Office 365 – the beginning of Microsoft’s death spiral?

Thursday, 30 June 2011

Microsoft has finally launched a Cloud version of its Office (Word processing, spreadsheet) product, to less than rapturous reception:

Dennis Howlett calls Microsoft Office 365 “a dud”.

The Register points out that “Office 365 …  been designed to complement desktop Office rather than replace it“.

Mary-Jo Foley, normally a Microsoft fan, posts that “Sorry, folks. This is not Office in the cloud

Meanwhile their acquisition of Skype has been slagged off as too expensive with no synergy and the dying act of a company desperate to be seen to be still relevant, the Windows line get worse and worse press, and some investors are calling for CEO Steve Ballmer to be replaced.

Poor Microsoft! I’m not a fan of their products, although I used to be and I use many every day, but I do really sympathise with their problems.

Addressing the Office 365 issue first, it is almost impossible to move a traditional (try not to call them legacy!) application to the Cloud. Cloud applications behave differently, so trying to both be a Cloud application and retain some look and feel of the old product is impossible. Microsoft is torn between wanting a decent Cloud product, yet not killing off the revenue stream from the old product (and killing their traditional route to market, the channel). So many traditional software companies have this problem, trying to both produce modern Cloud applications yet tied by existing user base, channels and revenue streams: SAP, Sage and even Oracle to name but a few.

Meanwhile competitors like Google Apps, Zoho, Open/Libre Office eat Microsoft Office’s lunch and open source (ie, free) software products like Linux and MySQL make inroads into their server based product line. Really Simple System’s Cloud CRM product is gradually moving off Windows Server onto Linux boxes for a myriad of technical (performance) and commercial (price) reasons. Windows Mobile is being killed by Android and iPhone. The only bright spot is that as yet there is still no credible threat to desktop Windows, although Macs are doing well and a few technologists like me are moving to Linux based desktops such as Ubuntu.

And Steve Ballmer? I’m continually drawn to the parallel between the handover of the British Prime Ministership/Labour party from Tony Blair to Gordon Brown: charismatic but tarnished leader hands over to gruff company man just before the ship goes down. Something I’ve noticed over the years is that when the original software company founders leave, the product vision goes and the company becomes just another money making business, milking revenue off the locked-in user base, until the old user base gradually drifts away. The names of Sage, Infor, Oracle and good old Computer Associates come to mind. No wonder Apple investors are worried as to what happens after Steve Jobs goes. Microsoft’s user base and revenue streams are so large that it will take a decade for that to happen, but happen it will.

Meanwhile I predict we’ll see Microsoft taking the traditional software vendor death spiral: ·

  • Short term investors force Steve Ballmer out, replaced with bottom line focussed CEO.
  • New CEO cuts swathes of costs, profits recover, share price is talked up, short term investors sell at healthy profit, new CEO pockets huge bonus and leaves. Products struggle on directionless.
  • CFO takes over as CEO. User base gradually moves on, more costs are cut, products languish.
  • Rinse and repeat until nobody cares any more.

Dropping support for IE?

Tuesday, 5 January 2010

Like many developers, particularly SaaS developers, we’ve pretty well decided that Microsoft’s venerable Internet Explorer is just not keeping up with the Internet and so we will no longer be spending long development hours trying to shoehorn such features as rounded corners into our CRM system when all the other major browsers (notably Firefox, Safari and Chrome) all have adopted CSS to do this for us painlessly.

We’ve been thinking of doing this for some time, and have been heartened to see other developers doing this either without telling the user (like WordPress here), or actually telling users that they should move from IE to “a more modern browser”.

Less than half the traffic to our site now comes from IE, with Firefox the main contender, and most of users don’t use IE, many at our recommendation.

I’ve some sympathy for IE, the CSS for rounded corners is not officially adopted by the standard committee yet. But users like and expect such niceties, so we need to implement them before IE9 arrives, for which Microsoft is currently forecasting this functionality.

So we’ll add the new features and IE users will get a polite message saying that IE will work fine with our system, but others work better.

Are many other software developers taking this approach?

Crunching the Number Crunchers

Tuesday, 5 May 2009

Last February The Gartner Group (a US firm of technology analysts) published a report showing that SaaS was more costly in the long run for large organisations. Now McKinsey (another firm of analysts) has published another report coming to similar conclusions.

Gartner’s logic makes more sense that McKinsey’s, and claims that despite initial higher costs for purchase and installation, after three years the cost would be cheaper than paying the monthly SaaS subscriptions, especially if you can spread those initial costs over a large number of users.

Well, Yes and No.

If you plug all the numbers you know about into a spreadsheet you may come to the same conclusion, but these mathematical models don’t cater for the real world, for example:-

The assumption is that you install a CRM system and everybody lives happily ever after. Well of course, if that CRM system is Really Simple Systems then this is not a fairy tale! However, as somebody we’ve all forgotten about once said “Stuff happens”. Stuff like the department being closed down, or sold, or downsized. Or a new technology coming along and making it all obsolete. Or a new CEO saying that he wants to use the same system he had in his last company. Or suddenly realising that this new CRM system doesn’t really do what you wanted it to do. Or it being so over designed and complicated that the sales people stop using it after six months. Or the vendor’s support falling off a cliff. Chuck a pre-paid for CRM system out after two years, let alone one, and that was an expensive mistake. Plus right now most companies’ cost of capital is a lot higher than bank base rates, and they are happy to pay a small premium for keeping that cash in house.

Unforeseen Costs
Then there are all the costs that never quite seem to be budgeted for. Like hours unscrambling laptops after the data sync failed. The operating system upgrade that revealed some bugs in the application, which had to be upgraded but the upgrade necessitated a database upgrade, which then caused another application to crash, occassionaly. Plus a maintenance price hike because the vendor is going through a hard time at the minute (pace, SAP & Microsoft!). Plus all those extra payroll costs that governments will be springing on us in two years’ time to pay for the current economic mess.

And finally, although no SaaS vendor seems to want to admit this, we can all bet that those monthly subscriptions will come down in price as the application area continues to be commoditised, and in three years’ time a larger enterprise really should be able to negotiate a price saving.

So even for large companies, I think SaaS works out cheaper, and it certainly does for small ones. The really good thing about monthly payments is that if you change your mind, you can leave. Once you’ve paid for a traditional install, there’s no way to get that money back when things change – and they will!

So according to Gartner & McKinsey, traditionally purchased software works out cheaper in the long run, providing the world stands still. In the long run, said Keynes, we’re all dead.

Thunder in the Clouds

Tuesday, 7 April 2009

I’m sure you’ve read about the IBM’s Open Cloud Manifesto, Microsoft’s reaction to it and then the press reaction to both. If you haven’t, see Paul Greenberg’s summary. Even the worthy Economist covered the story, so it must be big news.

“Open” initiatives are always launched by a consortium of second tier vendors who want to challenge the first tier vendors’ grip on the market. Unix v Open VMS, CORBA, the Open Software Foundation, we’ve all been here before. The market leaders will have their own “open” systems that are open as long as you use their products, whether their platform is Amazon’s, Google’s, SAP’s or And there is no way any of those vendors will want to make it easy for users to use products outside of the fold. Not surprisingly, the loudest noises are coming from Microsoft, the vendor with the most to lose from the whole concept of cloud computing – not just the application revenue, but the whole stack of client and server operating systems, middleware and databases.

When playing the “Open” card, vendors have to tread a fine line between making their systems sufficiently “open” so that customers are attracted to them, but not so “open” so that they can leave easily. Think lobster pot and you get the idea.

As always, the market will decide, despite different vendors’ attempts to set the agenda. Thank goodness!

Crossing the ChSaaSm

Saturday, 14 February 2009

Subtitle:  Can old dogs learn new tricks?

The fiasco surrounding Sage Live’s public outing, immediately pulled after blogger Duane Jackson exposed some serious security flaws in the product, and brought to my attention by Phil Wainewright, begs the question: can non-SaaS vendors make the transition into the SaaS world?

The IT industry has seen many platform changes, and most vendors didn’t make it into the new world. The leading DOS-based word processor and spreadsheet, WordStar and 123 respectively, moved into Windows late and lost out to WordPerfect and Excel. The acceptance of PC networks as a platform for multi-user applications killed off the mini-computer and Unix vendors. Client/Server computing culled a few more.

So will the current market leaders make it across the chasm into the brave new world of SaaS applications? In my experience, software vendors have to take two hard decisions:

  • You need to write a new product from scratch, not try to re-implement the old product on the new platform
  • You need a new development team that was brought up with the new technology

Trying to implement the old product on the new platform with the existing development team would like getting the London Philharmonic to play “Anarchy in the UK” – it would be technically note perfect, but it would be horrible. You need to get people writing the product who breath SaaS, who have written web applications for years, who understand the environment, who instinctively live the visual metaphors. Otherwise you can get a product that technically is an SaaS product, whatever the definition is of that (and there are many), but doesn’t have the soul of one, doesn’t have the zeitgeist.

Most vendors don’t make the leap, they are tied to their legacy products, user base and development team. There are notable exceptions: Oracle was one of the first vendors to have a hosted applications back in the 1990’s; Microsoft has woken up and smelt the Internet coffee numerous times, even if their adoption has sometime meant changing the definition of what SaaS is about.

So, will today’s leading application vendors become the new leaders on the SaaS platform? History is against them.

Fog Computing

Sunday, 1 February 2009

I was interested in reading the controversy this week about Oracle offering their customers the ability to run their CRM On Demand product on their own servers (see Eric Krangle’s article in Silicon Valley Insider, and also Phil Wainewright’s blog). The comments have ranged across challenging Oracle’s claim that their product is really SaaS (if the product is installed on your own box, what’s the difference between this and conventional in-house software apart from the pricing model?), insinuating that one of Oracle’s motivations is so that that the press will never notice any downtime (if one customer’s server crashes for a day only one customer is affected, whereas if a large shared platform goes down for an hour everybody screams and the press pick it up), and picking up on Europe’s stricter data protection laws (legally, if you want to store the personal details of European citizens outside of the EU you need each and every one of them’s individual permission, not that many people seem to know or care about this).

As Cloud Computing becomes the must-have technology for this and the next decade we’ll see lots of more traditional vendors claiming that their offering is Software-as-a-Service, all with their own definition of what Cloud Computing is about: pure play vendors with browser based applications and no (or minimal) local software, shared tenancy and monthly pricing (, NetSuite, Kashflow, Really Simple Systems); browser based software offered on in-house or single servers (Oracle); local software and the data in-house or hosted (Microsoft); traditional software running on in-house servers but accessed through the like of Remote Desktop Connection. Only when the fog around Cloud Computing clears and customers work out what they want and at and what price will the terminology and offerings stabilise.