Are We Witnessing the Rebirth of Microsoft, Mark II?

There’s a memorable scene in “This Is Spinal Tap” when turmoil among the band members leads to Nigel Tufnel’s abrupt departure. At the very next show, sans lead guitarist Tufnel, the few Tap fans at the Themeland Amusement Park in Stockton, Calif., are witness to the “rebirth” of Spinal Tap, Mark II.

England’s “Loudest Band” ditches its heavy metal rock roots, and a free-form jazz exploration ensues in front of a festival crowd.

Right now, I believe we are all witness to Microsoft’s attempted rebirth—warts and all. Like Tufnel, Gates is gone (though under much less acrimonious circumstances). And the executives in Redmond are finally acknowledging that business as usual in Redmond just isn’t going to cut it any more.

In fact, many of Ballmer & Co.’s recent announcements display an enlightened view not typically seen at the company.

For instance, Microsoft appears to be warming to the notion of “free-conomics.” It made a splash this week with the announcement of a free Web version of Office 2010 (think: “Office Lite”). MS Office brings in up to $20 billion a year to the coffers (second to Windows), and it’s widely accepted that Microsoft has been reluctant to make this move, “for fear of killing the goose that lays golden eggs,” notes an IDG article.

The company recently rolled out a beta security program for malware called Microsoft Security Essentials that’s free. (Final ship date isn’t known yet.) The Windows cloud platform Azure is attempting to change the rules in that space. And Microsoft is also made some in-roads with its revitalized search engine Bing, despite all of the naysayers.

Microsoft is also smartly attacking the enterprise software (ERP, CRM, and BI) markets at the midsize-company level, where the most opportunity lies (just ask SAP and Oracle).

Microsoft has used its near-universal presence in businesses big and small to sell its Dynamics line of ERP and CRM applications, touting the ease-of-use and integration between Office and SharePoint to those ERP and CRM application sets.

In the ever-changing enterprise apps space, Microsoft also offers business software innovation and stability. An acquiree, it is not.

However, there are still shades of a software vendor not fully willing to discard the lock-down strategies that have made it billions in the past. As execs are gloriously talking up its new Web-based wares and 1 million Dynamics CRM users at its Worldwide Partner Conference this week, the song remains the same with customers’ licensing frustrations.

For example, analysts point out that Microsoft’s enterprise licensing terms offer minimal incentive for big customers to move away from its on-premise products, reports the IDG News Service. Complexity and confusion abound while customers when MS execs have preached simplicity and ease of use.

Forrester Research analyst Chris Voce echoed a familiar refrain, when asked by the IDG News Service about the muddled licensing situation: “At the end of the day, Microsoft loves their recurring software relationships with their customers.”

Nevertheless, Microsoft does appear to have become somewhat more sensible with their product decisions and software strategies. It, perhaps reluctantly, see that the threats to its business lines are everywhere and that those threats are only going to intensify.

Of course, I should mention that in the “This Is Spinal Tap” rockumentary, the band’s “free-form jazz exploration” doesn’t sit well with the festival crowd. The band gets mercilessly booed as the musicians keep on trying to win them over with their newfound sound.

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