If this blog entry was a mockumentary film starring Sacha Baron Cohen's 'Borat' character, it would be titled "Cultural Learnings of Redmond for Make Benefit Glorious Future of ISVs". OK. You’re right. Less is more in a blog entry. How about we go with that classic Borat one-liner. 'Microsoft is dead.........NOT!'
Of course I'm referring here to the now ubiquitous Paul Graham piece titled “Microsoft is Dead”. After reading it, I had to ask myself is it possible that this obviously articulate and successful man also happens to be from Kazakhstan, and that his essay is really just a well-crafted Borat imitation? Or did I just miss the memo officially declaring that 'commentary' in the software industry has now been reduced to the kind of a-historical arguments and name-calling that one would expect to see at a UN General Assembly session discussing Israel?
While Microsoft's Don Dodge does a good job of defending the fact that Microsoft is actually quite alive and quite well, I have my own special reason for jumping in to this cage fight. And it has nothing to do with shamelessly scrounging up a little bit of philanthropy from the Gates foundation. My reason is this.
The “Microsoft is dead’ thing is just one more ‘thought leadership’ dead end for commercial ISVs. Why?
Because ISVs at every stage of development need to study and learn from the dominant market superpowers and natural monopolies like Microsoft. Learn what? How about the strategic discipline and best practices developed in their rise to the top. A little something I describe in my book as asymmetric marketing.
So let’s pull a few choice quotes from Graham’s blog to set up 3 simple points that support my argument that Microsoft and ‘Microsoft-ism’, aka asymmetric marketing, are more relevant to commercial ISVs than ever.
1. Graham Gets the History on Microsoft Dead Wrong
One aspect of Graham's thesis is based on his whopper-sized falsification of history. I quote. "I'm glad Microsoft is dead. They were like Nero or Commodus—evil in the way only inherited power (my emphasis) can make you. Because remember, the Microsoft monopoly didn't begin with Microsoft. They got it from IBM."
Sorry brother Paul. Microsoft did not 'inherit' its superpower status from IBM. Far from it. They creatively and stubbornly co-opted it through their own proven brand of competitive warfare, i.e. asymmetric marketing. Remember Paul, it was Microsoft, not IBM, that executed the marketing strategy behind the explosive 'clone' industry of the 80’s and 90’s, the basis for Microsoft’s future dominance.
And in point of fact, IBM has acknowledged this and openly demonstrated that they fumbled the strategic marketing ball by allowing their ‘non-strategic’ initiative in PCs to be co-opted by a small, outsourced software supplier from Redmond. IBM even vigorously sought to block and disrupt the rising market power of the asymmetric Redmondistas, first by changing the slot architecture of the PC in order to kill the cloners, and then via OS/2 to defeat Microsoft directly. But Microsoft successfully resisted IBM’s marketing countermeasures, and went on to leverage the market power they had co-opted from Big Blue into new markets.
And then they did what all customer-sanctioned natural monopolies in the software industry do. They leveraged their market power in one category into new categories, defeating market share leading ISVs like Lotus 1-2-3, WordPerfect, Novell and Netscape. Absolutely zero inheritance there as well.
Today’s ISVs need to see these 'category regime change' campaigns carried out by Microsoft, and the successful cooptation of IBM’s market power as the stuff of real, not imagined, software industry marketing history. They need to study and integrate that history into their own marketing strategies.
By the way, if you embrace the logic inherent in Graham's “inheritance of monopoly” argument, Google also can be seen as having inherited its market power… from Yahoo, via their ‘powered by search services’ deal that ran from 2000-2003, before Yahoo gave them the boot. Google, a very tiny company at that time, did exactly what MS did to IBM. They out-maneuvered Yahoo by co-opting Yahoo’s market power from within, via the SaaS equivalent of an OEM relationship, the ‘powered by’ model.
You’d also have to lump Adobe in with the monopoly ‘inheritance’ crowd based on their leveraging of the Apple LaserWriter PDF project into an industry standard called Acrobat Reader. Here's a link to a prior blog on how the systematic cooptation of 'non-strategic’ deals by emerging ISVs make future cross-category superpowers like Microsoft, Google, Oracle and Adobe. Not inheritance. Nowhere in the same gladiator ring as inheritance.
2. Graham Gets It Wrong on Natural Monopoly & ISV Opportunity
After getting his history wrong, Graham demonstrates that he really doesn’t get the fact that today’s superpower-dominated, natural monopoly software market landscape is a great opportunity landscape for ISVs---Especially in contrast to the banker-driven landscape of the bubble years. I quote, “I know when we started Y Combinator (Graham’s company) we didn't worry about Microsoft as competition for the startups we funded. In fact, we've never even invited them to the demo days we organize for startups to present to investors. We invite Yahoo and Google and some other Internet companies, but we've never bothered to invite Microsoft.”
What Graham is really saying here is that he and his startups are not interested in targeting the lucrative, installed-base ecozone of the world’s most successful software company. Strange to pass on that opportunity, when today’s CIOs overwhelmingly prefer to buy Web 2.0 solutions from established vendors, and established vendors often do OEM and ‘powered by’ deals with emerging companies.
Don Dodge, in his rebuttal of Graham, points out MS has 80,000 partners, a none-too-shabby number. A significant percentage of these are small and emerging category ISVs. These ISVs, by practicing 'symbiosis' with MS, not disruptive technology innovation (the state religion of California) against them, stabilize and grow their own businesses. They target the installed base of Microsoft with complementary products and services. They embrace, extend and expropriate, to put my own asymmetric marketing spin on that phrase made famous by the world's leading asymmetric marketer, Bill Gates. But natural monopoly is not unique to Microsoft.
The Oracle database natural monopoly also benefits many ISVs, as does the Adobe Acrobat natural monopoly, and the SAP ERP natural monopoly. And so does the eBay natural monopoly provide opportunity for an emerging generation of web 2.o developers seeking to attach to the eBay commerce and community platform.
The basic reality of the software industry is this. Asymmetric marketers like Microsoft, Oracle, Google, eBay and Adobe drive software and web markets in the direction of jagged edge, natural monopoly landscapes, and this is a good thing for startup and emerging ISVs. Even the rising stars act this way. Do you really think that on demand poster child Salesforce.com wants anything less than a future natural monopoly in cross-category on-demand apps in when it strives to morph it's CRM business into a 'platform' and messages that 'You can be the next salesforce.com’.
3. Graham Doesn’t Really Understand the Culture of Microsoft
I quote, “Microsoft's biggest weakness is that they still don't realize how much they suck.” I say…NOT. Their whole history is about coming to terms with competitive vulnerability, coming to terms with ‘sucking’ in all its forms in order to become a self-correcting superpower.
How about the Bill Gates Internet Tidal Wave memo, in which he lays out his own mistakes, praises competitors like Yahoo, Netscape, Sun and others, and lays the foundation for the successful campaign called the ‘browser wars’ of the 90's.
You see Paul, here’s the thing. Unlike the 5000 dead companies of the bubble, Microsoft did not begin its entrepreneurial life with a term sheet scribbled by a VC on the back of a Palo Alto bar napkin. They did it the old-fashioned ‘tribal culture’ way. They bootstrapped themselves, aggressively sold their way to fame and fortune, and along the way co-opted the market power and market reach of giants like IBM to advance their own agenda. They engaged in brazen acts of asymmetric marketing warfare.
The end result. Microsoft created a disciplined, tribal go-to-market culture capable of incubating new markets organically (Xbox multiplayer gaming) or through acquisitions (from Hotmail to Groove to TellMe). By the way, on the subject of disciplined culture, Eric Schmidt of Google, under questioning from Andy Grove (that other 'only the paranoid survive' evil, asymmetric marketing natural monopolist at the top of my list of role models) admitted that the well-publicized Google 'culture' also embraces this same disciplined approach in sales, operations, finance, legal and more. Now that’s scary.
After this rant I'm starting to like my long headline even more. "Cultural Learnings of Redmond for Make Benefit Glorious Future of ISVs". But the glorious future thing only happens if you watch the Redmond movie from the beginning.