Is This the Beginning of the End for Enterprise Software

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Is This the Beginning of the End for Enterprise Software?

Is this the beginning of the end for enterprise software?

Today Microsoft announced it’s downsizing by 5,000 people over the next 18 months. More interesting is it’s laying of 1,400 today.

That has to be a painful thing for any company to do, and obviously nobody gets joy from people losing their jobs. Like the rest of us they have families, mortgages, hopes and aspirations.

Onlookers who haven’t been involved in the software business will have trouble understanding how this can happen. After all Microsoft has dominated the desk top for more than 25 years. Apart from those strange Apple freaks (me included) everybody uses Microsoft software whether they like it or not.

Anybody who has been involved in the business for long enough won’t be surprised. They can remember the halcyon days when “nobody got fired for buying IBM“.

There was a time when IBM, Burroughs, Sperry, Honeywell and ICL ruled the roost, not only for hardware but software as well. The independent software industry consisted of relative bit players, like Dun & Bradstreet. SAP was just a funny little German outfit with ledger software.

As the boys in investment banking discovered recently nothing goes onward and upward forever.

IBM started to lose the plot when Digital Equipment Corp (DEC) started offloading apps from the mainframe with cheaper MIPS. But dug it’s own grave when it chose MSDOS for its desk top hardware. That was the birth of Windows.

IBM is still there after frighteningly painful restructuring in the 1990′s, and after acquiring Price Waterhouse Coopers. DEC got taken over by Compaq which itself was swallowed by HP. All of the others are effectively out of the main computer business, alongside a host of once mighty software businesses.

So, if nothing has lasted forever in the past why should it now? Microsoft is history, it just doesn’t know it yet.

Anybody building a business model based on a technology is going to get taken down when the technology changes. Not because they can’t handle the technology but because they can’t handle the changes in cost structure that comes with it.

In its path to world domination Microsoft attracted an entire ecosystem to support it. Hardware partners needed ever more hungry software to overpower yesterdays cpu and memory, so we’d have to buy new. Distributors needed ever more complex features to keep their customers asking for expensive support. Enterprise IT people needed even more features to stop their “lunatics” taking over the asylum.

And Microsoft won that battle, but in technology nobody ever wins the war. There’s always a new kid on the block trying to undermine the serenity of permanent exploitation of the customer.

Google Mail may not have killed off Outlook, but it’s holed it below the waterline. Google Apps and Open Office may not have killed off Office, but it’s done the same. Internet technologies may not have killed off desk top computing, but combined, all the people contributing flexible, simple, secure, manageable software have offered a realistic alternative.

All of this for free, or close to it.

Surely, Microsoft can build systems with HTML as well as anybody else. What it can’t do is live with the new cost model. All the feature builders and enablers that built the fortress cost money, and the prices charged by new competitors just won’t allow that level of overhead.

So the challenge for Microsoft is how to compete in this new low cost, minimal feature world without burning the very people who gave it dominance.

It can’t do it. It can’t restructure its business as fast as the market is demanding.

Downsizing a business is the most difficult job for anybody. Transitioning from one business model to another is something no IT vendor has successfully managed.

So this is the beginning of the end for Microsoft. SAP and Oracle won’t be far behind.