Enterprise Software: Beyond Microsoft Vista

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For a Microsoft executive, using "open source" in a sentence without an introductory pejorative is the first step in what promises to be a multiyear struggle.

Can They Pull It Off?

Putting the technology challenges aside, there are other reasons to doubt Microsoft’s ability to execute its vision. "Their approach has always been ’put in our stuff,’" says Forrester’s Rymer. Changing that will require a large cultural shift for a company that has more than 71,000 employees and is about to lose its guiding visionary, now that chairman and cofounder Bill Gates announced in June that he will leave the company in 2008.

Another challenge is this cultural shift will have to take place at the same time the company is marketing Vista and Office, two products only tangentially related to Microsoft’s long-term strategy. Over the next year-plus, it’s unlikely that a CIO will be able to turn on a TV or read a magazine without seeing an advertisement for Office or Vista. This will keep the company’s marketing and sales organizations squarely focused on the company’s old product-oriented business model. In fact, for all the talk about the Live initiative in the business and IT press, trying to find out about it from Microsoft’s sales department is very difficult. Barbara Gordon, Microsoft’s VP of enterprise sales, says she doesn’t sell ’Live’ anything and doesn’t know when her organization will. They’re focused on selling Vista.

Customers see this reality too. "I don’t think that Vista is the link between the current environment and the Web services one," says Norton Healthcare’s Devenuto, who has been beta-testing Vista for Microsoft. It’s a more secure operating system, he says, "not a transitional tool."

And, while reinventing its enterprise line, Microsoft is taking on Google and Yahoo for consumer applications, and Sony and Apple for consumer devices—game consoles and music players. "If I were a CIO I would wonder if the investment in MSN and Xbox is a distraction that will not allow them to deliver [on their enterprise strategy]," says David Yoffie, a professor at Harvard Business School. "Any company, no matter how large, has a limited number of A teams. Do you put that team on search or Xbox or the vision that you described?"

Microsoft counters that it doesn’t comment on the makeup of its project teams but that the number of people working on the software-as-a-service management tool will increase as Vista and Office development efforts wind down.

But even if it is able to redirect significant energy to the enterprise, the new vision requires that the company move outside of its traditional comfort zone.

"Microsoft’s management offerings [such as the Microsoft Management Console and Active Directory]—have historically been spotty," says Davis, the Ovum Summit analyst. "So it doesn’t arrive at the table with any overarching credibility."

Microsoft’s executives are all saying more or less the same things about the company’s need to embrace a heterogeneous IT environment and the opportunity that managing software as a service presents. That has to continue for Microsoft to reinvent itself. "Talking the talk is step one when you are trying to change culture," says Laraine Rodgers, a change management consultant.

But while Microsoft’s executives are preaching the gospel, their language sometimes betrays the company’s famously closed culture. Lees, for example, introduced the concept of supporting applications built on non-Microsoft platforms by saying that’s "what’s called interoperable," as if no one in the room had ever heard the term before. Slips like this demonstrate just how large a change Microsoft is trying to make.

Ozzie, the man replacing Gates as the chief visionary, says supporting a Web services environment is just a logical extension of the expertise Microsoft developed in the client/server era. And at the end of the day, Ozzie says, the same skill set that made Microsoft the most important vendor then—an understanding of business issues like security, manageability and compliance, as well as its experience with development tools like .Net—will prove to be the most important factors in the software-as-a-service world.

Microsoft has the experience to build the tools that will make the services era manageable, he says. "It’s unsexy," Ozzie says, "but it’s what’s going to make [hosted] services as important as technologies inside the data center are today."

Senior Writer Ben Worthen can be reached at bworthen@cio.com.

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Copyright © 2006 IDG Communications, Inc.

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