here are 2 parts to this article – first part deals with what is wrong with Microsoft and second one on why is it important for it stay healthy.

The past couple of weeks I have totally moved out of Microsoft’s technologies using a Macbook and iPad to control two Linux servers in the cloud. I use LAMP stack for development, Open Office and a bunch of iPad apps for productivity. I favor HTML5 over Silverlight and Flash and except for Xbox I don’t see Microsoft’s leadership anywhere. As I have started using apps like Flipboard, Mobilenoter and Popplets on iPad I’m now wondering what is the future of the PC and the company that is most reliant on it – Microsoft?

How relevant is Microsoft today for startups?

Microsoft’s fall from tech perch is as spectacular as its rise to the top. In 2 decades, the company founded by an Harvard dropout conquered the tech world pushing companies like DEC into history and bringing stalwarts like Apple & IBM almost close to extinction in mid 90s(they have since bounced back to glory).

The coverage of Kinect 360 (gaming console) & Windows 8 Metro UI notwithstanding, these days Microsoft is almost absent from tech news. It is hardly mentioned in startup blogs like Mashable & Techcrunch and hardly any successful startup is using its stack. Even the grudging respect and fear is gone.

The much hyped up Microsoft Surface, Zune, Photosynth, Bing, Silverlight, Azure, Windows Phone have not shook the world and have not led to a new Microsoft. After 100s of ventures, it is still a company making PC operating systems & office productivity software. MSN & Hotmail has faded into distant memory, ASP & IIS severs are frowned upon in most of tech world. Apple with its iPad has brought the war right into Microsoft den – The PC. So much is the impact that Microsoft is now focusing primarily on tablet computing for the next release of Windows.

What went wrong?

Headless organization unable to tame internal warlords guarding their territory

Tech companies are defined by their leaders. Gates, Jobs, Page, Ellison were visionaries who were as brutal as they were charming.

 They had the full backing of their foot soldiers and could take the company in the direction they wanted. Microsoft under Gates was the world’s biggest tech company that had everything going for it. It was in fact so big & powerful that US government sought to break into two. Unfortunately, their present leadership is anything but strong.

Developers don’t love to be ruled by businessmen (Eric Schmidt is now booted out of Google to bring back Larry Page) and Microsoft CEO Steve Ballmer doesn’t fit in its culture. Ballmer has a very lukewarm support from his developers and there is very little trust at the bottom that he can pull things off. As the leader faces crisis of confidence plenty of divisional warlords are calling their shots leading to complete anarchy. There are many duplicated efforts across the organization and often times there are 2-3 different products for the same purpose.

Over diversification that inhibits collaboration

List of Microsoft products

Microsoft produces a database, an OS, office productivity suite, browser, search engine, mobile phone, gaming console … competing with the likes of Oracle, IBM, Google, Apple and Sony at the same time. There are 4 ways that this over diversification hurts Microsoft:

1. It reduces the focus at the organization level and spreads it too thin
2. It reduces scope for partnership with other tech mammoths
3. It wastes plenty of money and talent
4. Brings in too much internal rivalry as one division could step on other’s toes

The culture is reactive & never proactive

Steve Jobs announces the iPad 2 in January.

In 2001 Apple brought the iPod and shook the Music world. As its success became apparent Microsoft focused all its energies to create the Zune in 2006. Having diverted Microsoft, Apple brought the mammoth – iPhone in 2007. As phone success became apparent, Microsoft started chasing the phone (almost giving up Zune) revamping its Windows mobile division. As Microsoft was too engrossed in phones, Apple pulled its third trick – iPad and now Microsoft is busy chasing it. Interestingly Microsoft’s researchers had worked many of the technologies in music players, smartphones & tablets long before Apple came to it, but Microsoft’s management never put enough energies on execution.

Historically, Microsoft has always been following the pack and never leading it. The modus operandi is some company will bring a new innovation and if is successful, in a year Microsoft will bring its own version of it and take the market. It worked when the tech companies were as slow moving as IBM & DEC or small as Lotus (pioneer in Office apps and lost the competition), Hotmail (bought) or Netscape (killed with Monopoly). But, in the days of fast paced mammoths like Apple, Amazon & Google, Microsoft is not able to play its old tricks. It could neither compete in speed nor in size.

Focus on cost and not on quality

Microsoft’s historic refrain to Apple’s products is to point out its cost and boast how Microsoft enabled products are cheap. It worked well so far. But, now consumers are no longer pushed by cost alone. In the past 10 years, look at the successes of iPod, PS 2 iPhone, iPad, Xbox, Nintendo, etc. Were these cheap by any stretch? Even at the heights of recession consumers were gorging on Xbox Kinect and iPads. The verdict is clear – people are tired of cheap stuff and they demand quality gadgets. They are tired of half-assed products and are willing to pay a premium. You might ask then why is Windows still leading? It is not just cost, but its universal support & choice of software. As more software support Mac, we are seeing Macs increasing their share.

Focus on features and not on usability

If you ask a Microsoft engineer why his product is superior he will point to a whole bunch of features that his competitors cant. In fact, Microsoft products can beat their competitors any day on features front. But, an important question is are those features necessary? If your car could wash clothes, mop floor and cook food at the cost of decreased driving performance, would you accept? Plenty of unnecessary features causes Microsoft’s products to become bloated, confusing and crash prone.

Why is an healthy Microsoft important to us?

Microsoft brought technology to the masses and helped create a massive technology market. Microsoft’s implementation of IP (internet protocol) & packing Internet Explorer in Windows 95 helped the first wave of www revolution & its contribution to AJAX helped the second wave of Internet. A healthy Microsoft can keep the monopolistic intentions in Apple, Google, Oracle at bay, and help increase choices for the customers and tech employees. Pressure from Microsoft’s tablets & phones could make Androids & iPhone more user & developer friendly. Even after a lot of attrition in the past decade, Microsoft is still a store of massive tech talent and is still capable of great things.

Microsoft is important for startups too. For one, it improves the exit strategy as there is potentially one extra suitor to acquire your startup. But, more importantly it has been one of the most open systems for developers to write code. Windows Mobile was available to OEMs and developers long before there was Android, and it had an app ecosystem before there was Apple appstore. Hence it is important for us as users, developers and startup entrepreneurs that Microsoft get back on track.

Disclosure — I was a former employee of Microsoft Redmond & worked on Windows 7, Windows Phone and research teams.