Ballmer and Microsoft: Credit Where Credit Is Due

Rob Enderle

Recently Steve Ballmer has been under a microscope. Dan Lyons wrote a Newsweek piece called the "Lost Decade: Why Steve Ballmer is no Bill Gates" and he is right. Ballmer is no Bill Gates. But then I could as easily argue that Bill Gates is no Bill Gates either. Gates is managing his own charitable foundation; in effect he now works for himself and his foundation is no Microsoft. I've seen this multiple times, an iconic CEO leaves and everyone who follows is compared unfavorably to him. But times change, companies change, and the conditions that made the iconic CEO no longer exist, and even if the CEO comes back, he or she doesn't reach the same heights.


Often, the poor saps that come in to replace these iconic CEOs when they retire tend to be criticized for not being that iconic CEO and get blamed for all the problems the iconic CEO created. Can you imagine what a nightmare the poor person who comes in after Steve Jobs will face? Jobs is no Bill Gates either. Other than cloning the legend of Steve Jobs, likely nothing else will be good enough.


Assessing Steve Ballmer

Ballmer got the job as CEO largely because he was a fundamental part of Microsoft's success, making Microsoft into an enterprise player. For much of the '90s people -- competitors and analysts -- pounded on the company and exclaimed it could never be an enterprise company. Certainly Netscape and even Apple never made it to those ranks, and the list of companies that have is short. Companies such as Acer and Apple don't even try anymore, and Sony's efforts have largely been pathetic. But Microsoft was successful and Ballmer was largely the reason by managing the sales staff and owning corporate customers.


When Gates stepped down, Microsoft was far from its peak. Lyons correctly points out that Microsoft's growth over the past decade has been substantially less than it was the prior decade. But in the '90s, the x86 computer market was emerging; by this decade, it was mature and mature markets grow more slowly. Aerospace is far off from its earlier growth; white goods were hot in the '50s, automobiles in the '20s, and TVs in the '60s. Expecting a mature business in a mature market to do as well as it did in an emerging market is just silly. The question is how it is doing against competitors.


Microsoft Comparatively

Lyons compares Microsoft unfavorably to Amazon, Apple and Google. Amazon is an online retailer, Apple a hardware company and Google the leader in Web advertising driven by search. Microsoft is an operating system and tools company. Granted it needs to embrace the concept of cloud computing and evolve, but to try to go after Amazon, Apple and Google likely would be suicidal because it would take the company too far afield from its expertise and the basis of its success. Microsoft can't be a better Amazon, a better Apple or a better Google. There is such a thing as fighting on too many fronts, and each of these companies is designed for different markets.


Jobs has done a great job at Apple, but he failed miserably with the Lisa personal computer and Apple has never been nor likely will ever be a major corporate technology supplier. Even on the desktop, Windows 7 after a couple of weeks is about to pass Apple in total market share. Did the iPod beat Zune, sure, but I'd argue Microsoft had no business doing that product. Its strengths lie elsewhere. Given that, who has done better against the iPod? Consumer tech companies like Sony, Creative Labs, Sharp, and Samsung sure didn't. And Nokia, the largest cell phone company in the world, got stomped by both Apple and RIM smartphones. Of course, Nokia now wants a piece of Apple's pie.


Amazon is even farther from Microsoft's core business than Apple. Amazon's primary cloud offering is S3, basically a simple storage backup service, and it is very good. Microsoft has Hotmail, MSN, Office Live, Windows Live, Instant Messenger, Hosted Exchange and Azure. I don't even see how you can compare the companies. Amazon is a great retailer and that's where its money comes from, not S3.


Google is clearly getting into Microsoft's face; but stop a moment. Its Chrome browser lags Firefox (it just grew to a whopping 3.6 percent against Firefox's 24 percent) , its Chrome OS doesn't even exist yet and Android is still largely more promise than reality (Apple kicks its butt, too). While Google is making some inroads with Apps, outside of search and advertising, it is still more promise than reality. We assume success, but how much ot it is outside its initial core market? Remember Netscape was supposed to be the next Microsoft and look how that turned out.


The one company I would compare Microsoft to is Oracle. Larry Ellison is one of the few founders who have come back and done well. But Ray Lane, the interim manager brought in to correct Ellison's previous screwups, fixed the company and put it on a successful path. In addition, Ellison created the office of the CEO and got some incredibly good people in to actually run the company. I'll bet, as a result, Oracle does vastly better than Apple does when Ellison eventually does retire. (And I'll bet the poor sap who replaces Ellison is found wanting for not being him.) Microsoft competes with Oracle just fine, and it is hard to argue one is any better than the other where the two firms cross, and this is clearly where Ballmer is strongest.

Wrapping Up: Giving Credit Where Credit is Due

I'm often stuck by how badly we measure CEOs. In my early years when I was at IBM, the company was regularly praised for its great management and financial performance even though its executives were selling off its future. It nearly collapsed two decades ago largely because the executive management did what financial analysts at the time wanted them to. They focused so much on quarterly results that they nearly destroyed the company. Louis Gerstner and Jerry York, who helped save Chrysler and who now sits on Apple's board, saved it. (I think Jerry did more of the heavy lifting).


I think Microsoft also is too focused on expenses and not on providing adequate resources to critical projects, but let's put this into context. We just saw the entire financial industry collapse because it was too willing to take risks and massively overspent. Of the two problems, I think you could agree, the former is preferred and a perfect balance is likely unachievable. I think Ballmer's problem is trying too hard to please too many people and making the job harder than it needs to be, but that is for another time.


So I get Lyons' point. Microsoft could be doing better, and I think Ballmer himself might even agree -- there is always room for improvement. But could anyone do a better job? I wonder. Jobs couldn't handle the corporate side or complexity; Larry Ellison wouldn't understand PCs (remember thin clients?), Jeff Bezos is a retailer, Eric Schmidt belly flopped at Novell (granted Novell was on its death bed when he got it), and HP's Mark Hurd is a hardware guy. Carly Fiorina, Michael Cappellas (turned around and sold MCI), Louis Gerstner? I don't think so.


I share Lyons' frustration with Microsoft, but it could also do a lot worse and the job running a complex company is far from easy. Ballmer inherited a lot of problems, he certainly has made mistakes, but I can think of no one that could keep a company as complex and unique as Microsoft running so well, either. Sometimes it's all about perspective -- and I include myself here -- sometimes we need to be a little less critical, and give credit where credit is due. Ballmer will never be Bill Gates. I just hope he finds a way to be the best Steve Ballmer he can be.

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Nov 3, 2009 4:48 AM a. asdf a. asdf  says:

--"Microsoft is an operating system and tools company."

Not really. Microsoft also makes games, keyboards, consoles, music players. I think its fair to compare Microsoft against Apple. They are both competing in the same space, with the difference being Apple locks the hardware.

--"but to try to go after Amazon, Apple and Google likely would be suicidal"

Too late. For every Apple product I can think of there is a competing Microsoft offering (minus the locked hardware). It's already trying to go after Google with Bing. And getting ready for Amazon ( )

--"Its Chrome browser lags Firefox"

I'm still trying to figure out why Google didn't just buy Firefox. What is gained by releasing a 3rd-5th browser? They practically own it now, since Firefox makes most of its revenue from Google search.

Nov 3, 2009 4:55 AM Rob Enderle Rob Enderle  says: in response to a. asdf

But, at its core and where its profit is sourced Microsoft is still largely what they were. Yes Microsoft does more but most of these efforts contribute little to the bottom line. Apple remains a hardware company. Microsoft could sell to Apple (and did early on). Apple doesn't sell to Microsoft. I think they cross over more than they really should.

Companies often have trouble remembering what business they are really in. Look at Google for instance. Should they really be in the OS or Smart Grid business?

Agree that Google kind of owns Firefox at the moment, they certainly fund it.

Nov 3, 2009 7:29 AM a. asdf a. asdf  says: in response to Rob Enderle

--" Should they really be in the OS or Smart Grid business?"

I don't see what else they could be doing with the cash that they have. It's either improving search or branching into other aspects of the net. They can pour millions into search algorithms and improve it maybe 2%? Or do gimmicks like page preview, which I've never found useful. And with no real justification for the cost, since they dominate search and with no real competitor.

Its always a good idea to have branches, so that if one aspect of your business come under fire, you can use the profits from other branches to defend it.

Nov 4, 2009 9:36 AM Rob Enderle Rob Enderle  says: in response to a. asdf

Yes but the branches should be close to your core.  Google is at the core an advertising company.   That's the revenue pool they know and don't yet fully own.  They could branch to other internet areas but OS and Smart Grid are far from what they know how to do well.  Reminds me too much of Chrysler in the 60s or Netscape.

Nov 5, 2009 7:17 AM a. asdf a. asdf  says: in response to Rob Enderle

Ideally, you want some kind of synergy in your business units.

If Microsoft really wanted to go after Google, I really don't think Google could do anything to defend itself. If Bing offered higher bribes for using search ( ), or paid people to use Bing toolbar, or cut Bing ad rates to almost zero, I don't see what Google can really do about it. I think that is why Google is going into the OS space. As long as Microsoft has a dominant OS, it is untouchable, and Google knows this. The only thing Microsoft has to worry about is keeping under the regulatory radar.

I also think this was Netscape's downfall. There was no way a company can release a Windows app that can beat a similar Microsoft app. So, Microsoft pours money into Internet Explorer, much more than Netscape can, bundles it with the OS, game over.

Nov 5, 2009 9:00 AM Rob Enderle Rob Enderle  says: in response to a. asdf

They could get that by just doing the browser, they don't need an OS for that.  If they simply took over Firefox (which they fund) they'd have nearly 30% of the desktops on day one.   In fact, the actually own Firefox search access now even though the product doesn't have Google's brand on it.   The OEMs are more than happy to use them as the browser of choice and all they need is a window to the web.   The OS route is nasty because it puts them in competition with other OS providers (like Apple) who then will not use their search tools. 

Nov 5, 2009 10:10 AM a. asdf a. asdf  says: in response to Rob Enderle

Well, anytime you compete with Microsoft, you are competing with the OS by proxy, since majority of Microsoft revenues come from the OS.

23% of Microsoft revenue for the last quarter came from the client market. The client market ties in with the Office market (34% of revenues), and both of them together tie in with the Server Market (26% of revenues)

Microsoft is going to use the revenues from the OS market and ties-ins to compete against you. So Microsoft is attacking you on your own soil, while it has a constant revenue stream from its divisions that it doesn't have to defend that aggressively.

Even if Google had bought Firefox, its still a Windows app, it's still swimming in Microsoft's own pool. If Microsoft gets aggressive with the browser market and releases an open source version of IE that's compatible with all Firefox addons, does away with ActiveX, adopts a faster javascript engine, integrates closely with the client and server Windows and Office apps, Firefox could be in for a rough time.


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