Directions

Mind the (Product) Gap

• By Paul DeGroot
• February 01, 2011

The two biggest reasons for working with Microsoft are its solid support for partners and the breadth of its product line.

The company gives partners resources and breathing room in which to sell products and services and a solution for virtually every IT problem.

The flip side of the relationship is that the deeper partners are engaged with Microsoft, the more dependent they are on its ability to produce compelling and timely products. If Microsoft doesn't have a competitive product, then neither do its most-committed partners -- and that's becoming a problem.

Product gaps are becoming particularly apparent in the mobile space. When mobile was primarily a consumer preoccupation, it wasn't a major concern for a company that makes about 80 percent of its revenue from business customers. But as mobility, in the form of phones, netpads and so many other areas, becomes not merely a common feature of consumer life but a critical feature of business life, mobile technology and services become a critical endpoint for business.

The endpoint is what Microsoft, dependent on a virtual monopoly on desktop software for most of its profits, can't afford to lose. Any gains by competitors there have an outsized impact on the company: Every dollar earned by a competitor can easily cost Microsoft five dollars in profits.The impact can be greater if standards are involved. For much of its life, Microsoft has set technical standards, such as protocols or document formats, that others need to follow -- and sometimes pay royalties to use. Microsoft has made significant strides to move past that attitude, albeit sometimes with a firm push from antitrust regulators. On some occasions, having lost the lead, Microsoft itself must pay royalties to others.

Faced with such prospects, the company's executives are too often sniffing dismissively at competitive innovations and insisting that the IT world will, after a minor gravitational digression caused by itinerant space dust, resume its orbit around Redmond.

That leaves partners (and their customers) in a bind. Do they sit by while their competitors tap into the early wave of technology and potentially build a wide lead among early adopters? Do they assume that Microsoft will eventually weigh in with a superior offering that's worth the wait? Should they start with a non-Microsoft product and hope that Microsoft's eventual offering will be compatible or permit migration that doesn't cost more than the products and time involved?

For Microsoft developer partners, the problem may be less acute, perhaps even an opportunity. These partners can build software that lets Microsoft loyalists employ Android or Apple phones or netpads with Microsoft products, while Microsoft works on its answer to the "problem." In some cases, with a touch of chutzpah, Microsoft will claim its eventual compatibility with a leading competitive technology as a feature -- an advantage over the competitors themselves.

One clue for partners lies in the time frame. If Microsoft responds quickly, it has allocated significant resources to the project and given it the backing of senior executives who can smooth the way for the development and marketing teams. But if it delays and product details are vague, the company hasn't devoted enough resources or a proven manager to the project, or both. Partners and their customers will be frustrated. (Any project with12-plus months to the first beta is beyond the end of the earth, where only the hardiest partners should sail.)

Partners need a clear business strategy of their own to avoid the risk of suffering even greater than Microsoft does for Microsoft's mistakes. Few partners have Microsoft's resources to buy technology they can't build or intellectual property to trade with others if necessary.

On the other hand, Microsoft has no particular genius for spotting new opportunities. But partners often have greater exposure to niche technologies, and may realize their potential much earlier -- allowing them to adopt and adapt to these technologies faster than Microsoft can.

Next Time: An Early Take on the Impact of the MPN