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Dissecting Microsoft

"There's nobody getting rich (by) writing software" - Bill Gates

Microsoft®'s goal, aside from making profit, is simple: to be the exclusive computing platform of all electronic devices, including home appliances and PCs, business workstations and servers (with Microsoft Windows), and mobile devices (with Microsoft Windows CE). To date Microsoft's only successful method has been to implement the factory model of software development, maintaining high profits and limiting customer rights through restrictive licensing. Below the financial success and shrewd business tactics lies a huge pile of mistaken foresight and missed opportunities.

Microsoft's Business Model

Microsoft generates revenue from licensing software. It operates on a factory model of software sales: keep availability of bits limited to increase value and produce more bits for more people to increase revenue. In the traditional factory products made of limited resources are reproduced and sold. By simple laws of economics if supply of the product is somewhat limited and a demand exists, a profit can be made. Software - even Microsoft's - however, is a limitless resource. Giving someone my software does not deprive me of any of my software. The sale value is created by the artificial limit placed on copying bits by corporations such as Microsoft. While the resource limit can not be avoided in the physical world, this artificial limit placed on Microsoft software helps only Microsoft at the expense of the customer. The customer gets no better software by paying more to Microsoft.

Most software creators, by contrast, earn money for their services rather than sales. By most estimates 85% to 95% of all software developers do not work for a company whose revenue is derived from software sales. They are paid for their services in creating software directly for a customer. Software companies such as Microsoft aren't required for the continued growth of the information technology industry. How, then, is Microsoft so successful? A better question would be why is Microsoft so profitable? Microsoft's success is relative and questionable, but their ability to generate revenue is not. What affect does the Microsoft corporation have on industries, governments, and customers? All of these things need to be examined in more detail.

One component of Microsoft's strategy which hurts them as they grow ever larger is their limited flexibility in adapting to varying customer needs. When corporate customers' budgets become tight, for example, Microsoft does not adjust to their stricter financial needs. Not only are Microsoft's software prices not reasonably adjusted, mostly possible because of market dominance, but Microsoft does not create the right software to assist these companies in tightly managing their expenses. So when a customer wants a feature-reduced version of an application or better management of financial documents in order to cut costs Microsoft is not ready - or maybe not willing - to assist. This is only likely to hurt them more as time progresses and smaller competitors learn to fill the voids.

Until 1995 Microsoft didn't consider the Internet relevant. It was overlooked in Gates' The Road Ahead first published that year. Although the following wasn't: "The obvious mathematical breakthrough would be development of an easy way to factor large prime numbers." (Gates, Bill. The Road Ahead. Viking Penguin, 1995, p. 265.) Instead of the passing fad Bill Gates imagined the Internet became a primary reason many people use computers. It was created and grew without the help of Microsoft. Microsoft's Internet strategy has been to follow the lead of others in everything from the web browser to instant messaging.

In the forward to an old OS/2 book Bill Gates proclaims the joint operating system venture between Microsoft and IBM to be "the future of computing." That didn't turn out as he imagined. OS/2, which was supposed to be a replacement for MS-DOS and Microsoft Windows™, was abandoned by Microsoft and left in the hands of IBM. Microsoft took the version they had and turned it into Windows NT. IBM, the company which provided the hardware for Microsoft's initial success, was left to compete on the software front and in this case failed. This is a clear example of Microsoft turning on an ally.

About "Dissecting Microsoft" and the Author

This book is a broad analysis of Microsoft® and its software. It's continually updated with new information. The latest version can always be found at Public contributions and comments are welcome.

I don't claim to be unbiased. Through more than 15 years of using Microsoft's software I have found much that I don't like. When taking into consideration Microsoft's affect on the computer industry, the economy, education, and government I stronly believe the negative implications of using their software far outway the positives. I use this book to explain all of the many reasons Microsoft's software and services should not be used. Everywhere possible I provide sources and links to further information.

My opinions do not come from one close-minded perspective or only from my own observations. I have done substantial research and have had many conversations before coming to any conclusions. I hope within these pages to provide you with enough facts to formulate your own conclusions.

Copyright © 2004-2007 Matthew Schwartz