10 Things Microsoft Fumbled in 2007

From a financial perspective, 2007 was likely a good year for Microsoft. The software giant is expected to announce healthy earnings for the year later this week, and the release date for three of the biggest products in Microsoft history – Windows Server 2008, SQL Server 2008 and Visual Studio 2008 – is a bit over a month away.

Yet despite these positive developments, I’d imagine that a few Microsoft executives are looking back on 2007 with mixed feelings. Several significant products – from Windows Vista to the Xbox 360 – have suffered sizeable setbacks of one form or another, and a host of the other small mishaps, gaffes and kerfuffles have had Microsoft doing damage control throughout the year.

In the interest of adhering to the national obsession of creating lists, I’d like to present the first annual installment of the top 10 things that Microsoft fumbled, booted into the weeds, or otherwise wished they could get a “do over” on from 2007. (In the interest of fairness, we’ll also be posting a list of the things Microsoft can look forward to in 2008 next week.)

Part of the difficultly in putting this list together was narrowing down my entries to the required top ten. Some of the items that didn’t make the list: Microsoft’s ongoing skirmishes and travails over state and foreign governments over the open document format (ODF); the obscenity-spewing MSN Santa Claus that entertained (or, alternatively, horrified) people who were..ahem..."exposed" to it; and the obscure Microsoft patent that reportedly allows Redmond to read our thoughts via Microsoft Office. (I’m not sure that fashioning a helmet made of aluminum foil will prevent the Edward Nigma-esque device hidden in the basement of the Microsoft campus from reading our thoughts, but it may not hurt to try.)

So with that in mind (and tongue partly in cheek), let the list-making begin!

1. Virtualization, Shmirtualization

I attended a Microsoft Reviewer's Workshop a few months ago, and Microsoft put a brave face on their virtualization efforts. Sure, Hyper-V looks promising, as do some of their other recent announcements in the virtualization arena. That said, Microsoft has a bit of catch-up work to do. VMware has a sizeable lead in server virtualization, both from a market share and technology perspective. Paul Venezia at Infoworld suggests that “Microsoft’s Hyper-V is roughly analogous to VMware Server 1.0, although not as polished.” ESX Server 1.0 was released a while ago. Like in July of 2006. That leaves Microsoft roughly two years behind where ESX Server is today, but also doesn’t factor in all the other advances that VMware has made in the areas of live migration, virtual machine management, and other areas.

Sure, Microsoft put the smack down on Lotus, Netscape, and WordPerfect on their way to world desktop domination, leaving those companies as damaged goods, ripe for takeover or dismemberment. But for every company like Digital Research and Novell, companies like VMware and Google have proven that it is possible to compete with Microsoft. VMware has two things going for it that most of these other Microsoft competitors never had: a demonstrably significant lead in technology, and a dominant, entrenched market share with large enterprise clients. I’m sure Microsoft’s virtualization efforts will improve over time, but VMware has a head start—and won’t be waiting for Microsoft to catch up.

2. Chasing Google

Speaking of Google, here's another area in which Microsoft has been sucking the exhaust fumes of the competition. Google has emerged as the desktop search standard, and Windows Live Search -- despite numerous name changes and shifting marketing strategies -- is still battling with yahoo for second place.

It's clear that Microsoft has made big strides in their race to catch up with Google, but Microsoft has a long way to go to reach parity. Google is beginning to nibble around the edges of the dominant Microsoft Office suite with their online Google Docs effort, and Google's push into mobile phones indicates that Microsoft will have to defend yet another market segment from Google’s advances. I wish I had a dollar for every time that a Microsoft executive (privately, no doubt) used the word “Google” and their favorite expletive in a sentence. Do you think I’d be a millionaire by now?

3. Has Your Xbox 360 Failed Yet?

I'll admit I'm wholly biased here, since I'm the owner of an Xbox (which died back in 2004), an Xbox 360 Steering Wheel (which needs to go back for warranty service), and an Xbox 360 (which displayed the infamous blinking ring of death last year). Microsoft did replace our Xbox 360 in record time -- it arrived before Christmas -- but I'm an admitted Microsoft video game skeptic now. In the span of time between the death (and subsequent resurrection) of our Xbox 360, my kids picked up their Nintendo Wii controllers and haven't looked back.

I'm trying hard not to imagine Stan Laurel and Oliver Hardy supervising the Xbox hardware quality control team, but it's not easy. Given these hardware issues, a recently-filed lawsuit over Xbox Live and the continuing dominance of the Nintendo Wii, Microsoft’s gaming initiatives appear to be losing steam.

And it could get worse: the PlayStation3 is gaining share thanks to price cuts and big upcoming game releases (think Gran Turismo 5 Prologue and Resistance: Fall of Man 2), and the included BluRay DVD player in every PS3 seems increasingly like a sharp move on Sony's part -- BluRay now appears to be the victor in the high-definition DVD format war with HD-DVD, and Microsoft (and by extension, the Xbox 360) was backing the latter. Regardless, the Microsoft Games group has their work cut out for them in 2008.

If you’ve had an Xbox 360 fail, I feel your pain. So does fellow Xbox 360 owner Doc Adams, who put together a ballad about his exchange with Microsoft over his expired game console, set to the Johnny Cash classic Ring of Fire.

4. Microsoft, P.I.

I’ve worn many hats over the years, and part of my experience included a few years as a PR Manager for a video game publisher. I learned a few things from the experience. Organizing a press event can feel a bit like herding cats, and PR is most definitely not a job for the weak-willed. I’d wager that most tech journalists are a friendly bunch, but I’m sure some of us are high-maintenance types. There’s always a prima donna from a large publication (with an ego to match) that needs to feel like he’s getting better information than the B-listers, and the kindly older journalist that likes to spin tales of what the industry was like in the days of 5.25” floppy disks and 8088 processors.

So I have some empathy for the PR exec at Waggener Edstrom – Microsoft’s PR agency – that inadvertently sent a journalist’s dossier to that journalist by accident. The reporter in question was Wired Magazine’s Fred Vogelstein, who was working on an article about Channel 9, a Microsoft video blogging initiative. Microsoft was clearly doing its homework by generating some background info on Vogelstein, but the idea of someone compiling exhaustive dossiers on journalists seems, well, a bit Orwellian.

The FBI did the same thing during the Cold War when they were looking for communists, but does a tech journalist writing about a video blog rate the same treatment? Now I’m imagining the Mission Impossible soundtrack playing while Microsoft staffers whisper into shirtsleeves and drive around in blacked out Lincoln sedans equipped with Microsoft-developed FordSync mobile technology, obviously on the hunt for tech journalists with questionable loyalties.

I’m sure that I don’t rate a Microsoft dossier yet, but I’d imagine that my colleagues Karen Forster and Paul Thurrott have voluminous, leather-bound dossiers with their names etched in gold, perhaps perched prominently between marble bookends in the office of a Microsoft PR bigwig.

5. Tale of Two Gadgets: Zune and the iPhone

Whereas Apple seems to be working towards convergence – with the iPhone representing the best example yet of a single device that serves as a PDA, MP3 player and mobile phone – Microsoft’s strategy seems more fragmented. Microsoft’s approach is to work on a portable media device of their own (the Zune), while working with mobile phone vendors mainly by providing them with software. In a recent interview with a German newspaper, Microsoft’s Bill Gates was quoted as saying that “In the so-called smart phone business we will concentrate solely on software with our Windows Mobile program...we have partnerships with a lot of device manufacturers from Samsung to Motorola and this variety brings us significantly more than if we would make our own mobile phone.”

It’s clear that Windows Mobile-based smart phones will rule the corporate roost for years to come, but the iPhone and looming competition from Google’s Android mobile phone project could translate into even more competition for Microsoft.

Given all of these trends, it’s hard to imagine the Zune remaining a viable device as a stand-alone media player. The latest Zune may be a vast improvement over the original, but Microsoft appears to have arrived at the digital music party a few years too late.

There's also a big question about where Microsoft takes Zune in the future. Will it maintain the device as a low-cost, high-feature alternative to cheaper iPod models? Or will Microsoft introduce mobile phone capability to the Zune and then alienate their Windows Mobile phone partners? Microsoft has been very tight-lipped about the future of the Zune, so who knows?

6. The Eastern Front: Microsoft’s European Problem

I don’t know about you, but I’m getting the impression that European antitrust legislators don’t like Microsoft much. Microsoft recently settled a long-running legal battle with the EU over bundling issues with Microsoft Windows, and it now appears that the European court is back for another swipe at Microsoft, this time over two new complaints. The first is from a group of software makers known as the European Committee for Interoperable Systems, and they claim that Microsoft hasn’t been providing enough information to competitors about how Microsoft software operates, making it difficult for them to create applications that work with products like Microsoft Office. The second complaint is from Opera Software, a small Norwegian software developer that produces the Opera Web browser. Opera claims that Microsoft is still using its dominant market share in desktop software to unfairly restrict competition with competing web browsers.

One can imagine that Apple and Google – which have arguably exhibited plenty of bad corporate behavior of their own in their respective markets – will face the same level of scrutiny as Microsoft, but recent history doesn’t seem to bear that out. My advice to Microsoft execs? On your next trip to Europe, be sure to tip well, smile often, speak fondly of the value of the Euro, and learn how to say “But what about Apple and Google?” in French and German.

7. Marketing Moniker Mashup 2008 SP1

I'm no marketing genius, but I'd like to send this one out to Microsoft's marketing department. I'm sure their ranks are filled with people who are far smarter than I am -- likely sporting MBA degrees from prestigious schools with ivy-colored walls, and bearing business cards stamped with very long titles -- but I have to ask: What are you guys thinking?

Here at Windows IT Pro, we've had to correct each other several times about the differences between various Microsoft product names and marketing strategies over the last year, and we cover Microsoft on a daily basis. Case in point: The branding strategy behind Microsoft's online efforts is positively Byzantine. Windows Live is supposedly all about online applications like email, sharing photos, and communicating with friends. But Windows Live Writer is an offline application for writing and editing blog posts. Despite the name, Office Live Small Business doesn't actually have anything to do with Microsoft Office -- it's essentially a web hosting solution. Then we have Office Live Workspace, which doesn't have anything to do with creating Office documents online -- it's basically an online storage space for Office files and documents.

But wait! There's more marketing confusion ahead. At last count, there are eight planned versions of Windows Server 2008 (not counting the many 64-bit versions, which would bring the total to more than a dozen). Then there are bundled Server 2008 products like Windows Centro, which has been renamed Windows Essential Business Server. Okay...so does this mean that other Windows server products aren't essential?

Maybe Microsoft has a big template on their wall that directs staffers to create product names in the form of "Microsoft [Noun] [Adjective]" or "Microsoft [Adjective] [Noun]" If that's the case, I'd really prefer something a bit more distinctive -- even something like "Windows Live Jive" or "Microsoft Happy Office 2008" -- at least they would be easier to tell them apart.

I'm convinced that the marketing department of Microsoft is filled with brilliant, dedicated, and genuinely nice people. But if the Windows IT Pro editorial team staff is frequently scratching our collective heads about parts of Microsoft’s branding strategy, what does this mean for potential customers? I’d wager all this marketing fog is confusing customers, and confused customers tend to sit on their wallets until clarity emerges. With Google and VMware now giving Microsoft more competition than it’s had in years, does Redmond really want to have a befuddled customer base sitting on their credit cards and purchase orders?

8. Vista Falls Short

Despite all the rosy pronouncements about the success of Windows Vista, it’s clear that Microsoft’s latest OS isn’t doing as well as Microsoft would have hoped. On the sales front, Microsoft sold 100 million licenses in 2007, compared to PC sales of 270 million in the same year – a disparity that my colleague Paul Thurrott describes as a “big and obvious problem."Then there’s the staying power of XP, which has proven to be more successful that Microsoft would care to admit. Some independent product tests have proven that XP SP3 runs significantly faster than Vista SP1 when running Office applications, a development that may give cash-strapped IT managers yet another reason to delay the move to Vista.

Even the messaging on Microsoft’s official Vista Web site seems to recognize that Vista isn’t delivering on expectations, with quirky exhortations that sound more like political slogans than product advertising. Here are two examples: “Since the launch of Windows Vista, people are more confident.” and “Since the launch of Windows Vista, people are more convinced.” I have a few suggestions that may help: “Since the launch of Vista, you look more attractive”, or “Since the launch of Vista, you have more friends”. Yet despite these happy thoughts, it’s abundantly clear that Microsoft’s once optimistic sales targets for Vista have fallen by the wayside.

So what will be the fate of Windows Vista? Some claim Vista will suffer the same ignominious end as Windows ME, while others argue that Vista is the only real alternative to Windows XP, and that migration is simply a matter of time. Regardless, it’s clear that Vista is off to a rocky start.

9. Windows Vista Not-So Ultimate

Speaking of Vista shortcomings, none may be as glaring as Windows Vista Ultimate. Billed as the penultimate incarnation of Vista, Windows Vista Ultimate is promoted as “having the most advanced capabilities--they're all here.” Well, not all at once, as Microsoft has been painfully slow at adding new Windows Ultimate Extras, which were billed as being “exclusive software and services that give your Windows Vista experience an extra lift!”

As of this writing only a handful of those extras have been made available, a development that irks the people that shelled out up to $399 for Vista Ultimate. Is it worth an extra $160 (over the cost of Vista Premium) for the DreamScene animated desktop, BitLocker Drive Encryption, a multilingual UI and a re-skinned poker game? I’m sure Microsoft had good intentions went it decided to created Vista Ultimate, but the execution leaves much to be desired.

It’s tough to see Vista Ultimate as little more than an attempt to squeeze more money out of Microsoft’s most loyal supporters, a perception that Microsoft would be wise to address in the coming year. Steve Jobs has recently lampooned Microsoft’s Vista marketing strategy, and rightly so: Does Microsoft really need to have four different versions of Vista aimed at the home and small business markets?

10. We all Scream for WGA

Falling somewhere below the approval ratings for President Bush and the Democratic Congress is Windows Genuine Advantage (WGA), Microsoft's copy protection scheme for their Windows products. Some industry wags have suggested that WGA is a misnomer, as it is neither genuine nor an advantage. There’s no question that software piracy is theft, but is a potentially disruptive system like WGA the best way to prevent piracy?

A major failure of the WGA system in August 2007 resulted in many legitimate owners of Windows being notified that their software was unauthorized, essentially implying that these paying customers were slimy software pirates. According to a post on the official Microsoft WGA blog, the outage was caused when “when preproduction code was accidentally sent to production servers.” It’s important to note that the glitch was promptly fixed by the WGA team, but the failure highlights the difficult balance Microsoft must take between protecting their products and unnecessarily inconveniencing legitimate customers.