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In the post-PC era, is Microsoft toast?

Timothy B. Lee (via SMH) | July 30, 2013
Tablets and smartphones are the future of computing, and Microsoft is falling farther behind the market leaders, Apple and Google.

The computing industry is now undergoing a similar transition. Millions of consumers are foregoing relatively pricey and complex PCs in favour of Android phones and iPads. And the experience of Digital Equipment Corp, the leading minicomputer firm in the 1970s, provides some clues to Microsoft's own future. The parallels between the two firms are striking.

According to Christensen, DEC tried to enter the PC market four times between 1983 and 1995. But each time, the firm's corporate culture proved an insurmountable obstacle to success in the PC business. A workforce that was used to making tens of thousands of dollars on each sale did not have the talent or enthusiasm for selling computers that would fetch a few thousand dollars each. None of DEC's PCs was a hit with consumers.

Microsoft has repeatedly tried to enter the mobile OS market with similarly dismal results. The company introduced its first tablet PC more than a decade ago, and it was offering a mobile version of Windows for years before the iPhone came on the scene.

But Microsoft was too invested in the PC business model to succeed in the mobile marketplace. It tried to offer the full capabilities of a PC in a mobile form factor, producing an interface that was too cluttered and confusing for small screens. And its business model of charging smartphone manufacturers for each Windows phone it shipped left the company flat-footed when Google offered Android for free.

DEC eventually fell on hard times, but it took more than a decade for the growth of PCs to seriously undercut DEC's business. The firm's relatively powerful computers continued to sell well throughout the 1980s. And the company continued to innovate. The Alpha processor, introduced in 1992, was widely regarded as a technological marvel.

In 1995, DEC released AltaVista, one of the first full-text search engines. But none of these products proved profitable enough to replace declining revenue from its minicomputer business.

Microsoft is due for its own decade of stagnation as the computing industry shifts from PCs to mobile devices. Yet PCs aren't going away. Businesses are not going to put iPads on people's desks anytime soon, nor are they going to ditch Microsoft Office in favour of Google Docs. So if Microsoft firm can keep its costs down, it can continue to be profitable for years to come.

The problem is that no technology CEO wants to admit that his firm is no longer capable of succeeding on technology's cutting edge.

Selling Windows and Office may be profitable, but it's not as glamorous as writing the software that powers smartphones and web apps.

So just as DEC continued producing innovative but doomed products such as the Alpha and Altavista in the 1990s, Steve Ballmer will probably keep pouring money into such money-losing projects as Bing, the Zune and Surface. That's probably not good for Microsoft's shareholders, but it could be great for consumers.

 

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