July 31st, 2007
Ozzie tries to justify Microsoft's consumer detours
Microsoft Chief Software Architect Ray Ozzie states the obvious when he notes that consumer technology is leading the industry these days. Shame he’s just trying to justify the red ink spent on Microsoft’s various consumer forays.
It’s hard to argue with Ozzie’s premise. These days technology hits the consumer first and then migrates into the enterprise. Not all that long ago it was the other way around. Does anyone doubt that the iPhone will find its way into the enterprise? How about Web 2.0?
But Ozzie’s comments, detailed by Mary Jo Foley, indicate that he believes technology companies need to have breadth by focusing on the consumer and enterprise markets.
Don’t buy it. It’s the rare company that can do both consumer and enterprise and Microsoft isn’t exactly the poster multimarket company. How’s that Zune doing? Sure, Xbox is a hit, but wake me up when the division is profitable. Was the Xbox really worth the billions of dollars Microsoft spent?
For fiscal 2007 ending June 30, Microsoft’s entertainment and devices division lost $1.9 billion on revenue of $6 billion.
So what’s Ozzie up to? He’s trying to justify Microsoft’s consumer business that hasn’t shown financial returns. Ozzie is right when he says consumer electronics has the “most exciting things,” but you can make a lot more money doing other things. Consumer electronics is a global scrum. Microsoft competes well against Sony with the Xbox only to get clubbed by Nintendo. Microsoft’s Zune never got out of the corner before Apple iPod thumped it. Even if the Zune gets some momentum it runs into Sandisk. It’s not a nice neighborhood.
What’s truly comical this Ozzie statement:
“One of the things that I’m extremely happy about, about Microsoft, is the breadth. The fact that we have Robbie (Bach’s Entertainment and Devices) business all the way at the front edge lets us build things and work them into an enterprise in a way that matches the way that it’s working in the entire ecosystem. And I think IBM in general, or any IT company that lacks that consumer component, is going to be disadvantaged from the perspective of IT.”
The big difference between IBM and Microsoft? IBM already knows the consumer business stinks (ask Lenovo if it has buyer’s remorse). IBM knows services and software is the name of the game and is acting accordingly. And at last check Oracle and SAP, neither of which have consumer businesses, were doing pretty well. And does Salesforce.com really need consumers? Isn’t software as a service fairly innovative? How about virtualization?
The bottom line: Microsoft has chased the consumer, which is fine when you have $23 billion lying around. But I seriously doubt IBM is at a disadvantage because it chooses not to lose money chasing consumers. Overall, the debate over whether consumer or enterprise is leading technology is a bit frivolous. The pendulum will swing both ways.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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