Send in the Clowns

Back in the old days – circa 1997-2000 – fear of Microsoft was a healthy preoccupation. Not only had Gates and crew succeeded in laying waste to the productivity app space, they had blunted the browser wave and were poised to lock down the developer community with .Net’s superior Visual Studio tooling.

Today nobody is afraid of Microsoft anymore. Instead Google‘s lock on behavioral advertising has upset the balance of power and transferred fear from Redmond to Mountain View. Free food and Red Bull are all the payment developers need to enter the startup sweepstakes fueled by the social media land rush. In this myopic climate, a series of major players have taken steps to eviscerate themselves by failing to understand Microsoft’s innate power.

This complacency is surprising enough given that Microsoft’s choke hold on computing is not exactly a fading memory, but what is stunning is that companies created to take advantage of gaps in Microsoft products and strategy have let the clock run out. Take VMWare, which you better hurry up and do before it is delisted. Started as a desktop virtualization product to cater to the multiple OS developer crowd, the code base was absorbed into the dynamic infrastructure wave of the early 2000’s.

What Google did was to co-opt the virtualization model, turning it into a private network on which to layer applications. Instead of competing with Microsoft, Sun, and Oracle, VMWare was competing as a Layer 5 infrastructure play with no user awareness let alone loyalty. When Microsoft turned its sights on the space in earnest 2 years ago, they acquired Calista Technologies and then later Softricity, and turned these advanced technologies and the brains behind them plus Microsoft Hyper-V into the advanced Windows 2008 virtualization server platform. Today, VMWare’s EMC-controlled board suddenly ousted CEO and President Diane Greene as share prices plummeted.

We all know the Yahoo slow motion death slide with this week’s stars Carl Icahn and a newly not-fired Steve Ballmer. Conspiracy theorists suggest destruction of the Valley stalwart and disruption of the VC-startup-exit ecosystem was the plan all along. But for that to be true, Ballmer would have to rely on religious hatred of the Borg to keep Yahoo’s board from confronting reality long enough to reduce the company’s options to a surrender of search to Google and of the cream of their acquisition talent pool to Google, Microsoft, and Salesforce. Naah, that wouldn’t happen.

Then there’s Adobe. Assets: Photoshop. Various proprietary graphics and animation formats with cross-platform penetration but no revenue. Great street cred in the Borg-hating crowd, and with the acquisition of Macromedia, an opportunity to extend Flash as an XML-aware runtime for stitching together rich internet applications to challenge the hamstrung Office and related business apps. Only problem: Google’s good-enough collaboration suite with a dash of Gears and an emerging Android mobile platform.

Unfortunately, Adobe developers are wasting time doing feature comparisons between AIR/Flex and Silverlight, not noticing that Live Mesh erases much of the relevance of cross-platform compatibility by approaching it at a higher level focused on social search and other more disruptive economic models. This week’s announcements of Microsoft Online services illustrates how Microsoft can shift its IT-controlled user base from premise-controlled Exchange to Microsoft-served Exchange with no perceived change of user experience and one-button deployment.

Similarly, a Silverlight-based Office product could be pushed down to Windows, Mac, and Linux users while adding collaborative business services that can be monetized to offset the eventual loss in licenses. What Adobe, VMWare, Yahoo, and even Google can do little about is the war chest that Microsoft has to finance migration of its users to the Cloud. The fact that Google is so strong even takes the antitrust weapon away. And the trend with idealistic companies such as Mozilla to adopt the same strategic initiatives of their more overtly commercial competitors makes it harder to attack Microsoft given Mesh’s relentlessly open strategy.