2001: A Microsoft Failure

Disclaimer: I own stock in Microsoft, be sure to read my Colophon to see what else I own stock in.

I got a thought in my head the other – that thought was the basis for this post and subsequent conclusions that I draw. The thought: Why do I keep thinking Microsoft won’t be a name that my children recognize? One could argue that the reason is because I am an Apple nut – I think it will be because Microsoft is on a severe slide, one that could paralyze the company.

Microsoft first shipped Internet Explorer in 1995 and 15 years later we are only on version 8 of Internet Explorer – meaning Microsoft releases a version of Internet Explorer every 1.87 years. Apple ships a version every 1.4 years (since Safari’s inception), Google every 0.16 years, and Firefox every year. Not surprisingly Microsoft has the slowest release schedule for major version updates to web browsers – this really should surprise no one.

What really blew me away about these numbers though is that Microsoft from 1995-1999 shipped a new version yearly. 1 In fact it was not until after 2001 that Microsoft really started slowing down their software launch schedule. Between 1985 and 2001 Microsoft shipped 19 versions 2 of Windows for an average of 0.94 years between new version of Windows, from 2001 to 2010 Microsoft averaged 1.5 years between releases. It is important to note that after 2001 there have only been 2 releases of consumer versions of Windows – the other releases have been major updates to existing systems. 3

Also, since 2001 Microsoft has only released two versions of Internet Explorer. 4 It is like Microsoft hit a wall around 2001 and was no longer able to ship products as a result.

The big question rattling around in my head after this seemingly innocent research: what the hell happened to Microsoft in 2001?

Prior to 2001 it seemed that Microsoft was banging out release after release – then 2001 comes around and by looking at their software releases alone you would think they had perfected everything because they stopped releasing new stuff.

Immediately I thought of 9/11, the stock markets crashing, and the post-internet bubble society that we lived in during 2001. Then I looked at Apple (among others) and their release schedules seemed unfazed. This tells me that it was not external factors that slowed the launch of new software, so it must have something to do with internal decisions at Microsoft.

In fact, the only product at Microsoft that seemed unfazed was the Office suite – odd stuff.

Gates

Then it struck me, at some point in the early part of this century Bill Gates handed over the CEO title to Steve Ballmer 5 – it just so happens that this change of guard occurred in January of 2000. It would stand to reason that for the first year of handing over the reigns Gates would stay pretty active in CEO type roles – the rest of the company (including Gates and Ballmer) would use this time to fully acclimate to the change. I think it would be absurd to think that once the hand over happened Ballmer was truly the CEO in anything more than title.

Most who have moved from one position to another within a company could tell you that they still answer questions about stuff they did in their old position. Now take that kind of transformation to a Fortune 500 company and it will be a bit harder for the Founder and former CEO to step into another role without having to juggle both roles for a bit.

It is my guess that Ballmer truly became CEO of Microsoft in 2001 6 – the exact point when Microsoft stopped shipping products on regular schedules. I have no way of knowing what happened during this transition, but I do think something significantly happened – something that fundamentally changed the way Microsoft thinks about the software it produces.

It would seem that it was at this point Windows stopped dead in its tracks. 7

OS Wars

Apple launched Mac OS X in 2001, the same time when Microsoft launched Windows XP (perhaps the most successful OS to date from a sales standpoint). Since then there has only been two new versions of Windows: Vista and 7. 8 During that same time span Apple has release seven versions of Mac OS X (10.0-10.6). 9

This is not to start an Apple versus Microsoft debate – I simply want to illustrate the point that even in today’s market you can continue to push new software all the time to users. To put it simply: the OS market is not stale and sales have not stopped – Microsoft just stopped shipping. Slowing from releasing a new OS on an almost yearly basis and moving to a release schedule in the magnitude of 3-4 a decade is a drastic change.

Microsoft stopped shipping when its biggest competitor 10 stepped up its game.

This is Important

I am anything but a fan of most Microsoft products – Windows Phone 7 might just be the only thing they have done recently that has got my attention. I still think that Microsoft owes its board and stake holders an explanation of just who screwed up in 2001.

Was Bill Gates really that vital to the companies success – even though at the time they had some of the brightest minds working for them? 11

Obviously Gates did not leave the company – he took a role to focus on the software development at the company. I get the general sense that a lot of things in the works right now at companies of Microsoft and Apple’s size take 5 years before they are ready for the consumer – meaning when Microsoft releases something they have been working on it for 5 years already. 12

That means that by the time Microsoft released Windows Vista in late 2006 they had been working on it since – wait for it – 2001. 13

In fact I don’t think Gates was the problem for the slow shipping – I think Gates was the reason. Further, I think Gates had an excellent reason for delaying new releases of Windows. From what I have read about Gates, and interviews I have seen conducted with him, it seems to me that he has a keen understanding of both where the market is going and what his faults are. 14

I would guess that he made the move from CEO to chief software architect in 2000 because he saw and imminent need to start innovating the software that Microsoft is making. I would further guess that after XP shipped, Gates walked into the Windows teams building and said: “Cancel everything for the next version of Windows – we are starting over.” Such an event would explain why it took 5 years for Microsoft to release the next major version of Windows (Vista). Two years after that release, they come right back with another – reestablishing some momentum within the division and the company. It would seem a plan was in place once again.

Gates would have been the only person at Microsoft with enough power and big enough balls to make such a radical decision.

Which is essentially why I fear for the long term health of Microsoft right now. Gates has essential left the company – serving only in an advisory role from here on out. Who is left at Microsoft that has the knowledge, foresight, balls, power, and skill to correct course when the company needs to?

Ballmer has all but shown that he cannot do this 15 – in fact I think this may be a sign of why so many high profile executives have left Microsoft in the past years. Those executives probably tried in vain to correct the course Microsoft is on – when they failed they had no choice but to leave (in one way or another). The fact is that one (Ray Ozzie) of the two guys Bill Gates directly appointed to fill his void is leaving the company. That will hurt.

Microsoft’s Future

The future for Microsoft looks bleak to me at this point: Windows 7 is successful, but not as hyped as Mac OS X; Windows Phone 7 has gotten little press; the Kin already failed; and Office users are beginning to wonder why they need to upgrade. The only recent success Microsoft has had is the Xbox Kinect and a $99 gaming device can only take you so far.

This is a very long winded way of saying something that I have said before: Microsoft needs a leader and they need one now – Steve Ballmer is not that leader.

My guess is that Gates laid out a great path for the software guys to follow and at the very least that path should be successful until 2013 (five years after Gates left). I think Gates has enough of a proven track record that we can trust his decisions.

The question becomes: what does Microsoft do after they have implemented all the ideas Gates laid out before he left?

  1. On average, two versions in 95 and none in 98.
  2. I did my best to only call something a new version if I remembered it being more than just a bug release.
  3. The new version being Vista and 7 – the updates being XP 64-bit OSes.
  4. Internet Explorer 9 is available in public beta form, but has not yet been released.
  5. Disclaimer: I am no fan of Ballmer.
  6. In the sense that Gates’ role was very limited and only served as advisory to Ballmer at this point.
  7. And with it IE releases.
  8. You could argue the case for 64-bit versions of XP and Server versions, but none of these are consumer facing products. For the most part those are releases that most consumers wouldn’t give a crap about. Even things like Windows Home Server are such a joke – what normal American wants to administer their own server at their house? I am a huge geek and even I don’t want a server in my home.
  9. Here you could argue that they only have released 5 – two of the releases were more bug fixes than anything else.
  10. Apple
  11. This was long before massive talent drains from Google started.
  12. Five years from concept to shipping product for major things like OS overhauls and phone platforms.
  13. Did I just blow your mind?
  14. Design
  15. People that throw chairs across the room – while announcing the same product as ‘new’ at CES each year – pretty much confirm that they suck as CEOs.
Originally posted for members on: December 16, 2010
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