I wasn’t paying attention when Microsoft announced its Windows Live initiative, but more than a few people see parallels between yesterday’s event and the announcement of Internet Explorer ten years ago.
Microsoft was forced to move into the web-based application space because so many innovative applications have been delivered recently as websites. I’m talking about things like Flickr, Gmail, and Basecamp. Companies large and small are building user communities around well-designed, limited-purpose applications like these. The revenue models are a mix of monthly subscriptions and context-sensitive advertising.
I think it’s unlikely that Microsoft will displace any of these Web 2.0 applications anytime soon, but I expect Microsoft’s offerings to be disruptive if they offer decent functionality and integration. Since Microsoft has control over the default settings of a lot of PC operating systems and desktop applications, I expect them to point to services at Live.com. Many PC users do little to customize their desktop environment, so this may hurt the growth of non-Microsoft web services over time.
On the other hand, Microsoft will have to get any services they offer through Live.com to the point of reasonable functionality quickly. Remember how Passport, Microsoft’s security and ecommerce service, failed to catch on? Six months or a year after its initial deployment, I chuckled to myself whenever I saw a website with a Passport login button. The Passport infrastructure lives on in Microsoft’s network of websites, but support for it is by no means considered the must-have feature that Microsoft once hoped.
The Passport fiasco should be a cautionary tale for Microsoft. They should avoid trying to be all things to all people from the very beginning of the Windows Live initiative. I think this is a huge risk for them, since they see small successes in the web space everywhere they look. Microsoft will not be successful at competing with all of these services. It also probably won’t profit from competing with some of them, no matter how they they go about it.
Microsoft could succeed if they approach the market for online applications in a piecemeal fashion, as Russell Beattie suggests. They could build tiny applications like to-do lists and calendars before taking on things like contact management and customer relationship management. If they executed on a business plan like that, they would be a major threat to every Web 2.0 application out there.
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