The Biz of Coding

Microsoft Vista’s low sales expectation shows Ignoring customers doesn’t work

by Ujwal Tickoo on February 20th, 2007

Microsoft Vista's Lowered sales expectations, is a result of the company's not keeping customers at the core of its OS upgrade agenda. (Microsoft recently acknowledged that Vista will find moderate uptake in 2007/2008.) Why isnt an OS that took several years to build – attractive enough for consumers? Common Sense can answer this question quite easily. When you build a solution for painful consumer problems, consumers flock to you.

No matter how often Microsoft states the opposite, consumers were not at the core of the Vista upgrade — competitors were. Vista carried the agenda of getting even with Internet giants Google and Yahoo!; besides copying several features of Mac OS, integrating Adobe PDF like functionality and then throwing in those extra bits. No surpise, Microsoft's consumers don't care?

However, the lesson isn't learnt. Ballmer stated that the company was planning to spend money to acquire online customers to win against Google. The bad news is that several industry experts and Linux backers were predicting that Vista won't take off while Google has been busy readying its Online Office suite.

Why Microsoft's claims of Consumer focus are self-absorbed talk

Since the time of bundling IE with Windows to bury Netscape, Microsoft has been primarily busy copying the benefits of new platforms and applications that could threaten the future of Windows and its applications business for Windows. Then to suit its business goals Microsoft has called this behavior — consumer focused activity. Ofcourse if 90% people of the world are given an OS upgrade that copies innovative non-Microsoft technologies into Windows, it could be theoritically considered consumer focused activity.

  But when you merely copy a Google, or a Yahoo! or an Adobe — you lose consumer intimacy with early adopters of technology. You also lose the learnings that comes from taking financial, product development, and marketing risks to build new technology products or shaping new markets. Thus, in the short term you do maximize business gains by copying competitors. In the long term you lose touch with an important set of consumers who help select new products and technologies for future consumption. Consumer intimacy with early adopter consumers, is one of the essentials to build new path-breaking software.

Note, that I am talking about consumer intimacy with early adopters of technologies, not mainstream consumers who are happy to beta test a copy of Vista to check for compatibility issues. 

When Steve Ballmer said that analysts' forecasts for Vista revenue in 2008 were "overly aggressive", Paul Kedrosky believed him. Paul says that Ballmer is not gaming the market and notes that although Microsoft "has long loved scaring analysts into conservatism early in a year, only to beat the reduced analysts through the year. This time is different… Rather than saying numbers looked high, overall, Ballmer was talking down specific numbers on…Vista.")

I like the summary of Ballmer's statements done by Roger Ehrenberg on his blog Information Arbitrage:

Ok, so in English, what I hear Steve really saying is:

1. 2008 Vista revenues will not meet expectations; therefore
2. Microsoft will incur lower operating expenses, because we just aren't selling what we'd hoped; and
3. Since we don't have many attractive ROI opportunities in our core businesses we'll continue to buy back gobs of stock; and finally
4. We may need to further scramble in search and other means of online customer acquisition since we are continuing to get the crap kicked out of us by Google.

It seems Vista may symbolize Karma catch-up time for Microsoft.

POSTED IN: Microsoft