Microsoft is No Longer Serious About gaining Market Share in the Cloud..

All companies need to make a profit.  Some companies, however, garner a reputation for screwing customers in an attempt to squeeze a little extra money out of them.

A few months ago, I posted a comparison of Microsoft and Google's online file storage and email services entitled Microsoft is Finally Serious About Its Online Services.  Now, Microsoft has taken a huge step backwards in its attempt to attract customers into its ecosystem.  It reinforces my view that Microsoft is not a company to be trusted.

Until this change, the owner of a free OneDrive account could access online version of MS Office and could enjoy 15 GB of online storage.  Users could get another 15 GB of storage by signing up for photo storage.  Now that many people have come to rely on this service, Microsoft is pulling the rug out from under them.  If you were enjoying your 30 GB of online space, you now have to make due with a mere 5 GB.  This does not just apply to new accounts.  Your existing account will be cut back as well.

If you want to avoid this cuts, you need to pony up cash for a paid account.  Microsoft is also raising the price of its paid plans and doing away with its unlimited plan.

I cannot begin to imagine what the Microsoft execs were thinking when they pulled the rug out from under their customers other than getting a few more paying customers short term while turning off a generation of customers who were just beginning to trust the new Microsoft.  The company has a reputation for changing the rules on its customers for its financial gain.  I thought that a new CEO would change things.  But this move kills that notion.  Meet the new boss, same as the old boss.

Bottom line: if Microsoft offers you a good deal on any good or service, don't really on it to continue.  It is no more reliable than a subscription that gives you an initial discount.  Maybe it is worse since an up-front discount at least informs you what the later terms will be.

After this action, users may be concerned about other attempts to squeeze more revenue out of services on which they depend.  There have been rumors that Microsoft may eventually charge a subscription for Windows updates.   Microsoft Office, which has already moved from a pay once to a pay forever subscription model may see price increases as well.  Other free Microsoft services such as Skype may also see cutbacks. Perhaps Microsoft will kill its free Office 365 cloud offerings, or start charging for its Office phone apps. These possibilities make customers wary of growing too dependent on Microsoft and encourage them to look for alternatives.

I had begun to move some of my work from Google Drive to Microsoft in the last few months.   But now I'm running back to Google and staying there.  Even if I like some aspects of Microsoft's online services better, I much prefer the stable terms that Google has maintained for years.

What Google Needs to Defeat Microsoft

Google and Microsoft are now going head to head in cloud based services. Each company has its own strengths.  Microsoft dominates the PC and laptop OS arena.  Android, has a more powerful presence with its Android OS on laptops and phones.  Google also has a powerful lead in free email. 

For this post, I'm ignoring third big competitor in the arena, Apple, since they do not seem to be pushing for dominant control of cloud services beyond users of their own phones, tablets, and laptops.

Google is seeking to expand its presence by pushing Google Drive, a host of applications that allow document creation and collaboration, among other things.  This puts them more and more into competition with Microsoft Office.  Microsoft has been moving its Office Suite to the cloud with MS Office 365.  While you can still download MS Office onto your hard drive, more and more work can be done directly in the cloud.  The subscription model further makes Microsoft look more like a service provider than a software seller.

Microsoft's strategy seems clear.  It wants to use its market dominance in the Office market, to move individuals and businesses into its cloud services.  It makes sense.  Businesses especially are so tied into the MS Office world that it is nearly impossible to collaborate with other businesses without having MS Office yourself.  If they can leverage that, as well as dominance in Outlook to draw users into its cloud storage and online email services, it becomes a major player in that field, and moves away from the collapsing market of selling software to PC users.

Google's strategy similarly reflects its desire to leverage its strengths in search and email to move people into its other cloud services.  Google encourages its Gmail users to use Google Drive, where they can create and share documents, spreadsheets, and other works.

Microsoft's greatest weakness is probably its recent reputation for overpriced buggy bloatware, for falling behind in the race to keep up fast paced technology trends, and for its tendency to gouge customers for maximum short term profit.  The fact that its solution is much more expensive than Google's only contributes to this preconception.

Google's greatest weakness is its lack of any reputation in the enterprise arena.  While businesses use its search services or other online free services such as Google Maps, they have been reluctant to move to Google's enterprise email offerings or use of Drive as the only way to create documents.  At best, businesses use them as a supplement for online collaboration, while still relying on MS Windows computers running MS Office for office work and MS Outlook connected to MS Exchange for email.

Microsoft has every incentive to tie Windows, Office, and Outlook into its cloud services and offer a smooth transition for businesses.  Microsoft has zero incentive to make it easier to access your Google Drive documents from MS Office or to integrate Windows into your Google cloud storage, or improve Outlook interoperability with Gmail.  If history is any guide, you will see MS create deliberate bugs that make interoperabliity with Google a real headache.

This makes Google's fight much harder.  Google will not capture the OS market any time soon.  Google Chrome will not replace Windows in the foreseeable future.  Android does not seem to be able to leap from tablets to laptops.  Therefore, Google has to focus on making its cloud services so much better and less expensive that people will go out of their way to use them.

To do this, Google must come up with a more powerful office suite.  Google Docs, Google Sheets, and Google Slides are ok for simple documents.  But they simply do not have the tools that professionals need to create more complex documents.  One great option would be a partnership with an open source Office suite like LibreOffice.  Another option would be to buy a dying competitor like WordPerfect Office.

Either way, Google could integrate the office application into Google.  It could allow subscribers to download the office suite, or make the suite itself cloud based.  Either way, users would have a much more powerful office suite with which to use Google's online document system.

Google has done well with individuals who want convenient free apps.  But if it wants to get the more profitable enterprises to get on board with Google, it needs to have a serious Office suite for business users.

Do Not Buy a Tablet Now

The iPad has remained the dominant tablet for almost a year now. There had been tablets in past years, but the iPad's user interface made it the cool product of 2010. Personally, I think the iPad holds little benefit over a netbook, and has the big negative of not having a keyboard. But I can certainly see why the large screen like a computer, combined with the highly nimble and responsive screen of a smart phone, has captured the imagination of the masses.

That said, I still think the iPad is doomed to fall to a niche portion of the tablet market over the next few years, much like the Mac computer did in an earlier generation. The number one reason for this is Apple's greed. Apple has near total market share right now because it is the only game in town. The company is to be commended for bringing a great program to market that had no equal. But that cannot last. As dozens of competitors seek to take on Apple in the Tablet arena, there are plenty of weak spots for them to attack.

Number one is the price: at around $500-800 depending on the model, the iPad can cost twice what a decent low end netbook costs. This is probably justified given the cool OS and new features. But competitors will soon match those features and sell a similar product for half the price. Apple could engage in a price war, but if past practice is any guide, it will not. Apple will come out with cool new features and offer an iPad 2 at a similar cost. Competitors will offer better deals and pick up more market share, much like Microsoft did in the PC market of the 1980's.

Apple is going to keep its prices for the device high, meaning that many people will not want to go in that direction. In addition, Apple is proving equally greedy in its App Store. It's 30% commission is far higher than the market will bear for very long. It if it wants to make its money on Apps, it should sell the iPad for half the price as a loss leader. If it did that now, it would gut the competition and make itself the market leader for years to come. But trying to make so much money on both the front end and back end is simply not sustainable over the long term. Eventually, other App stores will take a majority of the market, offer better terms to developers, and win the sales war.

Similarly, Apple refuses to share the wealth with other companies. Its refusal to support Flash, or to provide ports on the iPad to let third parties add their own creativity and imagination to the product will stifle its uses. Many users will find the iPad limiting. Apple tries to control how its device is used, rather than leaving that up to the user. That is a major mistake.

So who will emerge the winner? Probably not other players like Blackberry or HP with its WebOS. They are late arriving to the market, unwilling to make serious price concessions, and unable to develop the large App selection needed to build critical mass. They may be very nice products, but that is not enough. Anyone remember the Amiga PC of the 1980's? It was an amazing computer for its time, with many very cool features far ahead of anything else available at the time. But its high price and the inability to build sufficient market share to encourage software developers to build a large stable of programs sealed its fate. Instead, the far less evolved but cheaper and more widely available MS-DOS took over the PC world.

So who will be in the position to be the next Microsoft? Certainly not Microsoft, which has not developed a truly ground breaking program since it introduced MS-Office a couple of decades ago. To me, the winnner appears to be Google. The Android OS, with the Honeycomb version being developed for tablets, looks to be the favorite. Just like MS-DOS in the PC world of the 1980's, Android is a widely available and cheap OS for developers of phones and tablets. It is a high quality OS with enough flexibility to let third parties develop and create new and innovative ways to use it. It is available to a wide number of hardware developers, meaning it will much more easily push its way into a large market share, thus encouraging more App developers, which only continues the cycle up to market domination. The fact that App developers are not shaken down for as much money as possible will also earn Android good will and devoted supporters in the developer community.

This leads me to the title of this piece. Do not by any tablet now. If you wanted to be an early adopter of the iPad, you should have bought six months ago. At this point, you should wait for the iPad 2 to be released in April. Even if the iPad original is all you need, the prices on that will drop considerably as soon as the iPad 2 hits the market.

If you are considering any other tablet, there is not much out there. Google's Honeycomb, Blackberry's Playbook and HP's WebOS are all still months away from release. When they are first released, you will likely see more bugs in first releases than we saw with the iPad. Apple is one of the best in beta testing and getting rid of glitches before going to market, despite its other faults. I would say Christmas 2011 is probably the earliest to consider such a purchase.

If you are concerned about getting value, you will probably have to wait until well into 2012 or even 2013 before the "bleeding edge" pricing goes away and competition forces tablets down into the sub $300 or even $200 level.

If you want something right now that is cheap, reliable and that is small and easy to carry around, buy a netbook. You can get a pretty good one for around $250. It will have a screen as big as the iPad, an OS as good as any PC, and it will even have a keyboard to make writing much easier.

Ten years from now, we will look at an $800 tablet the way we look at the $5000 PCs or $1000 CD players that were sold in the 1980's. A device made in 2021 will be much cheaper (probably under $150 in today's dollars) and will do much more. Sure, most of us won't wait until then since life is short and we want to enjoy the latest technologies now. But the next two years will see the largest decreases in price and the highest growth in improvements. Patience is well worth it.