When Microsoft introduced its Windows Server 2003 OS several years back, it instituted a marketing campaign around the notion "do more with less." While one might debate a hidden if unintentional message there--looked at one way, it seems to infer that Microsoft's own products are actually "doing less" than their predecessors--it appears that the IT sector--along with the wider world--is now ready to embrace Microsoft's ideal. We're going to have to start doing more with less.
Ongoing global economic problems have hit everyone hard. Microsoft last week reported its first ever year-over-year decline in Windows and Office revenues, a milestone that should alarm everyone reading this. That this event passed without a single mention of ongoing Windows Vista sales--has Microsoft actually given up on this PR-plagued release?--is, I think, notable as well.
Now, Microsoft actually earned $5.94 billion on revenues of $16.63 billion for the quarter ending December 31, 2008, and those figures should at least be somewhat reassuring. The company's other businesses, most notably Server and Tools, made up the difference, with that division seeing a15 percent bump.
But what's up with Windows? Microsoft credited two factors with the unexpected decline: "PC market weakness and a continued shift to lower-priced netbooks." The first of those factors, of course, is inevitable, not Microsoft's fault, and is something that we will all be dealing with, perhaps for years to come.
As for netbooks, these systems sell for considerably less than other computers, usually for far less than $500. (An entry-level Eee PC can be had for as little as $315.) To Microsoft, netbooks represent a financial problem: Its flagship Vista OS is too top-heavy to run on netbooks and is so expensive that PC makers aren't interested regardless. So they've been using the free Linux OS instead. To counter this unwanted trend, Microsoft has extended the life of Windows XP Home Edition and offered it to netbook makers at a steep discount. This keeps people off Linux, but it harms Vista sales and, more important, the software giant's revenues and earnings. Each netbook sale delivers less money to Microsoft than does any other PC sale.
And netbook sales are growing at an enormous rate. So much so, in fact, that netbook maker Acer catapulted into third place among PC makers worldwide and in the United States in the most recent quarter. Acer even topped media darling Apple, which fell to fourth place in the United States (it never makes the top five worldwide) and actually lost market share, year-over-year, for the first time in several years. Apple, tellingly, does not sell low-end computers of any kind.
The current trend of tech thriftiness affects every player in the market, of course, including the enterprises and other customers that look to these companies for products, services, and other solutions. Microsoft CEO Steve Ballmer has noted that the current downturn is different from past dips, like the Dot Com Bust, in that the effects may be permanent. "\[There is no\] quick rebound," he said last week. "Our model is things go down, and then they reset. The economy shrinks."
In other words, netbooks are not a temporary blip on the radar. They are, instead, the harbinger of a long-term trend: People are spending less on technology and looking for more value out of the hardware, software, and services they already pay for. This means lower-end PCs, more use of inexpensive cloud-based applications, services, and storage, and an expansion of virtualization technology across the board.
Intel's outgoing chairman, Craig Barrett, nicely summed up the ongoing move to a "doing more with less" lifestyle this week in a "New York Times" interview. He said, "In the good times, you can get a bit careless or not focused as much on efficiency. In bad times, you're forced to see if there is an \[existing\] technology \[you can utilize instead\]."
These words, of course, are familiar to anyone who has run a business of any size. In many ways, technology adopters inside of companies of all kinds have been living the "doing more with less" lifestyle for their entire careers. Hopefully that experience will help all of us weather this downturn as well.