Stephen Elop faced tough questions from Gartner Vice Presidents Neal MacDonald and Brian Gammage, who suggested that Microsoft had reached a crossroads, accompanied by declining profits. They wanted to know what Elop had to say about what they called the company's "big bang monolithic approach" to current market disruptions.
Microsoft has been providing its users with "diminishing marginal benefits at increasing marginal costs," according to the Gartner VPs. They cited business user adoption of Windows Vista as an example. According to Gartner's studies, more than 83 percent of Windows users chose not to migrate to Vista, MacDonald noted. About seven percent of those who did choose Vista halted the implementation before completion.
Moreover, only 24 percent of Microsoft Office users chose to migrate to Office 2007, according to Gartner's reports.
"We believe Microsoft is at the most critical point in its history," MacDonald told the audience at the Orlando, Fla.-based event. "In the next nine months, Microsoft will be shipping new products that represent more than 80 percent of its revenue."
MacDonald said that the upcoming 2010 versions of Windows, Office, Exchange, SharePoint and their respective online versions represent more of the same, one-size-fits-all applications that Microsoft has offered in the past. He predicted that people will not be willing to migrate to these new versions because there are so many new competitors offering commoditized versions that are either free or that come at a very low cost.
Gammage agreed, saying that customers are now asking where the business value is in Microsoft's products, especially when there are multiple options available.
Elop responded that Microsoft is meeting the challenge head on, as well as working with its competitors through interoperability principles adopted in February of last year. He pointed to recent agreements with Apple, Google and Nokia as examples.
"My read of the situation is much as you described it," Elop said. "It is a disruptive moment in technology and in Microsoft's history…but in times of disruption, it is time to have an impact."
Windows 7 is the beginning of a new wave of technology that will have a major impact with users, Elop said. The day before it was released, more than eight million people were using the "feature-complete" version, he added.
Elop was asked how Microsoft's family of business applications will compete with hosted applications from Google, which currently offers an Office-like productivity suite called Google Apps. He replied that Microsoft will continue to focus on the three things consumers and enterprise users have come to rely on: productivity, security and manageability. The release next year of Office 2010 will demonstrate Microsoft's commitment to a cloud computing future for PCs, browser-based devices and mobile devices, he added.
The philosophy he conveys to his product teams is that of "constructive disruption," aiming to meet the competitive threat. В
"Microsoft has demonstrated repeatedly that when faced with specific moments of disruption, whether it was the Internet or the graphical user interface, whatever those things are, that it has the unique ability to rally the troops and get things done," Elop said in the closing moments of the interview. "Our goal is to continuously evolve, and it's been that way since the first day the company was founded."
Elop also put in a plug for Windows 7, which was released into general availability last week. Based on Microsoft's studies, the new capabilities in Windows 7 provide savings for companies ranging from $120 to $190 per PC per year.
Elops' interview at the Gartner event can be viewed here.
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