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A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.



Something Ventured:
November 18th, 2005

By Brent Holliday
Greenstone Venture Partners


Interesting Vista


“Look up - Look down,
Look out - Look around,
Look up - Look down,
There's a crazy world outside,
We're not about to lose our pride” – Yes, It Can Happen


I spent a bit of time with Microsoft this week, as did a few other local VCs and entrepreneurs.  Dan’l Lewin (I never got to ask him where the apostrophe came from), the VP of Business Development for .Net spoke to a lunch crowd at this year’s very successful Financing Forum here in Vancouver.  He gave a buzzword-compliant, starchy overview of how start-ups can leverage Microsoft.  If you listened carefully, he was mapping out a very helpful partnering strategy that some local companies like Ten Digits, Flowfinity and Gale Force have been adopting successfully already.  Earlier, I saw my first preview of Vista and Office 12, the two huge product launches for next summer or early fall.  This exposure to Microsoft got me thinking about where they are headed as a company, especially in the face of the new $110B juggernaut called Google.


First, my summary of Vista:  Have you seen Mac OS X?


OK, seriously, Microsoft is doing what Microsoft always does in the market, they embrace and adopt what other trailblazers have already tried and proven.  This is their “fast follower” strategy, even though they never outright admit it.  Vista is laden with a great new user interface (UI) that allows you to see through the “windows”, rotate them in a 360 degree space so you can look through them like a stack of papers and see live previews of each window as a thumbnail, so that Alt-Tab is a lot more useful than it is today at finding the right window pane.  Well, gosh, isn’t that what Apple came up with in their OS?  In fact, the new transparent buttons and menus system looks extremely similar.


If the main theme of Vista and Office 12 is simplifying the UI, both in terms of presentation and programming capability, the second theme is the removal of the file folder structure of old by embedding fast text search into the OS and into Office 12.  Trying to elbow in on the success of companies like X1 (now Yahoo desktop search) and Google, Microsoft is embracing the concept of metadata tagging and fast searching to let you find and sort all of your documents by subject, author, content or whatever taxonomy you want.


I find it very interesting and a bit of a conundrum that Microsoft is spending between $6B and $8B a year on research.  They have some of the brightest minds on the planet working in their new century version of the 70’s Xerox PARC (progenitor of such things that Xerox never figured out how to commercialize, like the graphical user interface, the laser printer and, oh, yes, the PC).  What has it spun out?  Where is the ROI for that spend?  They claim to have added significant data mining capability to SQL Server 2005 for instance.  But I’m not sure they are getting the bang for their research buck, at least not yet.  In fact, there is a web site where they shop ideas that they have created and have no immediate use for, in order to license away some of their inventions.


Many folks have dumped on Microsoft recently with the launch of Microsoft Live for consumers and, soon, Office Live for small and medium sized businesses.  Once again, they show up with a glitzy launch for a lightweight, web-based information product about a year after everyone else discovers Web 2.0 type functionality.  Then the Ozzie memo circulates that lets us all know about an internal shift in Microsoft to adopt the next generation of web services technology immediately.  Another famous memo was “leaked” at another critical time in Microsoft’s history (the famous December memo from 1995), leading to a fundamental change in how they viewed the Internet.  The company went on to crush Netscape and re-assert itself as the dominant player.  Will it happen again now?


You have to bet on this company getting it right.  As long as Bill Gates is alive, the master of adopting and out-witting the competition with his $25B in cash must not be bet against.  The current criticism of the company sounds familiar and it is certainly warranted. But most critics I have read are saying its “different” this time, that there are structural and architectural differences that will keep Microsoft from asserting its dominance again.  To wit: open source and its ability to adopt new advances at light speed with the community of developers will always trump a company trying to change legacy code in a way that won’t cannibalize its user base.  Another popular theme: Google is far more prepared than Netscape or Sun were in the last Internet battle with $5B in the bank and a market cap nearly half of Microsoft’s already {My 2 cents is that media companies have more to worry about with Google than Microsoft, but that’s another story}.  And another theme: the world has moved to services and, although they talk a good game, Microsoft is stuck in a user license business model that cannot adapt to the new reality of software as a service.


These are all valid points and Microsoft has a hard battle in front of them even though the battle is likely to be mostly internal rather than in the marketplace.  But, I’ll say it again: Don’t bet against them.  Vista is an evolution that catches them up with other competing technologies and the vast user base will be sheep-like in their adoption of it.  Enterprise IT managers will not make a jump to Linux on the desktop and Open Office when Vista offers a “smooth” upgrade path. There will be erosion around the edges of Microsoft’s market, but the core will still be massive, especially among the developer communities.


It will be a remarkable few years ahead of us watching this play out.  Our job as entrepreneurs and investors is to listen to our customers and use the technology that meets their needs today and tomorrow.  Our theme is always going to be interoperability and integration with existing systems in order to build, support and service the needs of the enterprise and consumer customers.  Their job is to get us to use their stuff.  These differing mandates often collide as we get stuck trying to pick one horse or another in a technology race. 


What Do You Think? Talk Back To Brent Holliday


Something Ventured
is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks).

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