft-powered mobile phone is already out in the market. The telephone, called Smartphone, has all the trappings of the latest models: a high-resolution color screen that allows you to play games, check e-mail and images and also browse the Web. But those are now run-of-the-mill features. So what's special about Microsoft's newest gadget?

Smartphone comes loaded with Microsoft's Windows software, something that almost every potential mobile phone user is familiar with. Microsoft is betting that since people use Windows in their offices and homes, having the same software loaded on their mobile will attract buyers to go for Smartphones rather than the current 3G-capable phones that come with software that may not be compatible with Windows. The Smartphone has all the usual Microsoft products: Outlook Express, Internet Explorer, MSN Messenger and Windows Media Player.

Microsoft has already tied up with a number of handset manufacturers, including Samsung and Motorola, to roll out the Smartphone. However, Microsoft has run into opposition from market leader Nokia, which has chosen to use the C++ based Symbian Operating System for its own mobiles.

Several players - including Sony Ericsson, Samsung, Panasonic and Motorola - have also agreed to sell phones with Symbian software. As Nokia has over a third of the global mobile telephone market, it can definitely offer a serious challenge to Microsoft in the dominance of the mobile phone software market. DoCoMo, the main trend setter, has also shut out Microsoft in favour of Symbian OS and Linux.

Meanwhile, Microsoft is fighting Sony and Sega in the video game console market, which it entered nearly four years ago with its Xbox console. These battles are clear signs that Microsoft is increasingly diversifying into consumer goods.

As technologies converge and an increasing amount of domestic and office equipment becomes interconnected and wired to the Internet, Microsoft sees new opportunities in new areas. The company has increased its research and development budget and will spend nearly $7 billion on R&D this year, far more than any other IT company.

How do you spend $7 billion on research and development? If you're Microsoft, you literally build the future. At the company's headquarters in Redmond, Washington, Microsoft has constructed a "concept" home that reveals how we may live just a few years from now.

 As you reach the front door, you are welcomed by a flat screen, rather than a doorbell. You can use this screen to ring the doorbell, talk to the person inside the home or leave a message, which can be accessed by telephone or e-mail.

If you're the homeowner, walk through the door and the curtains go up, letting light in, and the entire house is soon subtly illuminated. The hi-fi will access its database to play your favorite music, and the air-conditioning will be preset to the temperature you prefer.

As you move to the kitchen, you take the ingredients for your lunch - say, flour, a piece of fish and a few stalks of broccoli - to a networked table. This will activate a system that will immediately offer you a range of appropriate recipes. Your smart microwave will fix the dish for you, consulting the recipe you prefer, via the Internet.

Practically every device in the house is a "smart" device, and Microsoft has really gone the distance in showing how innovative the company can be and what an important role it could play in our lives in the future. Microsoft denies that it will get into manufacturing consumer products like telephones or microwave ovens, saying that it will drive innovation in these products by coming up with new ideas about what these products can do and networking them.

With initiatives like this, the software giant is clearly moving away from being almost entirely focused on corporate clients to targeting individual consumers. Bill Gates admits that such a shift is happening.

"Yes, we are becoming increasingly consumer-oriented," he told Arabies TRENDS. "Today, we get perhaps 10 percent of our revenue from retail consumers, and this figure may double in the next decade.''

This shift is a sign that Microsoft is at a crossroads. The company is getting into new, exciting businesses that could catapult it from being a software giant to a major player in almost all aspects of human life.

But, at the same time, it is also facing unprecedented challenges in almost every sphere of its current business where it has enjoyed market dominance. Where are these challenges coming from?

Regulators, governments and, of course, Microsoft's business rivals. The company is currently negotiating a settlement with the European Commission, which has accused Microsoft of abusing its monopoly position in the software market through the Windows operating system platform. The Europeans are especially concerned about the bundling of Microsoft's media player in the new versions of Windows, saying that it will hurt other media player companies, such as Real Media.

The case in Brussels has been going on for over a year, and a decision is likely during the first quarter of 2004. The Europeans have suggested that either Microsoft remove Media Player from Windows or that it allows other media players access to the operating system.

Microsoft is unhappy with either option, but the company realizes that European Union (EU) anti-trust authorities could prove far tougher than their US counterparts, who reached a settlement with Microsoft that was timid in comparison with the initial threats of a breakup of the company in order to end its monopoly.

Although Microsoft has been negotiating with the EU and held a special three-day hearing in November, the company seems prepared for a tough ruling from Brussels.

Gates recently told Arabies TRENDS, "If we reach an agreement, then that'll be a good thing. If we can't, then there's a next stage in their process." The next stage, of course, is for the matter to be settled in court. 
 The EU case is important for the company, but this is clearly not the biggest headache for Gates or Steve Ballmer, Microsoft's chief executive officer. Right now, almost all the energies of Microsoft's top brass seem to be focused on fighting Linux, an open-source operating system that has been developed and promoted heavily by Microsoft's main rivals in the business - primarily IBM, Sun, Novell and Oracle.

Although Linux has been around for over a decade, the operating system has only recently begun to make its presence felt in the international arena. In the corporate world, Linux-based servers have seen rapid growth and, since 1998, Linux has been the fastest growing system, outpacing every other player in the field. According to International Data Corporation, Linux shipments in the first half of 2003 grew over 51 percent in volume terms, while those of Microsoft's Windows grew by a much slower 21 percent.

Even though Windows-based servers still enjoy a 4:1 advantage over Linux in terms of the total number of servers in the market, Linux's continuing rapid growth is a clear cause for worry in Redmond.

To add to Microsoft's troubles, a number of governments around the world - from Japan to Brazil and several in the Middle East, too - are now looking at Linux as an option for their operating system needs. This has created a sense of panic within Microsoft, with CEO Steve Ballmer flying to various countries in order to convince governments that switching to Linux would be folly.

Publicly, though, Microsoft maintains a disdain for Linux and its supporters. Martin Taylor, general manager of competitive strategy at Microsoft, dismisses Linux offhand, saying that although Linux has been around for as long as Windows NT, Microsoft has garnered a huge chunk of the market. "Most of the gains that Linux is making today are at the expense of Unix. We are not affected," he says, "but other Unix-based players are."

However, Gates is more realistic about the challenge posed by Linux. "We have been competing for a long while and are still competing with a number of companies on a range of products. We compete on operating systems, on the Xbox, on browsers," he told Arabies TRENDS. "But, yes, in a way, on some parameters, Linux is the toughest competition that we have ever had."

Software security is another major challenge for Microsoft. Over the past few years, Microsoft has become one of the most popular targets for hackers, who have been attacking the company's sites and operating systems, using the weaknesses of Windows to wreak havoc on the Internet.

The attacks have increased in number and severity over the years. And last year was one of the worst that Microsoft has seen. The month of August alone saw four major Internet worm attacks, including the notorious Blaster and a new version of the SoBig worm.

What is worrying for Microsoft is not just that the attacks are becoming more vicious and damaging, but that they are also coming sooner rather than later. Most often, hackers strike once Microsoft releases a security patch, fixing a vulnerability in its software. The hackers reverse engineer the patch to find the weak spot and then attack again. While Microsoft says that it has drastically reduced the number of weak spots in its new software, the hackers are getting smarter and quicker.

Explains Scott Charney, Chief Trustworthy Computing Strategist at Microsoft, "Two years ago, the first attack came 331 days after a security patch was released, while the recent Blaster attack came barely 25 days days after the patch.

The hackers are taking less time than ever to launch their attacks."

The string of attacks last summer forced Microsoft to launch its own counteroffensive. It launched its Trustworthy Computing initiative under which the company says its entire approach to computing has changed. "We have now put security at the heart of our software writing business. There is much more built-in security in our new programs, and we are even delaying shipping of new products in order to test them better," explains Charney.

While Charney admits that Microsoft needs to do more and get better in its security, he rules out a "zero tolerance" policy whereby Microsoft will not ship any software unless it is 100 percent sure that there are no bugs in its products. Charney says that Microsoft will not ship products if there are any known "critical" bugs, although the company will and does ship products with known "non-critical" bugs.

Interestingly, as part of its trustworthy computing drive, Microsoft recently acquired a Romanian anti-virus company. Microsoft says the acquisition is meant to boost the security of its software, while some critics say that the move could spell danger for other anti-virus companies, such as Norton, since Microsoft may be tempted to install its own anti-virus program in future versions of its software.

The next few years will be crucial in determining Microsoft's future. The company is now working on Longhorn, which will replace its flagship Windows operating system. The product is likely to hit the market towards the end of 2006. By that time, Linux will have stabilized as a player, moving away from its current growth rates of over 50 percent.

More important for Microsoft, the case with the EU will have been settled, leaving the company free to focus on the global marketplace.
Two years is a lifetime in the world of information technology.

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