Microsoft looks to create Apple-like business model to compete in future growth markets

“Who in his right mind would step into the ring against the iPod? Apple Computer’s sleek music-player, and its iTunes software and online store, dominate the digital-music industry as comprehensively as Microsoft’s Windows operating system dominates desktop computing. But just as Apple has tried for years to loosen Microsoft’s grip on computing, so Microsoft now hopes to loosen Apple’s hold on digital music. On November 14th, the software giant will launch Zune, a music-player that looks and works very much like an iPod,” The Economist reports.

The Economist reports, “Zune is unlikely ‘to make any dent at all in Apple’s market share,’ says Tim Bajarin of Creative Strategies, a consultancy in Silicon Valley. But Microsoft probably has no choice but to try, he adds. During its first 25 years, he says, Microsoft succeeded above all by bringing computer technology to businesses; to succeed in its next 25 years, it must turn its attention to consumer gadgets, for that is where the innovation and growth will be. But the formula with which Microsoft achieved its dominance in the first round appears not to be working in the second. So Zune is based on a very different business model-evidence that Microsoft is changing.”

“The Zune device does not work with other online stores, even those of Microsoft’s partners; and Zune Marketplace does not offer songs for non-Zune devices. Zune, in other words, is a proprietary bundle of hardware, software and service-exactly like Apple’s iPod-iTunes combination,” The Economist reports. “For Microsoft this amounts to an about-face shocking enough that Robbie Bach, the executive who runs the company’s entertainment division and who devised the strategy, goes out of his way to play down its importance.”

The Economist reports, “Microsoft has ditched the idea of providing enabling software to other firms in favour of Apple’s approach of doing everything itself. Its first move in this direction came with its Xbox games consoles, in which hardware, software and an online service are tightly coupled. (The Xbox division also reports to Mr Bach.) Zune is much more controversial, however, because Microsoft’s pre-existing hardware and service partners are left high and dry. ‘I’ve never seen a business so blatantly screw its business partners,’ says Peter Sealey, a professor at Berkeley’s Haas School of Business.”

Full article here.

Related articles:
Analyst: Zune could lead to ‘civil war’ between Microsoft and Windows Media partners – September 29, 2006
In wake of Zune announcement, should ex-Microsoft ‘partners’ join iPod ecosystem? – July 27, 2006
Analyst: Microsoft partners zune to be the biggest losers – July 25, 2006
In wake of Zune, Microsoft ‘partners’ consider abandoning PlaysForSure – July 25, 2006

60 Comments

  1. >’I’ve never seen a business so blatantly screw its business partners,’ says Peter Sealey, a professor at Berkeley’s Haas School of Business.”<<

    Apparently he doesn’t follow MSFT’s partnering schemes. MSFT has a long history of screwing “partners”

  2. ‘I’ve never seen a business so blatantly screw its business partners,’ says Peter Sealey, a professor at Berkeley’s Haas School of Business.”

    Then he must not have been observing Microsoft for very long. This is their historic behavior in a nutshell, going back decades.

  3. ‘I’ve never seen a business so blatantly screw its business partners,’ says Peter Sealey, a professor at Berkeley’s Haas School of Business.”

    I couldn’t resist following the first three posts.

  4. “For Microsoft this amounts to an about-face shocking enough that Robbie Bach, the executive who runs the company’s entertainment division and who devised the strategy, goes out of his way to play down its importance.”

    Boy, that’s a tough job, huh? Look at what Apple did, and then copy it. Wait, that’s what all of Microsoft’s executives do.

  5. During its first 25 years, he says, Microsoft succeeded above all by bringing computer technology to businesses…

    The only reason Microsoft succeeded is because of John Scully’s treachery against Steve Jobs, Apple lost it’s visionary and innovator for awhile.

    Microsoft certainly didn’t win the OS wars based upon quality and service, more like downright treachery.

    I’m willing to bet Bill Gates bought John Scully, lock stock and barrel.

    Steve Jobs had a temper back then, Gates used it.

  6. Everyone in the real IT world knows that Microsoft is the leader in terms of innovation and implementation, regardless of what new market it deems to enter. Microsoft’s former partners may cry foul over previous partnerships, but the real truth is these third-party vendors were abhorrently unsuccessful in advancing the PlaysForSure concept, a brilliant strategy by Microsoft that was unfortunately hampered by inept partners either unable or incapable of following Microsoft’s precise specifications. Microsoft in no way should be held responsible for the failures of these third parties.

    Microsoft has every right to advance its business model, and because of the lack of support in regards to PlaysForSure that it received from these partnerships, it evolved its strategy to be less dependent on outside variables. Microsoft should be commended for this new approach, and not reviled as so many on this site have a propensity to do.

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