Mind the Gap
Does your business fill a niche where Microsoft doesn't play now? It may not be the case for too long.
- By Paul DeGroot
- August 01, 2006
A steady new beat, in what Microsoft both says and does, pertains to
how it's filling gaps in its product line. For much of its history, the
company relied on partners to plug gaps, but there's a new tone these
days. Increasingly, Microsoft is filling gaps by acquiring a partner or
building its own solutions.
For example, one Microsoft executive recently said the company was "incredibly
weak at the edge" of the corporate network, so it bought FrontBridge's
anti-spam service and Whale Communication's VPN technology. Desktop management
is a big cost for customers, so the company bought Softricity and came
up with OneCare and a parallel security product for business.
This pattern should raise a yellow flag for partners. Now, when Microsoft
sees a gap, it buys a partner or internally develops a solution. If you're
not the purchased partner, you now have the world's largest software
company atop your list of competitors.
This is one of the oldest stories at Microsoft, and any company that's
a "dependent software vendor" (my colleague's term for
many Microsoft partners) should have known this from the start. But, over
the years, two important things have changed.
First, the Internet became the new desktop for consumers. Many of the
applications consumers ran on the PC -- maps, encyclopedias and e-mail,
for example -- have migrated and grown significantly on the Internet.
Developers followed. Where once an energetic programmer or a small company
would build a Windows application, they now erect a Web site.
The advantages: instant, worldwide marketing; no distribution costs;
multiple revenue streams (licensing, subscriptions, advertising); and
the rapid development of tools, such as AJAX, that enable ever more powerful
applications. No Microsoft software needed (except for the browser, which
the company helpfully distributes and patches, for free, on most of the
world's computers). Business has begun to follow. It loves the browser
as the universal and maintenance-free client, and service-oriented architectures
connect the islands of legacy data and functionality that dot any large
enterprise. The main impact on Microsoft has been a shift in focus from
the independent software developer to the corporate developer and integrator.
Second, Microsoft's focus for business customers has shifted from
basic plumbing -- a database here, an e-mail server there, a file server
everywhere -- to broad solutions, as the company climbed up the ladder
from small businesses and departments to the enterprise. The biggest step
was the acquisition of Great Plains and brethren (Axapta, Navision, Solomon)
followed by the development of a homegrown CRM solution.
But good solutions can't have gaps. An e-mail "solution"
that doesn't include solid anti-spam functionality isn't a
solution. You can't tell customers that your solution requires them
to buy a piece of technology from other vendors, with all the headaches
that accompany integration, licensing and support.
While Microsoft's increasing willingness to fill technology gaps
with its own or purchased technology should raise a yellow flag for partners,
it's not a red flag. Partners will still find many opportunities
in working with Microsoft.
Microsoft has good reason to want to sell full solutions that customers
will find easier to license, deploy, configure and manage, and customers
will have good reasons to buy them. Developers who build high on foundations
that Microsoft has laid will find that they can move faster than the competition,
and when Microsoft improves the foundation, the independent developer's
product improves as well.
However, we need to be realistic. If you provide a product that is,
or is likely to become, critical to business in the future -- in short,
if you're filling a gap in the market -- don't count on Microsoft letting
you keep filling it.
Paul DeGroot is principle consultant with Pica Communications, which provides consulting services for customers with complex Microsoft licensing issues.