What's Going On With Microsoft?

Today the biggest news was the profit warning issued by Microsoft. Their sales would be less than expected ... quite a bit less. The stock market reacted, and the tech stocks all dropped significantly.

What's going on? It's pretty simple really. 

To begin with, the entire personal computer market is softening for a variety of reasons (perhaps a subject for a future article). Sales all over at virtually every computer company are dropping, sometimes significantly. Drops in sales of personal computer hardware can certainly be expected to be translated to drops in software (and hence Microsoft) profits.

However, that fact alone does not account for the shortages that Microsoft is expecting this quarter. What's really happening is due to a significant fact, unanticipated by Microsoft (although if they had listened to the industry you would think they would have figured it out).

The fact is very straightforward: companies are not upgrading their computer systems as quickly as expected by Microsoft. Two major upgrades are out at the moment: Windows 2000 and Office 2000 (along with the severely under promoted Windows ME release), and Microsoft has bet big dollars that a large number of their computer base will upgrade soon. 

And that just isn't happening.

In fact, to help force the issue Microsoft has taken the unusual step of retiring their Windows NT certifications earlier than usual. In the past, the certifications have been retired after two major releases. Thus, the Windows 3.1 exams were retired after the release of Windows NT. This, in theory, gives over a million technical people the time to upgrade their knowledge. However, Microsoft has decided to retire the Windows NT exams now, even though Windows 2000 is only a year old and a new operating system release is years away.

In spite of all of Microsoft's efforts, Windows 2000 is simply not being installed as quickly as they had hoped. This implies that Office 2000 is also not being upgraded (most system managers will time the two upgrades to occur at the same time).

Why aren't system managers upgrading to Windows 2000 as quickly as expected?

• There is a significant learning curve associated with Windows 2000, and it's taking many highly overworked system managers a while to get around to learning the new technology.
• Many of us system managers are just getting the hang of our Windows NT environments and dread the changes (even the good ones) that Windows 2000 will introduce. With each service pack release Windows NT has become more stable and many of us are now becoming well trained and knowledgeable on this product. An upgrade means we more or less will start all over.
• Windows 2000 is a very expensive upgrade and Office 2000 is even worse.
• Many of us were required to upgrade all of our hardware and software in preparation for the Year 2000 "bug", and thus their is no pressing need or desire to begin the whole upgrade cycle again at this time.
• Quite a few system managers are more than a little ticked at Microsoft for retiring the Windows NT certifications so quickly. It's so blatantly obvious that we are being forced to upgrade that it is in many cases causing people to dig in and refuse to do so.

The delay in upgrading to Office 2000 is easier to understand:

• The Office 2000 upgrade is extremely expensive
• And there is no significant benefit to show for that expense.
• To top that off, Office 2000 requires much more hardware (disk, CPU and memory) to operate efficiently.
• To tell you the truth, most of our users are not even taking advantage of 10% of the features of Office 95 or Office 97. Why upgrade when they are not even using what they've got?
• Many of the recent virus disasters are the direct result of the extraordinarily powerful and completely insecure scripting capabilities of the Office suite. This makes system managers leery of upgrading too quickly and perhaps introducing even more security problems.

Of course we all understand that we will upgrade sooner or later. We have to do so, after all, just to keep our support options active and to remain competitive. But as a rule system managers demand stability - the last thing we want is systems crashing and burning around us. And given that our systems are stable and producing what we expect, then it's proving true in case after case to be more prudent to simply wait an extra year to upgrade. There is simply no reason to do so now.