Great White North Prognostications

I heard a rumor that Microsoft just did a 4 billion dollar bond issue. If true this is odd for a company with around 25 billion in cash sitting in a big vault with Microsoft surfing the waves of gold coins. This is odd for two reasons. One is that right now is about the worst time in many many decades to be issuing bonds (unless it turns out people are looking for reliable bonds and Microsoft is taking advantage of that) and what profitable thing could Microsoft be planning that is worth having that kind of debt? The next part that make it odd is that Microsoft must have watched companies die after they cleared out their war-chests and raced off and bought something that turned out to be stupid. Time-Warner buying AOL would be a great example.

So unless Microsoft is getting into some completely unrelated business like mining they are probably buying something tech and something that will cost the better part of 29 Billion dollars. So you can cross out most American companies as the courts would jump all over Microsoft if they bought anything that left Microsoft a monopoly. The leading candidate rumor is SAP. I like this rumor so I will explore it as the probable future.

I hate SAP. Not a little bit but a huge amount. If I were to go into detail I could make a sailor blush so let’s just say I hate this hard sell, high priced, company that smells like the breath of the slimiest MBA that you have ever met and had do the double gun fingers to you. This is somewhat different than the origin of Microsoft. Microsoft was founded by a bunch of geeks who struck gold. This attracted many more geeks who continued to mine gold at a furious pace. Some business types snuck in and no doubt helped to keep the books straight. Also like any collection of humanity Microsoft was probably slightly populated by charismatic ladder climbers but seeing that many of the original founding technical staff had senior positions and money coming out their ears these ladder climbing backstabbers probably didn’t get the same traction that they might in, say a government department.

But I suspect that the senior management at Microsoft is starting to follow Bill Gates to the exit and are being replaced by those charismatic ladder climbers who don’t have money coming out of their ears. But they want money to come out of their ears and thus are looking for the big score that selling another few million copies of office just won’t provide. A merger with something big might just do the trick. SAP would seem to be a good fit. They are big and provide what I call a big bang solution. A big bang solution is where you throw out your entire set of old software and you bring in a whole new software universe that you must live with no matter what. SAP provides an end to end solution that seems to be very hard to escape from. Microsoft provides an operating and server environment that is also very hard to escape from. Combined and their customers may very well find themselves caught in the software equivalent of a black hole.

But I don’t think that this business strategy, (on paper probably the best merger in many years) can survive the human equation. SAP in theory would be the junior partner but the technically minded staff would almost certainly be overwhelmed by a tidal-wave of senior SAP personnel who come from a sales background. From a Machiavellian point of view this would be like shooting fish in a barrel. But while this might be fun for SAP I suspect that the disruption to Microsoft would be massive. Also many of its resources would be turned to making Microsoft a SAP selling monster resulting in their neglecting their bread and butter of Office and Operating systems. So long term SAP would go all Microsoft and Microsoft would go all dead. In the short term SAP sales would go up and Microsoft sales would be sustained. But long term Microsoft sales would fade and SAP sales would be dragged down with them. Then if SAP were to abandon Microsoft as a platform then the death to Microsoft would be accelerated and who knows what would happen to SAP.

In the short term, even without SAP, I think Microsoft is facing a huge problem. Windows version 7 is about to come out. Not one of my geek friends has come to be with wonder in his eyes with tales of some cool feature. Also not one of my geek friends has tried out Windows 7. In years past my friends would install the latest operating system as fast as they could get their hands on them. I am talking about pre beta highly unstable operating systems that would explode over and over. But after Vista turned out to be such a huge honkin’ dud most of my friends either went with Apple or are sticking with and are happy with Windows XP. So this same bunch are not even bothering to look at Windows 7. None of us have seen any compelling reason to make the switch. Not a single one. It is people like myself who advise many companies what they should do. Unlike Vista I won’t advise avoiding Windows 7 like the plague but I won’t be pushing it or using it myself. This says to me that Microsoft won’t get a crazy surge in sales. They will pick up some of the people who refused Vista but their sales will certainly be made up mostly by new computer sales and the fact that Microsoft comes with the computer by default. I still don’t commonly advise Linux as a desktop but Linux is getting closer to crossing that threshold where I would make that suggestion. What one must take into consideration is that I suspect that the bell curve of the Linux switch is a very sudden bulge. Thus when Linux gets just a little better it might not trickle onto the desktops of the world but it will flood.There are organizations such as the national police force in France who have made the jump and I suspect that many people will analyse situations like that to death and eventually be able to make the case for Linux. So some day the Economist Magazine will have a cover with a penguin (Linux logo) saying that any sensible company uses Linux. That will be the death of Microsoft and SAP will take a body blow if they have become part of Microsoft.