Could Microsoft Disappear?

There is a piece on Business Insider that outlines the potential ways that Microsoft could find it’s business collapsing. I won’t address these, as they are reasonably well explained in the article. Instead, I want to simply point out that every business, no matter how big it is, can fail. No company is so big or important that it can’t simply disappear from the landscape, at least in the form we know it.

Big players have come and gone, although not in huge numbers. Few have simply closed their doors. Almost all were bought up, because technology companies have far too many valuable assets to simply go away. Instead, they tend to be swallowed by someone else. A good example is Digital Equipment Corporation (DEC), which was, at one time, the biggest manufacturer of minicomputers, with the VAX and PDP lines dominant in the scientific computing space. DEC, though, was in trouble. UNIX-based servers and workstations from Apollo and Sun were eating into their business. Eventually, they were bought by Compaq in 1998. The previous year, Compaq had bought Tandem, who was seeing some decrease in sales. Tandem was one of two major players in the fault-tolerant computer world. Compaq was one of the largest manufacturers of PC’s in the 1990’s, and buying DEC got them a foothold in the server room to complement their Tandem acquisition. Compaq eventually disappeared, merging with HP in 2002. There is a generation of technologists that have never heard of DEC.

The most telling example is the near-death experience of IBM in the 1990’s. Founded a century ago, IBM has seen it’s business change over the years. Originally a company that built tabulating machines and precision scales, it also made things like typewriters and printers over the years. During it’s heyday in the 1970’s and 1980’s, it was one of the largest technology companies in the world. The IBM mainframe was the backbone for corporate computing. They developed a respectable presence in the minicomputer space with the AS/400, and made the Personal Computer market a reality by first establishing it as a legitimate business machine. There was a saying at one point: you couldn’t lose your job by choosing IBM. They were computing in the minds of most people. The average person on the street prior the mid-1980’s hadn’t heard about DEC or Data General, but they recognized the name IBM. Today we talk about “Windows PC’s” or “Microsoft computers”, but if you asked about a computer for your desktop, you asked about an “IBM PC”. If you asked many people inside IBM, they were convinced that IBM was simply unassailable. There would always be an IBM.

A combination of events conspired to nearly bring down IBM. The rise of UNIX and Windows servers, the decline of the mainframe, and failed attempts to penetrate these increasingly important segments (PC/RT and OS/2 are two notable examples), meant that IBM was in trouble. Trying to stem the tide, IBM moved people from technical and support jobs into sales. The (flawed) thinking was that more salespeople would mean more sales. It didn’t work. IBM had to resort to large-scale layoffs for the first time in their history. It wasn’t until they brought in Lou Gerstner, the first outsider to run the company, that the company was put back on a trajectory for success.

IBM, once the largest provider of technology in the world, and the name people associated with computers, nearly disappeared. Had they stuck with insiders to run the company, I suspect that all that would have survived would be the IBM name. The rest would have been sold off, bit by bit, as the pieces were auctioned off. It took someone with a different perspective to get IBM off the path they were on, one fixated on trying to restore the mainframe to glory, and one which largely ignored the changing realities in the technology landscape.

An even bigger example, outside of the technology world, is General Motors. They, like IBM, were once the master of their respective industry. GM was America, in the minds of many: what’s good for GM is good for America. They were the largest employer in the US. At their peak, they held more than 50% of the car market: every other car sold during the early- to mid-1960’s was a GM car. They, like IBM, got caught thinking that they could keep doing “more of the same”. They stumbled badly in small cars, relied heavily on pickup trucks and SUVs, and were ill-prepared for the shift in car-buying patterns when gas prices skyrocketed around 2007-2008. Then, the economic collapse of 2009, and with it car sales, meant they were in trouble. No cash in the bank, and losing money on almost every car they sold, meant that they needed help. Without the bailout, and the rapid bankruptcy, GM would likely be a subsidiary of Ford. Again, a company that was once one of the largest in the world nearly disappeared from the face of the earth.

A current example, that could be a downfall in the making, is HP. They aren’t in trouble, but they are struggling. HP’s presence in the services world is respectable, but IBM is giving them a run for their money. HP continues to split a big piece of the server and infrastructure market with IBM. The PC business, while contributing a healthy amount of revenue, doesn’t provide much in the way of profit. The Palm/WebOS experiment has so far proven to be a disaster, and while the firesale of the Touchpad boosted HP to number 2 in the tablet space, HP no longer has a meaningful presence. While the situation appears to have improved since Meg Whitman took over, the future is far from certain right now. HP needs to find a direction. Time will tell if they will continue to exist, or if they may slip beneath the waves, subsumed into another company.

Microsoft isn’t special, and isn’t immune from disaster. The rise of the smartphone, the tablet and cloud computing, along with the consumerization of IT, could be the beginning of the end for Microsoft. They, like IBM, are fixated on doing “more of the same”, trying to preserve a model which may not survive the next decade. Their few attempts to “compete” have been pale copies of better products. The Zune is probably the most telling: on the surface, it was everything the iPod is. It had the same or better specs, offered a music store, had a better price, and offered features the iPod didn’t have. Well, the specs didn’t matter, the ecosystem was woefully inadequate and the “better features” were mainly gimmicks. So much of what Microsoft is trying to do follows the same pattern: copy the surface, but ignore the depth. The iPhone and Androids aren’t selling well just because of their image. They sell well because people want them. They have vibrant ecosystems that make them useful. The iPad dominates right now, not just because of the industrial design, but because it has an immense catalogue of apps and content that make it useful. What’s disappointing is that these are the exact same arguments Microsoft made in the 1990’s in favour of Windows over Macintosh and UNIX desktops: it wasn’t the specs, it wasn’t the “shiny bits”, it was the ecosystem.

The world is changing. Companies that don’t evolve will die. No company, including Microsoft, is immune the possibility of failure and irrelevance.