Paradigms shift

Posted: April 28, 2009 in CRM, Technology
Tags: , , , ,

I spent some time with Microsoft the other day.  I was invited to one of their technology centers in the Boston area to participate as a judge in an event that brought together entrepreneurs and developers to prototype applications using Microsoft products.  I was on a panel consisting of several venture capitalists and me.  The object was to give people some real world feedback on their ideas.

Microsoft is trying to position their CRM product as an ideal platform for application development and they use the moniker XRM to signify applications that can be based on that platform.  It makes a lot of sense to me.  CRM is, at its heart, a comprehensive database for all things customer related and building on top of that should get you a lot of new application ideas.  After all, this is what Salesforce.com has been doing for a long time with each successive iteration of its development environment.

I have to say though, that I was not impressed with any of the application prototypes that I saw.  Without giving away the store, the applications had several shortcomings in common that I think are serious.

First, there was no non-Microsoft content involved.  No application had the semi-bright idea of mashing up some data from another application on the Web from, say, a social networking site or even a mapping provider.  The applications we saw that day were all conventional database applications built on top of a conventional database.

Second, there was little reliance on SaaS computing even though Microsoft Dynamics CRM makes this possible.  Some vendors said they’d go that route but I’d say most focused on the old tied and true licensing model.  You might say there’s nothing wrong with that and you could be right.  But what made me skeptical was that in the business planning part of the competition, multiple vendors were telling us they needed many hundreds of thousands of dollars just to buy hardware.  Didn’t they do their homework enough to know how to avoid that expensive approach?

Now, don’t get me wrong, everyone buys hardware, for example, Oracle just bought Sun for good reasons.  It’s necessary.  But in a startup environment where every penny of expense has to be scrutinized, it seemed perverse to see an entrepreneur proposing to spend 30% to 40% of their capital on gear.  It didn’t and doesn’t make a lot of sense to me.

The whole experience left me with the impression that Microsoft is becoming the General Motors of the tech world.  I know that might sound cruel or arrogant but I haven’t seen the kind of thought leadership from Microsoft in many years that would give me confidence that they are still major innovators.  Moreover, the company seems addicted to a business model that is ending.

To be fair, some of that alliance with the business model is most likely an artifact of their go-to-market strategy.  They sell a lot through resellers who make a living on the margins and on the added value of their services implementing, customizing and training.  That’s a relatively high cost model and I don’t think it goes well in a world that, as Thomas Friedman famously described it, will be hot, flat and crowded.

Given the recession and the tectonic shifts going on in the software industry, it does not seem to me that Microsoft is preparing very well for the next iteration of this industry.  That world will rely on personal interactions made possible by social networking.  It will require lower costs to reach the large population of potential users who don’t live in first world countries.  And the technology will have to be dead solid idiot-proof.

So far in its long life, Microsoft has done well with a portfolio strategy in which it invests in multiple ideas until one catches fire and then it goes all in.  These days I can’t tell what’s in the portfolio though it seems like a lot of the wrong stuff.

I hope I am wrong.  I hope they surprise me and invent the next great thing in our business.  But so far all I see is a giant in a defensive position.

Comments
  1. stevereeves says:

    I so much enjoyed this post about Microsoft, thanks.

    It paints a wonderful picture or Nero fiddling while Rome burned, and the analogy with General Motors topped it of nicely.

    Steve

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