Windows 7 is now officially a year old. Since it was released October 22, 2009, Microsoft has sold over 240 million copies of the operating system — approximately seven copies per second. That makes it the fastest selling operating system in Microsoft’s history or any vendor’s history. Some industry pundits estimate that Windows 7 sales will top 300 million within the next six-to-eight months.
Microsoft has plenty of other reasons to celebrate Windows 7’s first birthday. Windows 7 has also been one of the most stable, reliable and secure releases in Microsoft’s history.
A three-quarters majority – 73 percent of the 400+ respondents to the latest joint ITIC/Sunbelt Software poll, gave Windows 7 an “excellent,” “very good” or “good” rating.
That’s very close to the 80 percent majority of beta and early adopters who gave the Windows 7 the same high marks in the 2009 ITIC/Sunbelt Software survey. The latest responses, coming after corporations have used Windows 7 in production for a full year, provides the best evidence that the Microsoft operating system is living up to the hype and fulfilling business’ needs. Only a small three percent minority of survey respondents gave Windows 7 a “Poor” and/or “Unsatisfactory” rating.
Windows 7’s immediate and intermediate future appears similarly rosy: a 72 percent majority of survey participants say they have already deployed, are in the process of deploying or will shortly deploy Windows 7. Only seven percent of those polled indicated that they are “unlikely” to deploy Windows 7 at all and none of the respondents said they plan on switching to a rival operation system.
Lack of funds was the chief reason cited by the remaining 21 percent of respondents who said they have no definitive plans to upgrade to Windows 7 over the next 12 months. Anecdotal user comments confirmed that many companies are still in the grip of a recession and will wait until they upgrade their desktop hardware to migrate to Windows 7.
So great has been the demand for Windows 7, that it has fueled record revenue and earnings for Microsoft over the last three fiscal quarters. Microsoft recorded record revenue of $16.04 billion for the 2010 fourth fiscal quarter ended June 30.
In fact, Microsoft’s financials and balance sheet over the last several quarters is pure gold (see below) and is or should be the envy of just about any business.

Microsoft by the Numbers
Profit Margin: 30.02%
Operating Margin: 39.51%
Return on Assets: 18.82%
Return on Equity: 43.76%
Revenue: $62.48B

Quarterly Revenue Growth: 22.40%
Gross Profit: $50.09B
Quarterly Earnings Growth: 48.40%
Total Cash: $36.56B

Total Debt: $5.97B

Source: Capital IQ

Instead, many industry experts and observers paint a grim picture of the 35 year-old Microsoft in a midlife crisis, well past its prime and unable to compete in new and emerging markets like smart phones, search engines, online search and advertising and the cloud against edgier rivals, most notably Apple and Google. Recent articles have made much of the fact that Microsoft garners far fewer headlines these days – about one-third to one-half as many mentions – as Apple, Dell, Google, Hewlett-Packard, IBM, Oracle, Research in Motion (RIM) and VMware to name a few.
Press of course, is relative, depending on the type of news one is generating. Still the prevailing sentiments in the news business are that “No news is not good news” and “It’s better to be damned than ignored.”
Microsoft executives are no doubt grateful that for a change, they are not one of the headliners in the increasingly vitriolic verbal volleyball that characterizes HP and Oracle’s disintegrating partnership. Similarly, press reports about Microsoft and its executives have been remarkably devoid of scandals – such as those that have recently rocked the HP board of directors.
That then begs the question, if Microsoft’s financials are so rosy, its core Windows and Office products in the black and thriving, why then are some industry observers writing the company’s epitaph?
A Tale of Two Microsoft’s
The answer of course, is that while the numbers aren’t lying, they don’t tell the whole story. For all intents and purposes, there are two Microsoft’s: one is the company that exists in reality and the other exists in the public’s perception. And the two Microsoft’s are indivisible.
The reality is Microsoft’s core businesses – Windows and Office continue to thrive – for now. The industry however, is inexorably changing. It is morphing from a fixed premises, subscription-based licensing model that has been the foundation of Microsoft’s astounding success and dominance over the past three decades to an increasingly mobile workforce that uses smart phones (Blackberry, iPhone, Android et al); tablets (the Apple iPad) and free Email and applications (Google Mail, Google Docs) to stay connected. In these emerging environments, Microsoft is playing catch-up and struggling to stay relevant as rivals like Google and Apple continually assault its core applications businesses.
It doesn’t help Microsoft’s case when high level executives decide to exit the company “to pursue other interests.” Chief Software Architect, Ray Ozzie, the iconic developer of Lotus Notes, is the latest high profile departure. Ozzie, who was touted as Bill Gates’ successor as Chief Software Architect, announced earlier this week that he was leaving Microsoft. No departure date has been publicly announced and until he exits Ozzie will lend his considerable talents to the entertainment division.
Ozzie’s exit follows on the heels of Robbie Bach and J. Allard’s departures earlier this year as executives in the entertainment and mobile divisions, respectively. Bach and Allard reportedly clashed with Microsoft chief executive and other executives on technology direction. Such divisions were made sharper by the flagging fortunes of Microsoft’s mobile and entertainment initiatives. After suffering the stinging embarrassment of pulling its KIN 1 and KIN 2 phones off the market on June 30, a scant six weeks after the product debuted to near non-existent sales.
The company is now regrouping around the Windows Phone 7, which it is targeting at business users. The new Microsoft mobile OS has garnered good reviews so far, now it has got to get users onto the platform. Microsoft will reportedly spend $400 in a fall and winter marketing campaign throughout the U.S. and Europe. Microsoft has more than just money invested in Windows Phone 7’s success. If it fails to gain tangible and significant traction, Microsoft may effectively be shut out of the lucrative but increasingly competitive and crowded smart phone arena.
Microsoft has other definite challenges – and they are daunting ones. It must:
• Make more headway in the search market. Bing is a very good search engine and does have traction. The latest statistics released by ComScore earlier this month, show Bing with an 11.2 percent market share. However, that is far behind Google’s 66 percent.
• Clarify its Azure and BPOS cloud strategies. Microsoft has made significant strides in its cloud offerings and strategies. But its marketing is still muddy. Microsoft must craft a cogent and cohesive cloud strategy and communicate it so that it resonates with the masses of existing Windows customers and potential users.
• Retain and attract top talent. Truthfully, the number and caliber of executive departures from Microsoft over the past several years has been no better or worse than the majority of high tech firms. But Microsoft is under a microscope and is judged more harshly than most of its rivals. Many of the departures were predictable; coming after decades of tenure and after the executives in question had made millions. That said Microsoft must retain and attract top talent. Easier said than done, I know.

The biggest blow of all of course, was Bill Gates’ decision to retire from day-to-day Microsoft operations to concentrate on his philanthropic pursuits. This is great for Gates and his charities but he’s as close as you get to the indispensable man. Remember how Apple’s stock stumbled when speculation was rampant during 2009 about Steve Jobs’ health? Microsoft has also taken a beating in the press with rumors that Ballmer may leave or be forced out of the top spot. The truth is every high tech firm needs a visible face like Jobs at Apple, the triumvirate of Larry Page, Sergey Brin and Eric Schmidt at Google and of course, Larry Ellison at Oracle. Right now, there are no obvious successors or heirs apparent to Gates or Ballmer. For Microsoft’s sake Ballmer should stay at the helm for the time being.
Despite Microsoft’s issues, it would be a big mistake to write the company off. There are lots of positives. They include:
• Revenue and entrenched market share and continued dominance in the Windows and Office markets which should continue for the next several years.
• The Xbox Kinect and Windows Phone 7 appear to be gaining real traction.
• Broad, deep portfolio of cloud products which has shown impressive growth in the past 12 months.
• Robotics: Microsoft is also a pioneer in another crucial emerging market: robotics. Microsoft’s Surface is a multi-touch, combination hardware/software product that enables users to manipulate digital content via gesture recognition, such as hand signals or real world objects. Available since 2008, it has racked up some impressive wins and is in use at Disneyland’s Tomorrowland, select Sheraton Hotels and Harrah’s Entertainment.
• Security and Reliability improvements in the core Windows products. Microsoft’s 2002 Trustworthy Computing Initiative has been a rousing success. According to the National Institute of Standards and Technology’s (NIST) Common Vulnerability and Exposures Database (CVE) SQL Server is the most secure of the major database platforms, with the fewest number of reported vulnerabilities associated with the platform since 2002. And the results from the ITIC 2010-2011 Global Server Hardware and Server OS Reliability survey indicate that 86 percent of respondents rate the security of Windows Server 2008 and Windows Server 2008 R2 as either “Excellent” or “Very Good.” Similarly, 50 percent of survey participants indicated that Windows Server security has “improved significantly” while 24 percent say it has “improved somewhat” over the last three years. At the same time, none of the survey participants indicated they were contemplating wholesale defections to rival platforms, although the number of individual users deploying Apple Macs and iPads is on the rise.

There is no question that Microsoft will survive and continue to thrive in its core markets. The looming question is can Microsoft get its groove back to aggressively mount a challenge to Apple, Google et al, in the lucrative mobile, online, entertainment and cloud markets. It must go back to its roots and aggressively play to its strengths. Microsoft’s $36.56 billion in cash should buy a lot of advertising and a lot of talent.

In a clear indication of Apple’s continuing strength with business customers, a new survey of enterprise technology managers shows accelerating interest in purchasing first-time or additional Mac OS computers and iPhones.
Satisfaction with the performance, reliability and security of Apple devices – particularly Mac hardware, OS X 10.x operating systems and the iPhone 3 and 4 (the antenna problems of the newest iPhone 4 notwithstanding) were very high. On average, approximately two-thirds of the survey participants rated the performance and reliability of Apple devices as “Excellent” or “Very Good.”
In addition, the survey responses validate the record breaking iPad sales statistics. As of June 22, Apple said it had sold over three million iPads in the 80 days since its’ April release. The figure is presumably much higher today. The ITIC/Sunbelt survey also found that the iPad is off to a very strong start, with 23 percent or nearly one in four IT managers stating they’ve already purchased or ordered the new Apple tablet. Another 18 percent said they plan to purchase an iPad within the next nine months, while just over half – 51 percent — said they have no definitive timetable. The remaining 8 percent said they plan to wait until Apple cuts the iPad prices for the first time.
And 86% of the respondents who have already bought an iPad say they are using it for both personal and business functions.
The responses to the question, “How often do you or your business experience technical issues with Apple products/devices?” were very positive and encouraging. Some 12 percent said they never had any problems; 50 percent or half the respondents said they “rarely” experienced problems; 20 percent said they “occasionally” encountered technical issues every few months; 5 percent said “once a month;” 6 percent said “two or three times per month;” 5percent said “regularly or once a week,” while a very small 2 percent minority indicated they/their businesses encountered technical issues on a daily basis.

Among the other survey highlights:
• Nearly two-thirds of respondents — 63 percent — indicated they/their organizations use the various Apple devices for both personal and business functions.
• An overwhelming 82 percent majority of survey participants said they use their iPhones to access corporate Email and data.
• 24 percent, who did not currently own an iPhone, said they “have already decided” or are “very likely to switch” with an additional 35 percent saying “it’s possible we’ll switch when the current contract expires.”
• Eight out of 10 organizations said they are “more likely to allow more users to deploy Macintoshes as their enterprise desktops” in 2010-2011, up from 68 percent in the 2009 survey.
• The number of organizations reporting large complements of Macs and OS X 10.x in their organizations continues to climb. Some 7 percent of respondents said they have more than 250 Macs in their enterprise. In the 2008 survey, only 2 percent had more than 250 Macs.
• The percentage of mobile/remote users using Apple devices is rising quickly & significantly
• The line between Apple consumer and enterprise usage continues to blur : 79 percent of survey respondents said that their firms will increase integration with existing Apple consumer products such as the iPhone to allow users to access corporate e-mail and other applications in the 2010-2011 timeframe. This is an 11 percent increase from the 68 percent of respondents who answered that query in the ITIC/Sunbelt 2009 Apple Enterprise Usage survey.

Analysis
The growing popularity of Apple products in the personal lives of IT managers is having a continued spillover effect in the enterprise. The acceleration of interest compared to our previous surveys tells me this trend will continue unabated during the next 12 to 18 months.

This is the third Apple Consumer and Enterprise Survey conducted by ITIC and Sunbelt since 2008. Each successive survey has shown a steady increase in both the number of Macs and Apple devices being deployed by corporate enterprises. ITIC will release the results of additional survey questions on Apple product satisfaction, reliability, security and ease of adoption/integration in August, 2010.
Particularly noteworthy is the survey participants’ strong interest and enthusiasm for the iPad, a product just a few months old. Plus the already strong iPhone adoption will continue as old wireless contracts expire. One can only project that if iPhone becomes available on Verizon in the U.S., the numbers of additional enterprise-based units could be staggering.
Thus far, consumer and corporate users appear to be nonplussed and largely unaffected by the iPhone 4’s much publicized antenna problems which have led to reports of dropped calls the essay comments and first person customer interviews. First person customers interviews on the topic have elicited little more than a shrug. One user said, “So what? All mobile phones and PDAs drop calls.”
Still, Apple must respond decisively and quickly to address any performance, quality and reliability issues related to any and all of its products. Apple has a press conference scheduled for later today to address the issues.
At present however, these issues do not appear to be having an adverse impact on iPhone 4 sales.
With Apple’s enterprise success though, will come new challenges. IT managers who participated in the ITIC/Sunbelt survey extolled the features and functions of the Apple Macs, OS X 10.x, iPhone and iPad for consumers. However, as more and more Apple devices make their way into the enterprise, the lack of enterprise-class third-party management and performance-enhancement tools and technical support is becoming a significant barrier and impediment to widespread enterprise adoption. It is not as problematic though, for organizations that currently have just a few Macs or isolated pockets of Macs and OS X 10.x in specific departments such as graphics. Still, Apple will have to address these issues if it is to mount a serious challenge to Microsoft’s dominance. So far, the company has been silent about its enterprise strategy.
A new consortium of five third-party vendors calling itself the Enterprise Desktop Alliance (EDA) has taken the lead to promote the management, integration and interoperability capabilities of the Mac in corporate environments. Apple is well advised to forge a closer relationship with the EDA and its member organizations to foster greater third party integration and interoperability between Apple devices and rival platforms.
Part 2 of the Apple survey results as they relate to security issues will appear in a subsequent blog.

Since January, the high technology industry has witnessed a dizzying spate of dueling, vendor product announcements.
So what else is new? It’s standard operating procedure for vendors to regularly issue hyperbolic proclamations about their latest/greatest offering, even (or especially) when the announcements are as devoid of content as cotton candy is of nutritional value. Maybe it’s just an outgrowth of the digital information age. We live and breathe instant information that circumnavigates the globe faster than you can say Magellan; the copy monster must be fed constantly. Or maybe it’s the protracted economic downturn which is making vendors hungrier than ever for consumer and corporate dollars.
Whatever the reason, there’s no doubt that high technology vendors – led by Google and Apple – are engaged in a near constant game of one-upmanship.
Apple indirectly started this trend in early January, when word began leaking out that Apple would finally announce the long-rumored iPad tablet in late January. The race was on among other tablet vendors to announce their products at the Consumer Electronics Show (CES) in Las Vegas in mid-January to beat Apple to the punch. A half-dozen vendors including, ASUSTeK Computer (ASUS), Dell, Hewlett-Packard, Lenovo, Taiwanese manufacturer Micro Star International (MSI) and Toshiba all raced to showcase their forthcoming wares in advance of Apple. It made good marketing sense: all of these vendors knew that once Apple released the iPad, that their chances of getting PR would be sorely diminished.
I have no problem with smaller vendors or even large vendors like Dell and HP, who rightfully reckon that they have to make their announcements in advance of a powerhouse like Apple to ensure that their products don’t get overlooked.
Apple vs. Google Battle of the Mobile Web Titans
But when the current industry giants and media darlings like Apple and Google start slugging it out online, in print and at various conferences, it’s overwhelming.
Apple and Google are just the latest in a long line of high technology rivalries. In the 1970s it was IBM vs. HP; in the 1980s, the rise of networking created several notable rivalries: IBM vs. Digital Equipment Corp. (DEC); IBM vs. Microsoft; Oracle vs. IBM; Novell vs. 3Com; Novell vs. Microsoft; Cabletron vs. Synoptics and Cisco vs. all the internetworking vendors. By the 1990s it was Microsoft vs. Netscape and Microsoft vs. pretty much everyone else.
The Apple vs. Google rivalry differs from earlier technology contests in that the relationship between the two firms began as a friendly one and to date, there has been no malice. Until August, 2009 Google CEO Eric Schmidt was on Apple’s board of directors. And while the competition between these two industry giants is noticeably devoid of the rancor that characterized past high tech rivalries, it’s safe to say that the two are respectfully wary of each other. Apple and Google are both determined not to let the other one get the upper hand, something they fear will happen if there is even the slightest pause in the endless stream of headlines.
Google and Apple started out in different markets – Google in the online search engine and advertising arena and Apple as a manufacturer of consumer hardware devices and software applications. Their respective successes – Apple’s with its Mac hardware and Google’s with its search engine of the same name have led them to this point: a head to head rivalry in the battle for supremacy of the mobile Web arena.
On paper, they appear to be two equally matched gladiators. Both companies have huge amounts of cash. Apple has $23 billion in the bank and now boasts the highest valuation of any high technology company, with a current market cap of $236.3 billion, surpassing Microsoft for the top spot. Google has $26.5 billion in cash and a valuation of $158.6 billion. Both firms have two of the strongest management and engineering teams in Silicon Valley. Apple has the iconic Steve Jobs who since his return has re-vitalized the company. Google is helmed by co-founders and creative geniuses Larry Page and Sergey Brin and since 2006 and Eric Schmidt, the CEO who knows how to build computers and make the trains run on time.
Fueling this rivalry is Apple’s and Google’s stake in mobile devices and operating systems. In Apple’s case this means the wildly successful iPhone, iPod Touch and most recently the iPad and the Mac Mini. Google’s lineup consists of its Chrome OS and Android OS which will power tablet devices like Dell’s newly announced Streak, Lenovo’s forthcoming U1 hybrid tablet/notebook due out later this year. The rivalry between the two is quite literally getting down to the chip level. Intel, which has for so long been identified with Microsoft’Windows-based PC platform is now expanding its support for Android – a move company executives have described as its “port of choice” gambit. Apple is no slouch in this area, either: its Macs – from the Mac Minis’ to the MacBook Pros, ship with Intel inside. Last week Nvidia CEO Jen-Hsun Huang weighed in on the Apple/Google rivalry on Google’s side, predicting that the tablet designs will converge around Google’s operating system.
But a stroll through any airport, mall, consumer home or office would give a person cause to dispute Huang’s claim: iPads and iPhones are everywhere. Apple recently announced that it has sold over two million iPads since the device first shipped in April. During a business trip from Boston to New Orleans last week I found that Apple iPads were as much in evidence as hot dogs at a ballpark.
Ironically, Microsoft, a longer term traditional rival of both Apple and Google is not mentioned nearly so often in the smart phone and tablet arenas. That’s because Microsoft’s Windows OS is still searching for a tablet to call its own. Longtime Microsoft partner HP, abruptly switched course: after Microsoft CEO Steve Ballmer got on stage and demonstrated Windows 7 running on HP’s slate, HP bought Palm and earlier this week acquired the assets of Phoenix Technologies which makes an operating system for tablets. That leaves Microsoft to promote its business centric Windows 7 phone which will run Xbox LIVE games, Zune music and the company’s Bing search engine. All is not lost for Microsoft: longtime “frenemy” Apple CEO Steve Jobs said recently that the new iPhone 4G will run Microsoft’s Bing fueling speculation that Apple will drop support for Google’s search engine. Both Google and Apple are still competing with Microsoft in other markets like operating systems, games and application software to name a few, but that’s another story.
There are other competitors in the smart phone and tablet markets but you’d hardly know it from the headlines. Research In Motion’s (RIM) Blackberry is still a market leader. But Apple and Google continue to dominate the coverage. I guess high technology just like sports revels in a classic rivalry. And this one promises to be a hard fought struggle.