Microsoft's Quandry

I can't say I've ever been a fan of Microsoft. Honestly, I was on the bandwagon back in the 90s of pathological Bill Gates haters. I got over that this millenium, but never came to like Microsoft. Show them some respect perhaps, but not actually like.

It occurred to me recently, something that really should have dawned on me months ago when slashdot articles were talking about it, that Microsoft is in a tough spot.

Honestly, Microsoft gets some Kudos because they saw this coming ages ago. Not really ages, but early enough on that they made the Xbox. However, before I really go into detail there I'll explain exactly the jam Microsoft is now in.

Microsoft has, for a long time now, been utterly dominant when it comes to operating systems. Their market share at both home and in the office is probably only comparable to the NES and SNES days of Nintendo. There was always competition, but it never amounted to anything regardless of quality, everyone was already using Microsoft/Nintendo and changing was harder than the benefits it might bring.

Microsoft still is dominant, but it is not the unreachable giant it once was. While mindless hatred of the company has died down, faith in their products hasn't. Windows Vista, code named Longhorn, was originally meant to compete with Mac OS X, though it wasn't meant to come out at the same time. However, we've seen several more cats come out of Apple, and Vista is still in beta, struggling to implement features X had out of the bag. The other geeks I know sometimes call Vista, "XP designed to force people to buy better graphics cards and more RAM."

Now, I have no doubt that Vista will sell. It will sell for the same reason every version of Windows since 3.1 sold, market dominance. When an untalented computer illiterate person invests hours in learning Windows (again, because of market dominance), there is little reason to step out of what little familiarity you have in an industry of techno-babble and wizardry.

However, Microsoft has taken good note that with each new version of Windows released, they lose a little bit of ground. They maintain dominance well, but time is catching up with them and they know it. As Microsoft has grown, it's developement times have as well. Additionally, Microsoft has to deal with continual virus attacks, spyware and adware problems, and much, much more than either OS X or any version of Linux has to deal with. The price of market dominance is a severe handicap in other areas.

Microsoft hasn't given up on pulling through, but Microsoft isn't stupid. Their products may not always be bug free, their organization structure may be shoddy, and recently the pants may have been beaten off them several dozen times by newcomer Google, but they're hardly out of the game. Still, Microsoft can see (and did see some time ago) that the monopoly like dominance they've enjoyed is not permanent, and long before now took steps to prepare for such a time.

Many, many, many times in the long, flammable debates concerning how well any given video game console is doing, it is always brought up that Microsoft and Sony work on a different model than Nintendo. Nintendo is solely and video game company, and if they don't turn a profit they sink. Microsoft and Sony are multifaceted megabusinesses that can draw on resources from one division to make up for loss in another. This is important because it explains how Microsoft can be taking quarterly losses continually from the Xbox and keep on trudging, as well as explain why they continue to push the Xbox and its successor forward despite that many would have stopped throwing good money after bad.

Microsoft may be multifaceted, but it is solely in the respect that Windows and its assorted products are viable in many different kinds of computer markets. Servers, home computers, office computers, PDAs, palm pilots etc. Microsoft has the OS and software for it. The vast majority of all Microsoft divisions deal in software. Possibly the only (at least that I am aware of) division dealing in the creation of unique Microsoft hardware is the division housing the Xbox. Everything else either is Windows, or runs on it.

For a long time, Microsoft could challenge anything and anyone, resting on the fortress of Windows' dominance in the home and business PC markets. Any and all challengers to Microsoft were crushable, simply because those markets provided Microsoft with all the finances they needed to do anything, and then some. Their strategy has been to tie everything neatly to Windows so that its dominance is maintained, and also succeed in moving Windows into another market and increase its profitability.

The Xbox is directly related to that. With foresight Microsoft saw that in the near future, Windows was bound to face stiff competition and barring decisive victories decline from market dominance. The answer? The Xbox. The same youthful computer aces that disliked Microsoft played excessive amounts of video games. Why not try and win their hearts with what they love, and create a back up source of revenue to support Microsoft in what would otherwise be a losing battle to maintain dominance. It goes deeper than that, but the basics of why the Xbox came to be lie in there.

The necessity of this can not be stressed enough. Unless Microsoft can build for themselves a steady source of revenue that does not rely on Windows to function, when Windows falters it too will falter, and defeat its very purpose of supporting Windows when its unsteady. That is why Microsoft is willing to have one profitable quarter out of a nearly twenty and still keep funding the venture. If they don't, they'll regret it. The only alternative is to engage in a battle of pure brute force versus everyone else, and it doesn't take a champion strategist to see the folly there.

If the Xbox 360 doesn't fly, Microsoft may try to build elsewhere, but I can't see where. In all likelyhood they'll keep making generations of Xboxs until Windows can no longer support them, or until they succeed.

It is important to take a look at exactly what Microsoft is doing with the Xbox 360. They are trying to A) make it successful and B) tie it into Windows, but not in such a way as that if Windows is doing poorly, so will the Xbox. They are hoping (whether it is beyond hope or not is debatable) that the Xbox 360 will be successful (either in spite of or because of Windows) and that in being successful it will promote and strengthen Windows. The scary thing is, both Sony and Microsoft want their consoles to be in controll of as much of your entertainment as possible. It's only a step up from that to controlling everything.