Maybe I was channeling Larry Dignan earlier today in my polemic against Microsoft’s profligate insistence on trying to crack the consumer space at the opportunity cost of focusing more on the enterprise.
In his ZDNet column, also available at Seeking Alpha, Dignan wonders about the sagacity of Microsoft’s insistence on trying to capture an unwilling Internet consumer market while the enterprise is beckoning for more attention.
Instead of chasing Yahoo, plotting to be an advertising empire and pining for consumers with things like the Xbox and Zune perhaps what Microsoft really needs is an IBM moment of clarity. Remember IBM? Big Blue used to do everything too, but then it suddenly got it. IBM unloaded its PC business to Lenovo and started focusing on the two things that were insanely profitable: Software and services. Oh yeah, the hardware is still there too, but IBM is all about enterprise and helping business get stuff done.
IBM’s public persona may have taken a hit with the average consumer–it’s not like Tivoli, Rational and IT services are discussed at picnics–but there’s no question it made the right move. IBM is more profitable than ever. And it’s focused.
Microsoft could use some of that focus. It’s not that Microsoft is forgetting the enterprise business. In fact, Microsoft is hellbent on being the No. 1 enterprise software company. The problem: That enterprise windfall is funding things like Live Search and Xbox. I credit Microsoft for its willingness to invest and be tenacious, but you have to wonder about the returns here.
Dignan wonders about the returns, I wonder about the returns, and Microsoft investors should wonder about the returns.
Actually, they ought to do more than wonder. What they should do is pepper the Microsoft executive team with hard-hitting questions about the feasibility and viability of these consumer pipe dreams. They should demand to know why Microsoft believes the time and money spent on an aborted acquisition of Yahoo shouldn’t have been spent on furthering the company’s advantage in enterprise solutions, including business-oriented web services.
Essentially, Microsoft’s investors need to keep the company focused and accountable. The Ballmer-led Microsoft is in serious danger of heading off in too many directions for too little return on investment.
Of course, Microsoft’s executive team will argue that it can win in both the enterprise and consumer markets. It’s up to the company’s investors to temper that hubris by pointing to Microsoft’s past performance and its corporate DNA — which, as Dignan points out, doesn’t exactly augur well for success in the consumer realm.