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Microsoft Feels the Economic Pinch

Happy New Year! Now, for the bad news: The economy is still, well, not great. And everybody's feeling the pinch, including the folks in Redmond.

Microsoft's going to have to tighten its belt, just like almost everybody else. The question at this point surrounds just how many notches are going to get cinched in Redmond. Rumors of big layoffs persist, but Microsoft says that that sort of thing won't be necessary. A few contractors here, some cost cutting there, and 2009 will be tough but manageable, the folks in Redmond insist.

Fair enough. We certainly don't want to see anybody lose his or her job -- even if Wall Street types think that a big layoff would be a good idea. Then again, who trusts Wall Street types anymore? Aren't they one of the reasons we're in this mess?

We here at RCPU would prefer to look at the potential silver lining in the cloud gathering over Redmond as the new year dawns. Cost cutting could lead to more focus at Microsoft -- and would that really be the worst thing, as long as most folks could keep their jobs? (We'll admit that we don't know how or whether it would be possible to cut costs and refocus operations at Microsoft without shedding jobs, but then we never did go back to school and get that MBA.)

Instead of trying to dominate every facet of the technology industry and a few others, maybe Microsoft could focus more resources on reworking its business models to adapt to changes in the software industry, specifically Software-as-a-Service and other, similar "Web 2.0" models of software licensing (even if some of those models might require some trial and error). Clearly, the wheels are in motion in that direction; the Azure platform, Dynamics CRM and a raft of other announcements are proof that Microsoft sees a changing tide on the horizon and is bracing to ride the coming waves.

But battleships like the USS Microsoft, while resilient, are also tough to steer, and this economic hiccup might be a great opportunity for Redmond to de-emphasize, say, its quixotic quest for search dominance or its obsession with competing with Apple's consumer gadgets. Hey, we understand that Microsoft needs to diversify, but the quicker and more coherently a SaaS plan comes together, the more effectively partners -- who hopefully will play a big part in it -- can take it to their customers.

And the more effectively Microsoft can continue to remake itself in a changing software industry. Again, we know that Microsoft's on board with new business models. It's just that now might be the time to jettison some of the peripheral stuff while there's an easy excuse for doing it.

What would you like to see Microsoft focus on in 2009? Let me know at lpender@rcpmag.com.

Posted by Lee Pender on January 06, 2009 at 11:55 AM