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Don’t Underestimate Microsoft

by Neil MacDonald  |  August 7, 2009  |  4 Comments

After the latest financial results were announced by Microsoft (including the first year over year revenue decline in its history), I heard an increase in the comments from press and some analysts along the lines of ‘Microsoft has hit its peak’.

Don’t underestimate Microsoft.

Microsoft is at its best when it is threatened. Time and time again, Microsoft has rallied its immense resources to successfully counter some emerging challenge to its business. The Internet and Web was a classic example. Reforming and revamping the Internet Explorer team and launching IE7 is another. Search appears to be turning a corner with Bing, and the recent relationship announced with Yahoo should strengthen this. Looking forward, the battleground for the Cloud is wide open and Microsoft will be a player with its differentiated message of hybrid on-premises and Cloud-based platforms enabling customers to choose how, when and where they move some infrastructure and applications to the Cloud.

Does Microsoft have challenges? Absolutely. Its cash cows are suffering. Upgrades and purchases of Office has slowed because of economic conditions worldwide. Windows Vista was a disaster and the declining sales of PCs directly correlates to declines in Windows revenue. Even growth areas like Netbooks are a mixed blessing as Windows is included with the vast majority of these units, but at a lower average selling price to Microsoft. Also, licensing and pricing remain a significant pain point for its enterprise customers.

At the same time, there are bright spots of substantial new growth such as SharePoint, Office Communications Server, CRM, and System Center. Windows Server is performing better than the overall market for servers.

I am the primary analyst on Microsoft at Gartner. A team of 35 analysts has just completed a comprehensive research set of six research notes comprising about 45 pages that overviews and rates Microsoft and each of its enterprise offerings. For clients, I’ve linked to the research here:

First the overall Vendor Rating:

Vendor Rating: Microsoft

And the five drill-down focus research notes:

Vendor Focus for Microsoft: Data Center, Systems Management and Security Offerings

Vendor Focus for Microsoft: Enterprise Applications, Collaboration and Search

Vendor Focus for Microsoft: Platform and Development Tools

Vendor Focus for Microsoft: Cloud Computing

Vendor Focus for Microsoft: Licensing, Channel and Customer Support

Each rating has a team of analysts and multiple research notes behind it. If you are looking for a big picture overview of Microsoft across all of its areas, I encourage you to review this research and talk to the analysts that are responsible for the ratings and research in each of the drill down areas to better understand how Microsoft’s solutions and initiatives will affect your organization.

Category: general-technology  

Tags: microsoft  

Neil MacDonald
VP & Gartner Fellow
15 years at Gartner
25 years IT industry

Neil MacDonald is a vice president, distinguished analyst and Gartner Fellow in Gartner Research. Mr. MacDonald is a member of Gartner's information security and privacy research team, focusing on operating system and application-level security strategies. Specific research areas include Windows security…Read Full Bio

Thoughts on Don’t Underestimate Microsoft

  1. Charles Fator says:

    Unfortunately every time Microsoft rallies we take a step back along innovation row. There is much more to be gained for technological innovation and cost of web application development if Microsoft were to loose its dominance than to preserve it (thinking Internet Explorer). I am hopping for the former.

  2. Neil MacDonald says:

    There are a few examples like SharePoint that show innovation. However, Microsoft is more often cited as not being innovative. IE is an example of both extremes. When behind Netscape and playing catch-up, the orginal IE was pretty good. Once the caught up and bundled IE with the OS, innovation faltered. Hence, the rise of Mozilla, Opera, Safari, Chrome and others with a good amount of innovation. Then Microsoft has to reform the IE team to make IE competitive again. with IE 7. There is no doubt that IE7 is a better browser than IE6, with some innovations like protected mode browsing that used the mandatory integrity control capability (only when run on Vista). Other improvements (like tabs) were introduced by competitors much earlier. Microsoft does best when it is threatened (and when there are innovations by others they can subsume). One last thought – there are some that would argue that Microsoft’s ability to subsume other vendor’s innovations and roll them into their mass market platforms is itself innovative, but I’m skeptical.

  3. Scott Olson says:

    I think that as long as Microsoft has Ballmer at its head they will continue to languish. It seems like they are only capable of me too ideas like the Zune or Microsoft stores. Additionally, Ballmer continues to erode their technical credibility with interviews like his one when the iPhone was launched. I must have seen that linked to over 100 times.

    More than anything, I think what worked for Microsoft in the ’80s and ’90s is now their albatross. Software for open systems is losing out to an integrated experience in a big way. Microsoft had a huge head start with Windows mobile, but now finds themselves lagging smart phone mind share to RIM, Apple and the latest Palm Pre, all integrated hardware/software experiences. Backwards compatibility weighed down Vista and will be a problem for Windows 7 as well.

    We’ll see, but I think that between fighting Google, Apple and open source, Microsoft has their hands full.

  4. Neil MacDonald says:

    Be sure to check out the blog posts from my fellow analysts on the partnership between Microsoft and Nokia.

    To me, this is evidence that Microsoft won’t let its poor performance with Windows Mobile handicap itself in its battle with Google.

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