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How Microsoft has become the Beleaguered Apple ’96

Ballmer vs Amelio
Daniel Eran Dilger
Windows Enthusiasts have been working hard to advance the idea that Apple has become the new Microsoft, supposedly by monopolizing the market for music sales and MP3 players and in creating new bodies of technology in its own image to discover territories outside of Microsoft’s reach. However, they’re missing something far more interesting: Microsoft is reverting to become the beleaguered old Apple of the mid 90s. Here’s how.


The Golden Age of Apple.
Throughout the early 90s, Apple appeared to be doing very well. Some even describe the period as the company’s Golden Age. Apple had joined forces with IBM to announce a new microprocessor architecture in Power PC, a new multimedia joint project called Kalieda Labs, and an advanced new operating system and development frameworks architecture known as Taligent.

Apple was selling 11% of the world’s computers and was releasing new technology well in advance of other competitors. QuickTime wowed audiences, and the Mac’s multimedia capabilities and intuitive user interface were so far ahead of DOS or Windows PCs that it was simply embarrassing to compare them.

Apple’s Newton MessagePad promised to create an entirely new market for handheld computers, and the company was leading the development of CD-ROM based interactive titles and game authoring.

The Secrets of Pink, Taligent and Copland

The Secrets of Pink, Taligent and Copland
How Microsoft Pushed QuickTime’s Final Cut
Newton Lessons for Apple’s New Platform

Cracks in the Facade.
However, behind the old Apple’s seemingly beautiful corporate fresco was a series of foundational failures. Back in 1985, Apple had handed its software partner, Microsoft, a wide open license to use its Macintosh user interface. By the early 90s, Microsoft had turned that agreement into a weapon to use against Apple in undercutting its hardware business.

Apple’s founder, Steve Jobs, had left in 1986 and took with him some of the company’s best minds and talent to NeXT to work on projects the increasingly conservative Apple was not interested in pursuing. Even Apple’s early 90s partnerships with IBM began faltering under the weight of heavy corporate cultural differences.

By 1995, Apple’s problems had become grossly obvious to the public in general. Apple’s Macs were struggling to sell in Sears and other retail stores next to cheaper PCs that were supposed to soon be able to run the fabled Windows 95, which promised to copy every last detail of the Mac user experience. Apple’s own operating system efforts were announced to be a mixture of vaporware and failure.

Meanwhile, third party developers were busy making plans to migrate to Windows. Chief among them was Microsoft, which had either canceled or halted development of its various Mac Office software titles by 1994. That served to direct all attention toward its own Windows 95, which was finally released at the end of 1995.

It didn’t matter that Windows 95 couldn’t do basic things that serious Mac users took for granted; it only mattered that sales and media attention were being diverted away from Apple and onto Windows PCs. As consumer PCs rapidly expanded and Apple’s Mac sales remained static, the company increasingly lost the resources necessary to address the problems in its business as it tumbled down a slippery slope toward failure.

Office Wars 3 – How Microsoft Got Its Office Monopoly
Steve Jobs and 20 Years of Apple Servers
Why Apple Failed

Why Microsoft is Today Looking Similarly Beleaguered.
Over the past decade, Microsoft has been similarly coasting on past performance. It rakes in huge revenues from its position as the unchallenged PC operating system software vendor, exacting per unit Windows OEM fees from every PC hardware maker apart from Apple. It also sells Office application licenses at retail and in bulk licensing agreements with businesses, and has a third major business in selling server-related software and Client Access Licenses for Windows Server, Exchange Server, and related products.

However, Microsoft’s efforts to build its business into new markets have repeatedly failed. Like the early-90s Apple, Microsoft is just doing what it has done in the past. Attempts to build new businesses in handheld computers, tablet PCs, automotive computing, media center devices, portable media player reference design licensing, DRM licensing for music sales, SPOT watches, handheld and living room game consoles, smartphones, and in other areas have all only lost spectacular amounts of money. Efforts to muscle into Internet search and ad sales have also been disappointing, particularly in comparison to Google.

At the same time, Microsoft’s three core businesses are increasingly under attack. The market for desktop PCs is rapidly cooling, with very little overall growth. Apple is eating into the most valuable PC segments as Microsoft has run out of new market expansion to ride. Gartner’s most recent quarterly PC market numbers showed just 3% overall growth in the US and 12.3% growth in PC units worldwide, year over year. Apple outpaced the industry in US growth by more than a factor of ten, expanding its unit sales in the US by 32.5% over the same quarter last year.

Microsoft’s Outrageous Office Profits

Microsoft’s Outrageous Office Profits
AppleInsider | Apple snags 6.6% share of US PC market in first quarter

The Windows PC Blame Game.
Analysts blamed weak PC sales in 2006 on the delay of Vista. They blamed weak Vista adoption in 2007 upon its early bugs and other rollout issues in comparison to the mature Mac OS X Tiger. Now, a full year after the release of Vista, PC sales are still stuck in neutral while Apple has shifted into high gear with its new Leopard release and zipped past every other domestic PC maker in unit growth.

Microsoft and its Windows Enthusiasts are now working to deflect attention away from the problems of Vista and instead focus upon projects like Windows 7 that are still three years away. Others reference Singularity, a research project that has nothing to do with Windows and will not solve the problems users who currently need Windows face.

The blame for tepid growth in the PC market and the failure of Tablet PC, UMPC, Windows Mobile and other stillborn efforts to push the Windows brand simply lies with Microsoft’s ongoing infatuation with market control and profits rather than an interest in developing good products. The company needs to focus on earning success rather than just conquering it through clever exploitation of its users and partners.

Apple has a long way to go to put its Mac OS X software on more PCs than Microsoft’s Windows, but Apple also makes far more money on each PC sale than Microsoft does. That’s part of the reason why with just over 5% of the PC market, Apple brings in half the revenue of Microsoft. Apple has also successfully adapted its operating system to power the iPhone and iPod Touch, something Microsoft has been unable to match with either the poorly performing WinCE/Windows Mobile or the overweight Windows XP/Vista.

Apple’s current success is based upon its focus on pleasing customers instead of seeking to destroy all competition so it can push out poorly designed products and raise their prices in the vacuum of a monopoly as Microsoft did with Vista. Apple’s brush with death in the mid 90s resulted from some the same management decisions that Microsoft is following today: a focus on impractical product ideas, poor and sloppy project management, and a failure to focus on clear and narrow objectives.

CES: Fear and Loathing in Las Vegas

CES: Fear and Loathing in Las Vegas
The Spectacular Failure of WinCE and Windows Mobile
Innovation: Apple at Macworld vs Microsoft at CES
CES: Fear and Loathing in Las Vegas
Scratching the Surface of Microsoft’s New Table PC

Microsoft’s Brain Drain.
Like the old Apple, Microsoft is also losing its brains. As Apple lost its luster and grew increasingly conservative in its ability to ship exciting new products, its best engineers, managers, and designers left to start their own projects. Jobs left for NeXT; Bill Atkinson and Andy Hertzfeld started General Magic (its IP was later acquired by Microsoft); QuickTime’s Bruce Leak left for Web TV (acquired by Microsoft); Claris’ Donna Dubinsky left for Palm; and Newton’s Steve Sakoman left with Jean-Louis Gassée to start Be Inc., just to name a few.

Apple not only lost its existing talent, but also found it increasingly difficult to recruit well qualified new people. Apple tried to hire a young Jean-Marie Hullot, only to watch him instead join NeXT and go on to develop the pioneering Interface Builder tools that Apple desperately needed to bolster its Mac development efforts.

Similarly, Microsoft has found it increasingly difficult to hire new talent because the company no longer offers any exciting future potential. In the 90s, Microsoft’s rapid growth could offer new hires a secure but uncharted future. Now it can only offer them a boring career path at a company struggling with monopoly maintenance and reviling or failing at everything interesting in tech, from open source development to mobile devices.

Microsoft itself is exacerbating the problem by trying to only hire cheap labor. The company has actively petitioned Congress for years to relax HB-1 vista immigration and has misrepresented facts in testimony about hiring foreign workers in order to drive down the wages it pays to its employees. The result has been that well qualified applicants have been hired up by key competitors, including Google. Meanwhile, the recovery of Apple since the late 90s has resulted in an end to the one way flow of talent from Apple to Microsoft, just as the demand for qualified people in the tech has rapidly ballooned.

Windows XP Media Center Edition vs Apple TV: WebTV, General Magic, QuickTime
AppleInsider | An Introductory Mac OS X Leopard Review: NeXT Developer Tools
Open Source, Open Competition.
While being battered by Apple on the premium end of the PC market, Microsoft is also facing competition from Linux on the low end. The Asus EEE PC and OLPC system, both running Linux, have sent the company scrambling to reconfigure low end versions of Windows XP stripped to fit on entry level hardware.

Microsoft is also getting battered in the embedded OS market, prompting it to announce plans to rename its WinCE and WinXP embedded products as “Windows Embedded Compact” and “Windows Embedded Standard” by June 2008. The name change won’t actually solve the problem that those products are competing against free and open source alternatives that have no problem running on hardware with reduced resources.

The server front is also getting pummeled by Linux, particularly as industry heavyweights pull away from Windows to embrace open software. Microsoft is now on the defensive, advertising that Windows Server works as a platform for running open source server software. That may be true, but it doesn’t address the problem that Windows Server is very expensive compared to the free alternatives those open source users are already familiar with.

If Microsoft were the size of Apple, it could market Windows Server as a premium product niche alternative to Linux. However, Microsoft is struggling to perpetuate its monopoly over all PC operating system sales. Every lost sale destroys its ability to maintain the critical mass required to keep automatic licensing revenues flowing toward the company. Without any proven capacity to enter new markets successfully, Microsoft is left sitting on top of a melting platform, just as Apple found itself in the mid 90s.

Apple's Open Source Assault

Apple’s Open Source Assault
Office Wars 4 – Microsoft’s Assault on Lotus and IBM
Why Does Microsoft Really Want Yahoo?
Microsoft’s Unwinnable War on Linux and Open Source

Office Rivals.
In desktop software, Microsoft is also finding itself up against new competition. Office alternatives are improving, and investment in them in increasing. IBM announced new support for a distribution of Sun’s OpenOffice under the name Lotus Symphony, to be integrated into Notes. As increasing numbers of users defect to free alternatives, the need for expensive Office licensing will dry up.

Apple has also developed its own iWork suite to shed the need for many Mac users to buy Office. Microsoft is rapidly shifting from being the only game in town to being the game nobody wants to play any more.

The next article will consider why Microsoft’s current and future operating system projects share too much in common with Apple’s failures of the mid-90s, and what this means for the future of the PC desktop, the Windows platform, and new emerging mobile markets.

Windows Vista, 7, and Singularity: The New Copland, Gershwin, Taligent
IBM Launches Pilot Program for Migrating to Macs
IBM’s Strategic Interest in Macs Goes Beyond Pilot Program

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64 comments

1 IBM’s Strategic Interest in Macs Goes Beyond Pilot Program — RoughlyDrafted Magazine { 04.19.08 at 4:27 pm }

[...] How Microsoft has become the Beleaguered Apple ‘96 → [...]

2 Apple » Blog Archive » How Microsoft has become the Beleaguered Apple ‘96 { 04.19.08 at 4:43 pm }

[...] danieleran wrote an interesting post today on How Microsoft has become the Beleaguered Apple â

3 beanie { 04.19.08 at 5:39 pm }

“The server front is also getting pummeled by Linux”

Any stats to back that up or is that just wishful Mac/ anti-Windows thinking? According to IDC, in the 4th quarter of 2007, Windows Server growth 12.8% and Linux 8% and UNIX 3%. Windows Server is now clear market share leader with 35.7%.

“Apple has also developed its own iWork suite to shed the need for many Mac users to buy Office.”

So how many job ads do you find for OpenOffice and iWork? So if you use them you have useless skills in the job marketplace. The power of Microsoft Office is the integrated programming language, VBA, which only Microsoft Office has. So developers, developers, developers wins again. Microsoft took out VBA from the Mac version. Who wants to learn Applescript?
There is OpenOffice Basic but the API is different. So who is going to waste their time learning a new API?

4 jezcaudle { 04.19.08 at 5:41 pm }

Windows 95 was launched on August 24th 1995, not at the year end. I know this because August 24th is my birthday.

I soon got a job in 1995 doing telephone support for Windows 95 and it was quite an easy job. All the user had to do was boot from the floppy that came with the computer, reformat the HD and then re-install from the CD. Problem solved until a few weeks later when the system over wrote some other important DLL or deleted the registry.

As you elude, Win95 was all hype and no knickers. It gave users the same features I first used on a Mac in 1988. In the same way that IBM lost the plot, MS is already well on it’s way. What did they think they would get from buying into Facebook? Google can’t make money from MySpace and social networking is about giving a lot of things away for free while paying through the nose for server hosting. Web 2.0 is just Internet-bubble 1.0 re-branded. And MS have bought into it!!

5 dallasmay { 04.19.08 at 5:46 pm }

You are forgetting a key break in MS’s monopolies. The internet allows all people to access the same software free from any computer with or with out windows.

I am a teacher in Dallas, TX and we use an internet based Gradebook and Attendance program called Gradespeed. I also do all of my lesson planning with Google Calendar, Assignment making with Google Docs, and data collecting on Google Spreadsheet. (THe Presentation version is not quite good enough for me yet, but I’m sure it is not far off.)

While not as good as and feature rich as what you can get from locally installed software, the portability and accessibility is astounding. Microsoft can’t block this. It will be very hard to match what Google offers me for free.

6 wings { 04.19.08 at 6:00 pm }

Hey, beanie, I see your logic. Just who DOES want to learn new things and do things in a new way, anyway? I mean, we should have been content with the horse & buggy, or the telegraph, or the … just-about-everything.

7 enzos { 04.19.08 at 6:24 pm }

That’d be ‘visa immigration’, eh? Forget ‘vista immigration’ – who’d bother?

Nice article that fills in some of the details for me about the maneuverings of the mid 1990s. Still can’t get over how much worse Word 96 was than Word 95. The latter was close to be being a very decent, efficient and effective word processor… before it was transformed into the hideous dog’s breakfast we know today.

8 MikieV { 04.19.08 at 6:56 pm }

“Microsoft itself is exacerbating the problem by trying to only hire cheap labor.”

Reminds me of the fall-out from Microsoft’s settlment of the 1996 lawsuit from “permatemps”…

http://en.wikipedia.org/wiki/Permatemp

“Microsoft, for example, decreed that an individual could not be a temp for more than 364 days, and that individuals must be separated from Microsoft for more than 100 days between temporary assignments with the company.”

I remember reading an article describing the host of changes that swept through Microsoft after that settlement…

1. Contractors not hired directly by M$, but through a couple of designated agencies – so none of them could -ever- be considered an employee of M$.

2. M$ changing more and more of its employees into “contractors”… for less pay & no benefits. Cafeteria staff, secretaries, HR… basically anyone not directly-related to software development.

“Don’t want your old job back, at less pay? Fine. We’ll find somebody who does.”

9 MikieV { 04.19.08 at 7:10 pm }

beanie wrote:
“The power of Microsoft Office is the integrated programming language, VBA, which only Microsoft Office has. So developers, developers, developers wins again. Microsoft took out VBA from the Mac version.”

Last line jumped-out at me:

“Microsoft took out VBA from the Mac version.”

Funny, I was just reading some of Daniel’s earlier postings, and this reminds me of his post about the “myth of vendor lock-in” for FairPlay drm’d songs on the iPod.

With Office, vendor lock-in -isn’t- a myth… :)

10 counterproductive { 04.19.08 at 7:10 pm }

>>So how many job ads do you find for OpenOffice and iWork? So if you use them you have useless skills in the
job marketplace…>>

Ummm hmmm. Those MS Office skills are real skills — anyone that wrestles with those programs and gets any kind of decent results deserves a medal. Kind of like an alchemist sweating over a lump of lead. If you can get a silk purse out of a sow’s ear you deserve to be called skillful all right. What does VBA actually do besides spread viruses? When all is said and done, too bad there is no time in the typical workday for polish. Five hours in Office or five minutes in Pages — which one is more productive for the company?

The rest of the day can be used to let the actual skills and creativity of the Pages user to shine. Creating a decent document should be a no-brainer. Not many jobs ask the applicant if they can type or turn on a computer. It goes without saying that this is pretty basic.

You see very few decent looking Office-produced documents. For a “professional” result stuff is sent out to PR consultants or to a special in-house PR dept. that has a whole diff skillset of its own. Yet my nine-year old and my 90-year old grandma can get better results out of Pages than most Office users get out of Word. I don’t expect a Pages user to be proud of it.

Usually, in an interview the Apple user can claim to know how to look at the big picture in a department: improving workflow, efficiency, using the best tool for the task at hand, getting great results with very little, how to prep and reuse assets, etc.; a general thinking outside the box and unwillingness to accept unproductive frustration. So-called Office skills are a misplaced sense of accomplishment at getting any useful result at all.

11 blacktalonz { 04.19.08 at 7:35 pm }

Quote beanie: “So how many job ads do you find for OpenOffice and iWork? So if you use them you have useless skills in the job marketplace. ”

That would be a valid argument if it was not for the fact that most of the jobs are not provided by these mega-corporations with 50,000 Microsoft seats.

They are instead provided by employers with less than 500 employees, and these employers are not afraid to buy a Mac server for %5 grand versus MS at $18 grand, are much more likely to use free open-source Open Office, or iWork.

Thank God for these little guys, the world would be bleak indeed if everyone had to work for a mega-corporation!

12 devnull { 04.19.08 at 7:45 pm }

beanie,

re: “The server front is also getting pummeled by Linux”

You can check the stats on webservers anytime at http://news.netcraft.com. It shows Windows has never been in first place and as of late is losing market share.

By the way, my corporation has been using OpenOffice for years. We’ve found that Microsoft hasn’t added a single feature we need since Office 97, and OpenOffice competes quite easily with Office 97 – Office 2000 (the versions we own).

Today, approximately 75% of our users use OOo.

13 danieleran { 04.19.08 at 10:09 pm }

@beanie:

“Any stats to back that up or is that just wishful Mac/ anti-Windows thinking? ”

If Linux wasn’t dramatically impacting Microsoft’s server business, the company wouldn’t be disgorging an expensive flood of anti-Linux propaganda. Compare Microsoft’s profit margins in server products against Windows desktop and Office licensing. One has significant competition, the other two not so much.

“According to IDC, in the 4th quarter of 2007, Windows Server growth 12.8% and Linux 8% and UNIX 3%. Windows Server is now clear market share leader with 35.7%.”

How would IDC arrive at those figures? By looking at OS sales? A free OS that users can install themselves on hardware they can build themselves is invisible to the sale counting of IDC and similar outfits. It would be difficult to compile accurate figures for the installed base of server OS, but it would be nearly impossible to accurately measure growth quarter over quarter when you include free software.

Every time Microsoft issues a server release, every upgrade is counted as a sale. There is no counting done when the various FOSS projects release upgrades.

You can count Windows vs Solaris vs IRIX, but you can’t throw Linux into the mix and suggest your numbers are anything more than guesses. Similarly, you could count music sales from iTunes and Amazon, but you couldn’t really say what percentage of songs people have are ones they have written themselves, bootlegged, or torrented. That isn’t a market because no money changed hands.

Similarly, Linux primarily exists outside the typical market. Some proportion of PCs and Macs are currently running Linux. We know that number isn’t huge because webstats suggest that Linux users aren’t well represented. However, there are more reasons to use Linux on the server side, including cost, and there’s no way to really accurately estimate use based on web stats because those sites aren’t browsing the web as clients.

Your IDC numbers do not represent the real scope of the use of Linux on the server side. Also, they are percentages of growth, which is even more meaningless. Of course Windows Server 2008 is “growing,” the entire MS-beholden installed base is buying licenses for it. Is Linux “growth” only measured as new seats migrating to Linux, or do you similarly count Linux shops that upgrade to the latest version of a given distro? Your entire stat blurb is simply absurd.

The point is not whether there are companies that will throw money at Microsoft and hire MSCEs with the sole qualification of being able to buy MS licensing. The real point is what will happen as Microsoft runs into real competition in servers, Office software, and its desktop OS. There is clear evidence that suggests that when confronted with real competition, MS will crumble and fail just as it has in every arena where it has run into real competition in the recent past.

Recall that MS failed against Apple in media DRM and sales, MP3 players, and now smartphones, and Apple has only recently become a company of significant size and resources. MS’ allies are now abandoning the company. Temp staff who know how to use Office 2000 are not going to bail the company out, particularly since Office 2008 is no easier for employees to learn than OpenOffice/Lotus Symphony.

The millions that go into training office workers in how to use Office can be spent training them to learn anything. The real issue is the difference in cost, and MS’ software licensing is a huge expense that is quickly becoming unnecessary for companies to pay.

14 davebarnes { 04.19.08 at 10:26 pm }

My experiment did not work.
Let’s try again.
It is façade and not facade.

15 WholesaleMagic { 04.19.08 at 11:30 pm }

I think your stat that Apple is earning half Microsoft’s revenue is the most astounding. Imagine if Apple had 50% of the PC market? Or even 20%?

These figures tell us how good Apple’s business model really is compared to Microsoft’s. It seems that while software is essential, the big money is in selling both software and hardware.

However, I think that if Microsoft turned around and said that they were only going to allow Windows to be installed on Microsoft-manufactured computers (assuming they did decide to build hardware), they’d be grilled through anti-trust.

The new Open Computer that was released last week, while being no threat to Apple, may foreshadow the (near) future. When (and if) Apple gets 50 or 90 percent of the market, I don’t think people will want to only install Apple’s software on Apple machines exclusively. Apple may be forced to turn OS X into the next Windows, at least in terms of freedom to install it on any hardware.

16 WholesaleMagic { 04.19.08 at 11:32 pm }

The crux of my argument was this: Apple may be forced to give up their hardware-software business model?

I’m sure I’ve missed some crucial point, though. Anyone care to tell me why I’m wrong?

17 Berend Schotanus { 04.20.08 at 4:02 am }

@WholesaleMagic:

“When (and if) Apple gets 50 or 90 percent of the market, I don’t think people will want to only install Apple’s software on Apple machines exclusively.”

This is why my guess would be it’s Linux, not Apple, that will make the big jump in market share the next years. The hardware market is much more restrictive than the software market, it’s just not credible that all those Dell boxes could be replaced by Apple boxes within a few years while a change in software can happen overnight.
Interesting about Apple is that their added value is on a higher level than the core OS, they invested in integrating computers in peoples lives with programs like iTunes and iLife. Apple already showed they can benefit from these investments on Windows so why wouldn’t they adapt a multi platform strategy and bring out key programs on Linux as well? I don’t expect Apple would be interested in a 90% OS-X market share.

18 lmasanti { 04.20.08 at 8:27 am }

I see a difference between those two companies:
In the 90′s, while sinking, Apple was developing a new processor (PowerPC), a new operating system (Talingent), a new multimedia framework (Kaleida), a all-new kind of devices (Newton)…

What is doing Microsoft: must continue to support XP (Vista’s sales failure), copying a falling product (Zune), buying Yahoo! (at least, Y! has some value)…

19 Rip Ragged { 04.20.08 at 10:35 am }

Wholesale Magic,

As long as Apple doesn’t unfairly restrict competition, a la Rédmond, they really can’t be successfully called a monopoly.

For that reason, they won’t have to worry about the “whole widget” business model.

If Microsoft built a computer and said their software could only run on their hardware – there would be no Microsoft.

20 Mr. Reeee { 04.20.08 at 11:47 am }

Imasanti…

Yes, yes.

Microsoft’s built their business mainly by acquisition. They bought other companies or (stole) their ideas. Or they announced vaporware to derail competing products. It’s predatory culture is entirely different from Apple’s core of technical innovation, user-centric and design models.

The world knows Microsoft’s tactics and fights or bands together to block them. Hence the failure of HD HVD: an inferior technology pushed ahead by Microsoft, partnering with Toshiba, also the maker of failed mp3 players repackaged as the Zune.

21 Brau { 04.20.08 at 1:07 pm }

Can’t agree with much of this article.

1. Apple had 11% at their peak, MS has 90% today.
2. Apple was a niche North American product, MS is globally entrenched and has tentacles extending into hundreds of thousands of investments.
3. Apple refuses to enter the low-end PC market meaning Windows or Linux are the only realistic choice in developing countries … where Windows is growing another generation of users.

I do agree with Daniel in that all the signs of impotency at MS are present, but MS is so diversified these days they can simply ride their investments for decades to come.

I also agree with Berend that Linux is best suited to take the world by storm as it is in the same position MS was in the 90s to be installed on the existing PC base. No wonder MS nor Apple want to support it in any real way.

22 danieleran { 04.20.08 at 4:52 pm }

@ Brau: Apple had more than 90% of the serious graphical computing market in the US in 1990. There was some competition from Amiga and Atari in music and CAD in the EU, but nobody challenged Apple in graphic design, etc. Similarly, MS has a monopoly in desktop PCs, not in computing in general. The majority of web servers and big iron are not running Windows.

Gartner and IDG paint a picture that flatters Microsoft. If you don’t like the comparison between MS and Apple 1996, then compare it to IBM.

Also, Apple has entered the low end PC market: the iPod Touch and iPhone. $399 for a mobile web browser with the potential to run all kinds of apps. Worth a lot more than a bunch of disposable eWaste CRT PC systems running IE/Windows.

What I keep repeating is not that Apple will take majority market share (I don’t see that happening), but that Apple’s assault on the high end will kill profitability in the MS monopoly in tandem with Linux’s attack on the volume/low margin end of the market.

Apple will do well doing what it has been: developing a premium market for classy products. Linux will appeal to DIY and the cheap end. Windows will not offer much of anything, as it is neither high quality nor cheap.

@ Davebarnes
Facade is an acceptable spelling in English. There is no ç in the English alphabet. :)

23 Danthemason { 04.20.08 at 6:22 pm }

The low end? The choice in developing countries? These souls in the third world are trying to throw off the chains of dictators, I doubt that MS chains fit them any better than they do Europeans or Americans. Apple or Linux will be a better choice for the future. Paying a yearly license fee will keep them poor, and less productive, just like in more technically advanced societies.

24 lmasanti { 04.20.08 at 7:32 pm }

quote:
“If Microsoft built a computer and said their software could only run on their hardware – there would be no Microsoft.”

They would say that their software ONLY can run their software… no allow other OS.

25 lmasanti { 04.20.08 at 7:33 pm }

Dan…

“Facade is an acceptable spelling in English. There is no ç in the English alphabet. ”

You are right, I’m with you… but we are Macintosheans and there is a “ç” in every Mac keyboard!

26 lmasanti { 04.20.08 at 7:40 pm }

quote:
“I also agree with Berend that Linux is best suited to take the world by storm as it is in the same position MS was in the 90s to be installed on the existing PC base. No wonder MS nor Apple want to support it in any real way.”

I disagree with the “same position”… behind MS was the search for money, not now behind Linux.

Personally, I think that “the Linux world” (to name the whole environment, not just the kernel) could take the desktop if just learn from the Second Coming of Steve Job.

What he did with Apple hardware and software?
He “focus”! Two desktop models: low and high. Two laptop models: low and high.

Joint up to show one or two highly polished distros. I know that they already exist but… the world should know!
As Apple built up a strong brand awareness, Linux should go to get it: not in the geek world, in the Mom and Dad’s world!

27 John Muir { 04.20.08 at 7:53 pm }

Interesting article and good comments…

Since we’re talking about Linux now – Microsoft’s most existential threat – something I’d love to see is a RoughlyDrafted article or two on how its been doing on the desktop and the server.

Like lmasanti, I think Linux needs focus. Mark Shuttleworth is probably the closest it has to a Steve Jobs just now, and Ubuntu has risen to relative prominence quite quickly. I do though doubt that the 21st century Apple experience can be replicated in collaborative open source. Just as much as I doubt that Apple will ever manage to cater for more than 20% of the global installed base.

OS X is a fascinating story and I think the perfect ongoing case study in how to take down a monopoly. But it’s not going to do it alone. Other systems have to exist to displace the giant, letting diversity truly reign. What will they be?

As soon as I saw the iPhone unveiled a little over a year ago – living in phone obsessed Europe instead of PC saturated America – I knew it and other handhelds would have a big role to play in all this. That’s my expectation anyway.

It’s all possible because of the internet. That one little thing which has been the root cause of all of Microsoft’s problems! (Besides maniacal greed…)

28 lmasanti { 04.20.08 at 8:55 pm }

quote:
“OS X is a fascinating story and I think the perfect ongoing case study in how to take down a monopoly”

The most amazing thing about the Macintosh, Mac OS X, the iPod, the iPhone –at least to me– is that they were not made to “take down” anything.
The were made to “build something”…
This is the main reason why they succès d’estime.

[Note: I thought I had misspelled "success" and I looked at the Dictionary and found --and learnt-- the correct words to reflect my idea:

succès d'estime |soōkˌsā desˈtēm|
noun ( pl. same)
a success through critical appreciation, as opposed to popularity or commercial gain.]

29 hylas { 04.20.08 at 9:00 pm }

FTFA:
“Like the old Apple, Microsoft is also losing its brains.”
(insert zombie joke here).

I was working for Apple in this time frame, with the roll out of the new iMac, even though it was a low level job it was pretty grim until that little jewel – it changed everything.

Your article is well crafted, and a much needed balance to what was said in the past, of Apple. It’s not black and white – but it is correct from what I’ve read, lived and researched.
I only hope Apple, as a company halts the “feature creep” and writes code more with security in mind, as this is the crux of this, and now, MS’s story.

30 Boycott Novell » Links 21/04/2008: GNU/Linux Raves in Kerala; Portland OSS in the News { 04.21.08 at 12:02 am }

[...] How Microsoft has become the Beleaguered Apple ‘96 [...]

31 Incremental Blogger » Blog Archive » RoughlyDrafted Daniel Dilger takes another swipe at Microsoft { 04.21.08 at 12:58 am }

[...] sure does a good job at defending Apple, whether it needs it or not. This time around he’s suggesting that Microsoft has now become the beleaguered Apple of 1996. Whatever similarilities he points to, he sure does miss the obvious? Microsoft is a huge and [...]

32 Robert.Public { 04.21.08 at 1:21 am }

“Also, Apple has entered the low end PC market: the iPod Touch and iPhone. $399 for a mobile web browser with the potential to run all kinds of apps.”

This needs to be considered by everyone who believes that a desktop monopoly by Microsoft will be maintained for a significant time. It may, but IMHO the desktop itself will not be the dominant form factor. The failure of Windows Mobile may prove to be the most painful thing in the long run as opposed to people’s ambivalence toward Vista.

Apple’s hardware is high end and will not probably go over a certain market share figure in desktops because of this, but I think berend is right when he advocated “a multi platform strategy and bring out key programs on Linux” to keep the mobile platform going as M$ starts really sliding.

Apple is churning out interface patents left and right. Mobile devices will only get more and more usable.

33 lmasanti { 04.21.08 at 1:22 am }

quote from other source:
“In a statement issued by Red Hat’s desktop team last week, the company says that building a general-purpose desktop Linux operating system isn’t a profitable strategy. ”

http://arstechnica.com/news.ars/post/20080420-red-hat-novell-desktop-linux-ready-for-workplace-not-home.html

34 zaxzan { 04.21.08 at 3:35 am }

A Mac Linux? – must be evolving in the Apple “skunk” lab …

35 zaxzan { 04.21.08 at 3:53 am }

… or, is that a ridiculous idea?

If so, why?

Please be urbane while being informative.

36 PerGrenerfors { 04.21.08 at 4:41 am }

What I would like to see is some kind of Linux version of the iFund. Just like someone already said, the Linux world should start focusing on consumers too. Great steps have been made by the easy-to-use Ubuntu dist but there’s still things to do.

When my non-technical parents feel secure about installing Linux themselves, this current model could work but until then Ubuntu needs to find its way into consumer and education markets as a pre-installed OS. This would be the attack on MS low-end market. Instead of a license fee, a small contribution to the Linux fund should be made with each computer sold.

Development resources should gather around a single desktop dist and a single pro/server dist to get the Jobsian focus. This would be easier to market and since it’s all open source, smaller dists would profit too.

Then there’s the problem of turning a profit out of this proposition. Obviously these budget computers will not offer any huge margins. Still, HP and Dell somehow manage to get by with their razor thin margins. Why not companies that focus on the “value segment” and contribute financially to open source? Wow, I sound like such a hippie :)

37 danieleran { 04.21.08 at 4:48 am }

@ lmasanti: Redhat makes its money selling support for its Linux distro, so it’s no surprise it will make more money targeting businesses rather than home users.

However, Dell, HP and other PC makers stand to save lots of money were they to ship computers that don’t include Windows licensing. The average PC cost is now somewhere around $700, making MS’ $35 OEM license a 5% of the cost. Components need be be around 50% of the retail price, so a $700 PC needs to have a bill of materials around $350 to be profitable. Cutting out MS’ fees means 10% of the BoM is gone.

While RedHat might have no business selling home Linux, PC makers do, if only it can run Windows software and look similar enough. Linux is making progress in both areas.

@zaxzan: Yes it makes no sense. Mac OS X can already run most software developed for Linux (ie FOSS libraries; graphical X Window titles are less idea, but commercial Linux software that Mac users might be interested in barely exists). The only remaining reason for Apple to want to develop a “Mac Linux” would be to remove the superior Mac OS X’s BSD software and replace it with a version of Linux that offers no attraction to people who need to use or prefer to use Linux.

38 PerGrenerfors { 04.21.08 at 7:18 am }

“While RedHat might have no business selling home Linux, PC makers do, if only it can run Windows software and look similar enough. Linux is making progress in both areas.”

I’m not convinced that Linux needs to run Windows software to gain relevance in consumer markets. Most distros already do a lot of what people need, except offer native iTunes syncing with their iPods. Gaming is not entirely relevant either as more and more people move to consoles. Computers with pre-installed Linux would really be Macs on the cheap for price-conscious buyers.

I think that the Linux community is afraid to admit that they really need the average guy as a consumer to thrive.

39 lmasanti { 04.21.08 at 8:32 am }

quote:
“What I would like to see is some kind of Linux version of the iFund.”

You must realize that iFund is “to give money back to the VCs”. So, iPhone’s apps are “trully possible money makers” (they decide to whom give the money).

If you find someway of making Linux so “profit rewarding” the VCs will jump on!

40 lmasanti { 04.21.08 at 8:36 am }

quote:
“I think that the Linux community is afraid to admit that they really need the average guy as a consumer to thrive.”

I think that the “average guy” wants to be safe. And Windows gives him this “sense”. If Linux/Ubuntu can “get into this feeling” they will win.
“Apple is easy to use” should become the mantra for Linuxians… if it is really easy to use!

41 nextcube { 04.21.08 at 10:33 am }

The other thing left out of this discussion is the thin client. While it hasn’t taken off the way that Sun and Oracle thought they would ten years ago, they have an enormous presence in medical facilities and could easily replace desktop PCs across banking, call centers, and many offices. I know that Apple isn’t a player in the thin client biz, but I think we’ll see a lot more action in thin clients with companies looking to save $$ on energy and support.

42 tundraboy { 04.21.08 at 11:16 am }

A few items to throw in the mix:

1. Microsoft is not a software company, it is a ‘Monopoly Acquisition, Extension & Perpetuation ‘ company. It is a historical accident that software is the vehicle most conducive to successful monopolization in the ’80s and ’90s. In the previous turn of the century, Standard Oil was the Microsoft of its time. Back then, oil was the best vehicle for monopoly building.

2. So what is Microsoft’s primary skill set? Painfully obvious that it’s not software design.

It’s primary skill set is the establishment and defense of monopoly through a. aggressive acquisition, b. shrewd contracting (ask IBM about DOS and Apple about Windows), and c. ruthless intimidation that in significant instances has crossed into criminality.

3. Microsoft’s success is not due to the ‘open’ approach they took with Windows. It is due primarily to the shrewd contract for DOS that Gates maneuvered IBM into signing. If IBM got an exclusive on DOS, or bought it outright, IBM would still be the king of desktop computing and Microsoft would be just another apps vendor. They certainly would not have been able to shove aside Wordperfect, Lotus 1-2-3 or Netscape because they wouldn’t have the OS monopoly that made it possible.

4. The Microsoft Prime Directive: Protect and Defend the Windows and Office Monopolies. This is why they are in trouble now. Defending those monopolies meant hanging onto existing customers (and their legacy apps) at all costs. So their product became backward and bloated and the brightest, most creative minds avoided working for them. Contrast this trench-warfare mentality with Apple’s willingness to jettison old tech for new tech and their demonstrated confidence that they can win their customers all over again, and attract some new ones on top of that.

An aside on Linux. Anyone whose lived in housing with shared facilities, or driven a company-owned service car knows about this: ‘If everyone owns it, nobody owns it.’ Linux will never succeed on consumer desktops because unlike enterprises, consumers in general don’t like paying for support. And since support is the only way to make money on Linux (remember the software is free so everyone owns it), then that’s it for the consumer market.

43 lmasanti { 04.21.08 at 11:26 am }

quote:
“The other thing left out of this discussion is the thin client.”

“Thin clients” had taken off as “thin [profits' PC] clients”.

44 John Muir { 04.21.08 at 1:10 pm }

Good article at Ars on this same subject today:
http://arstechnica.com/articles/culture/what-microsoft-could-learn-from-apple.ars
I can tell the author’s British … too many similarities with my own experience!

As for the Mainstream Linux Desktop: here’s a showstopper which has been in effect so far. The GPL. Linux as a whole is built upon code which in many cases must not only be kept open source, but which legally demands subsequent code built on top of it to be open source too. Bang goes the chance to build a professional ecosystem … at least, without a nightmare of dependencies both technical and legal.

I’d just love to see the BSD License philosophy take hold in Linux-land, so that a professionally supported and promoted OS can be achieved, at least in one particular distro. However, it’s more than just the mountain of Windows’ installed base which is in the way. A lot of this also comes down to developers’ beliefs.

One last thing: Moms and Pops and Joe Sixpacks don’t even know their PC runs Windows … despite the five minutes of logos every time they switch it on. It’s a PC. Notice how Apple’s advertising – now legendarily effective – doesn’t put the Mac against Windows, but against a bumbling if geekily charming PC. That’s the brand they’re taking on.

45 OlsonBW { 04.21.08 at 4:29 pm }

The flaw here is in thinking that a company has to sell it and that a company has to make a profit on it OR that you have to pay for support or that people will think they have to pay for support.

Actually none are the case and why RedHat and Novell aren’t interested in this segment.

Support wise, Linux distributions (Ubuntu, etc.) have message boards are more than sufficient for Linux support.

46 John Muir { 04.21.08 at 4:46 pm }

@OlsonBW

I agree with you so long as the following is added to the end:

“For technically advanced users.”

But that is 100% not what the mainstream desktop is about. Linux already does well among the minority of us who take pride in understanding how our computers work and who are open to trying (and testing and supporting and developing) new things. We have to remember though that we are and shall always be: a niche.

47 beanie { 04.21.08 at 4:57 pm }

“Windows Server growth 12.8% and Linux 8% and UNIX 3%. Windows Server is now clear market share leader with 35.7%.”

Correction: That was from a EMEA (Europe, Middle-East, Africa) IDC report.

For 2007 globally, Gartner says Windows Server had 66.8% market share, Linux with 23.2%, and UNIX 6.8%. Windows Server gained a percentage point while Linux dropped a percent and UNIX dropped a little over a percent. About 8.8 million servers sold in 2007. HP, Dell, IBM, and Sun were the top four server vendors.
IDC probably has similar stats.

[And by "market share" does that mean software commercially sold with PC servers that Gartner knows about and can track, or does it represent what people are actually using? Netcraft reports that Microsoft IIS web servers still are less than 40% of the servers on the web, despite the company moving high profile web service providers to move thousands of dummy sites to IIS just to make things look better. It's also pretty obvious that IDC and Gartner exist to recommend Microsoft. - Dan]

48 OlsonBW { 04.21.08 at 5:06 pm }

@John Muir

If you look at message boards for Ubuntu there are definitely more than just experts on there. While they won’t be rank beginners, those people don’t call Microsoft either.

They talk to whoever in their family is willing to deal with that computer. These are the people that will deal with Linux too. And if they don’t know the answer, they will go to the Ubuntu message board.

You will see these people and people like this on the Ubuntu message board and on Apple’s message boards which are supported mostly by co-non Apple people (meaning the Apple message boards).

49 Lance_G { 04.21.08 at 5:08 pm }

Interesting article as always, Dan. BTW, PLEASE tell me where I can find a larger size version of the image of Jobs planning the Open Source Assault with the X-wing pilots. I grew up consumed with Star Wars and would love to make that my wallpaper on my computer at work.

50 OlsonBW { 04.21.08 at 5:09 pm }

@beanie

If you ignore the initial point that Gartner and EMEA only look at sales they you will always be looking at the wrong places to know in reality how many actual new servers are out there.

If you continue to look at sales then people at Microsoft will pat you on the head for looking at the wrong data.

51 addicted44 { 04.22.08 at 11:31 pm }

The general idea of this article is correct, in that MS has hit a stalemate, but the fact is that MS is not close to failing the way Apple was. The simple reason for that is they leveraged their monopoly to create a lock-in that will be very hard to get rid of. Apple never had that. They will flatline, but I doubt they will collapse (unless they make drastic moves in an effort to grow). The continued need for supporting stuff like VBA and Acces within the enterprise is too great. In fact, the place I worked at (and many other consulting firms) paid for expensive Oracle or DB2 licenses, but they always had to have 1 IT guy on staff simply to create an Access front-end for the consultants, who had no idea how to deal with SQL and wanted to use what they knew, i.e. Access and Excel. Fortunately, the personal market seems to be veering towards alternatives (especially on macs, with iwork).

The lower quality workers is more a result of Google’s increasing prominence and desirability than anything MS has done. Contrary to what you claim, MS is actually one of the good guys as far as H1B visas are concerned, since their H1s earn about the same as their American counterparts. Most of MS’s H1 hires are graduates from great American Universities with as good (if not better) GPA’s and recommendations as Americans. There are companies that abuse the H1 system to lower wages, but MS is not one of them.

52 Rip Ragged { 04.22.08 at 11:50 pm }

Respectfully disagree. The lock in fades a little more with each consumer purchase of a Mac, and with each installation of a Linux server.

Microsoft doesn’t dare make any radical changes to anything. Their entire business model is based on backwards software compatibility. Microsoft is locked-in to their lock-in. The rest of the world is beginning to discover it is not.

“The collapse has already begun. It cannot be stopped.” – Hari Seldon

53 addicted44 { 04.22.08 at 11:59 pm }

@Rip Ragged:

I agree that the lock-in is reducing. What I am claiming is that the lock-in gives MS far more time than Apple ever had.

But you are correct, that the lock-in is not just a lock-in for customers but also a lock-in for MS, in that, they dare not drop backwards compatibility! Thats a very good observation I had not thought of.

54 Windows Vista, 7, and Singularity: The New Copland, Gershwin, Taligent — RoughlyDrafted Magazine { 04.23.08 at 12:15 am }

[...] ← How Microsoft has become the Beleaguered Apple ‘96 [...]

55 Rip Ragged { 04.23.08 at 12:49 am }

I agree they have more time than Apple did, but I suspect the fall will be swift. Not because of the lock-in alone, but for a combination of factors. The way they’re spending money to fight the fall will hasten it. As their money evaporates so will their buffer.

Add to that the innovation going on around them while they are paralyzed. Their technology becomes more burdensome than useful every day.

If they retrench and rebuild they may last a while longer. If they continue to try to stretch, as Apple seemingly is forcing them to do, the fall will be sudden and ugly.

56 harrywolf { 04.25.08 at 10:49 am }

Microsoft wont collapse – there is a complete economic system that surrounds them, and that system wont let them fail.

There are millions of people who need the daily mess of Windows to pay their mortgages and feed their kids.

If computing is to evolve into a world where maintenance is cheap and common sense prevails,
( a Mac and Linux world, lets say) then we are talking about a revolution in human behaviour.
Unlikely.

Microsoft is a typical company in our flawed world. They do lots of things wrong, are grossly inefficient, suffer envy and jealousy and greed for power.
In other words, normal.

Apple has a visionary in charge, makes a beautiful product, is interested in style, is very efficient, by comparison.
In other words, abnormal.

I dont believe that Microsoft and Apple are even faintly comparable, and are not even in the same business.

Apple are a very special business, one that could be making electric cars in 10 years, such is their design and vision of a different world.

Microsoft is just a normal, dull, fearful business; hopelessly stuck in behaviour that ought to hasten its downfall, but doesnt.

Apple is what we might be, were we to look beyond our pointless fears, suspicions and insane delusions; Microsoft is what we have become, a daily reality of grinding tedium and fear.

The ‘battle’ between M$ and Apple is a microcosm of our world, where the good and sane battle the other 95%, the masses who live on fear and distrust, who vote for war and believe in a variety of Death Cults (mainstream religion), and are addicted to magical thinking and delusion.

57 Ephilei { 05.07.08 at 5:10 pm }

I work in the Salvation Army. We use Lotus Notes and love being cheap. Even with the cost free integration of an office suite into Notes, we’re keeping Office as de facto because it’s so common and (with a special deal from MS) quite cheap.

58 Partners in Grime { 05.18.08 at 11:50 pm }

Amazing that Apple pulls in half the revenue of Microsoft. I expect that to increase rapidly with the iPhone platform SDK results coming on-stream soon.

59 Partners in Grime { 05.18.08 at 11:52 pm }

Pages is a wonderful app with its professionally designed templates. I am constantly amazed at what can be accomplished with Pages.

60 WWDC 2008: Future UI Designs in Mac OS X 10.6 — RoughlyDrafted Magazine { 06.06.08 at 8:37 pm }

[...] How Microsoft has become the Beleaguered Apple ‘96 The Road to a More Consistent UI is Paved with iTunes. Apple’s dominate market leading app is iTunes. The company certainly doesn’t have a monopoly there; Windows Media is far more entrenched thanks to its tied bundling, and there are any number of alternative media apps and content stores people can use, from Amazon to Napster to eMusic. However, iTunes is Apple’s UI bellwether, and regularly gets used to show off and advance new user interface concepts. [...]

61 Eric { 06.15.08 at 11:17 pm }

Eric…

That is very interesting….

62 Myths of Snow Leopard 4: Exchange is the Only New Feature! Apple’s limited comments on Snow Leopard, the next version of Mac OS X due in about a year, have opened the playing field for rampant speculation. Here’s a look at a series of myths th { 06.20.08 at 1:28 pm }

[...] Why the World Went Windows How Microsoft has become the Beleaguered Apple ‘96 10 FAS: 10 – Apple’s Mac and iPhone Security Crisis You Can’t Always Have What You Want. [...]

63 Gates, Seinfeld and the $300 Million Ad to Nowhere. — RoughlyDrafted Magazine { 09.09.08 at 1:27 am }

[...] How Microsoft has become the Beleaguered Apple ‘96 [...]

64 Neil Anderson { 05.17.09 at 5:06 pm }

Harrywolf said, “Microsoft wont collapse – there is a complete economic system that surrounds them, and that system wont let them fail.”

Is that what GM thought?

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