Microsoft hits crossroad

What comes after world desktop domination? For Microsoft the challenge isn't Linux, open source or other IT vendors, but having to compete with itself, according to Meta analyst Mike Gotta.

He said because Microsoft is unique in its breadth of coverage across markets and most private and public organisations have some dependency on Microsoft, there is little joy in being a software giant.

"With such dominance comes many burdens such as attacks from advocacy groups, government investigations, competitors forming standards associations to lessen Microsoft influence; all of this contributes to an incremental erosion of public goodwill," he said.

"We believe Microsoft is at a crossroad as market, economic, organisational and technology use trends are diminishing the principal value propositions of its core engines and inhibiting effective positioning of future solutions."

Gotta is not referring to a crossroad in revenue trends or specific product technologies, but believes the software giant is facing a "value chasm", the growing perception by business and technology decision makers around Microsoft as a strategic partner.

He said customers are questioning the value of Windows features, Office products and continued upgrades of the desktop, but he is optimistic Microsoft will overcome this chasm by 2007 reinventing itself around direction, processes and products.

Microsoft Australia marketing and business operations general manager Mark Iles said customer expectations have risen in the past two years.

This is why the software giant is making internal changes particularly in the enterprise space with the introduction of specific groups to address industry verticals such as financial services and government.

"We have to articulate and deliver a greater value proposition to customers, more so than in the past; we were classically product-focused and that was fine for the 1990s but times have changed," Iles said.

"Back then it was a much simpler value proposition and given the size of IT budgets it was acceptable, but we have to deliver a much more customised value proposition. I think this shift has occurred across the entire industry."

Speaking at Microsoft's TechEd 2003 Conference in Brisbane, Microsoft CTO Peter Moore acknowledged that changing perceptions is a challenge for the company with the focus moving to value rather than features.

Moore described the competitive environment for Microsoft as "interesting"; once upon a time it was easier to be the best and cheapest, but today it has moved to maintaining "relevance" with its customer base.

He said making products secure was a priority as well as being a good corporate citizen, which means engaging in activities to benefit society such as "painting the walls of community centres".

"Customers are our life bread so we want to demonstrate a commitment that goes beyond being a supplier," Moore said.

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