Microsoft is making all sorts of more-than-irritating noises lately to just about anyone and everyone.

It’s not just product activation. The corporate sector is getting told essentially, “Give us more money and if you know what’s good for you, you’ll upgrade when we tell you ‘Jump.’

Why are they doing that? The reason is simple.

The Gravy Train Is Over

For most of its existence, Microsoft has had earnings growth averaging about 40% a year.

Those days are over. The easy pickings are over. You have three virgin markets left:

  • Those in the developed world who don’t want anything to do with computers
  • Those in the not-developing one who can’t even afford running water and electricity yet.
  • Those in the developing sectors who can.

    Those in the developed world will either be gradually forced to by circumstances, or will just die off. Not exactly a growth market.

    Even Bill Gates pointed out the absurdity of the second during some of his charity work.

    This leaves the third. However, if you or your company can barely afford a computer, you’re not too likely to lay out lots of money for software, especially when the handy nearby computer market bazaar is selling copies of anything you might need for a few dollars. That’s not going to change anytime
    soon, either.

    So unless Microsoft gets a nuclear capability, in the near term, they’re pretty much stuck with milking a mature marketplace.

    Microsoft’s growth rate has dropped from about 40% to more like 15%. I took a look at MSs most recent SEC report, and there is nothing they’ve got which is showing explosive growth.

    So what can they do to boost the growth rate? They can keep introducing new, slightly-improved products, but this hasn’t worked too well. People haven’t exactly been breaking down doors to upgrade to Windows ME, for instance.

    Even when MS has introduced a significantly better product (Windows2000), corporate users have taken their sweet time about converting from NT.

    There’s only so much you can do to improve a product like Office, too. It’s hard to justify a major upgrade expense just for one or two new features.

    This may make perfect business sense, but not MS business sense. To them, it’s like being a dairy farmer on a farm where the cows decide when they’re good and ready to be milked.

    Milk Them More

    So if you can’t find too many new cows, and you want more milk, you’d better milk the ones you’ve got a lot harder. If you look at the core of all MS has been doing, that’s the end result. They want more than they’re getting for what they’re doing.

    If you look at .NET, and you look at new licensing, what Microsoft wants is a bigger and guaranteed flow of revenue from corporate coffers. In the latter case, MS no longer wants to sell its products as one-time transactions. It basically wants companies to keep paying for new products and services whether they actually use them or not. It’s the difference between buying a car and being on a twenty-year lease where you pay for a new model every few years whether you take it or not.

    If you don’t want to be put on that schedule, and pay more, you can stick to one-time-buying, just expect to pay a lot more.

    In the meantime, product activation serves to round up the stray cows within easy reach to be milked.

    Will This Milk The Cow, Or Kill The Goose That Lays The Golden Eggs?

    At the very least, the timing on this is pretty bad. “Give us more because we want it” is a tough sell at the best of times, never mind now.

    I’ve never been too impressed with NET, or for that matter any ASP program, for the extremely simple reason that current Internet technology guarantees worse performance. I think the general concept makes
    a lot of sense down the road once that bottleneck is eliminated (which is not the same thing as saying it’s a good idea for Microsoft to have access to your data). Ten, fifteen years from now, maybe. Now? No.

    There’s this pervasive attitude of “we’re going to make you do what’s best for us, ’cause we’ve got you by the short hairs.” This is not the way to make friends and influence people. This makes the whole IE fiasco look saintly in comparison.

    All I know is that if I’m a corporate executive on the road, and OfficeXP stops working for some unknown reason*** at the start of a business trip, I’ve just been told MS wants me to pay 50% of what would be my upgrade bill every year or else, and the same guys
    are telling me, “don’t worry, in a couple years, we’re going to take care of everything for you,” the concept “No” is going to form very clearly in my mind.

    ***A couple people have speculated that power-down in a notebook may trigger that Office XP “I’m not working for you anymore.” That’s just speculation, but I’ve heard from better sources that if you make any kind of hardware change, that will trigger activation in OfficeXP.
    Just the thing to do to persuade people to hand MS more money. 🙂

    Email Ed

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