Mind the Gap

Does your business fill a niche where Microsoft doesn't play now? It may not be the case for too long.

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.

About the Author

Paul DeGroot is principle consultant with Pica Communications, which provides consulting services for customers with complex Microsoft licensing issues.