Google and the Coming Search Wars, Revisited

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But while the New Age Theory doesn’t apply to the Web, it does increasingly apply to the software market.  After completing the Google article, I had embarked upon research for my upcoming article, on open source software and the challenge it poses to Microsoft and the traditional software industry.

And here I found an unexpected convergence between another criticism advanced against the Google article and my new research.

On the one hand, my research on open source reconfirmed my view that standardization, platforms, and APIs and will prove just as important in the future, and in the search industry, as they have in traditional PC software and many other sectors.  On the other hand, I also found strong reasons to think that the open source movement is changing the nature of standardization contests, and represents a powerful threat to Microsoft’s control over mass market software.  Consequently, as new standards emerge, Microsoft may not be the one to control them.

Several people responding to my Google article argued that I had simply overestimated Microsoft, which, they said, was now at best mature and possibly in decline.  I increasingly feel that they were correct.  By relying too heavily on its monopoly control of Windows and Office, Microsoft has painted itself into a corner.  Both Microsoft and its products are now large, aging, complex, and very expensive, rendering them vulnerable to attacks from below.  Open source software, with its low cost, transparency, and decentralized development model, threatens the very foundations of Microsoft’s power.

Large computer vendors, corporate users, and governments have become increasingly frustrated by Microsoft’s behavior, and they are actively funding subversion, most notably in the form of the Linux operating system and applications based upon it.  And, as I shall discuss at length in my forthcoming article, they’re winning. 

The result is that Microsoft now faces increasingly serious threats to the entire spectrum of its mature businesses while it simultaneously tries to enter growth areas such as the Web, mobile devices, and the game industry.  Thusfar, with the partial exceptions of the Xbox game system and the MSN portal, Microsoft’s progress have been singularly unimpressive.  When I have asked knowledgeable friends recently about this, most of them say the same thing:  Microsoft has lost its edge.  It’s over.

There seem to be three reasons for this. 

First, Microsoft has gotten addicted to the money derived from repeated forced upgrades.  As a result, it is now a high-priced incumbent with large, aging products -- an inherently poor position when faced with a less expensive, newer competitor such as Linux. 

Second, Microsoft has become a large, politicized, often complacent company.  Many of its senior employees are now so wealthy that they don’t have to work hard, take orders, or worry.  The CEO is a former Procter & Gamble brand manager, not a technologist, and the company is so large and complex that politics inevitably distorts information flows.