Thought for the New Year:Money, Microsoft and making it through the gloom

Simon Moores posits dramatic new moves from Microsoft as the IT industry copes with another hard year.

Simon Moores posits dramatic new moves from Microsoft as the IT industry copes with another hard year.

According to Richard Holway of analyst group Ovum, 2003 is not the year of revenue growth. It is the year of competitiveness and market share.

We've had several years now of the larger IT vendors directing business towards the benefits of a new El Dorado - return on investment (ROI) - and most customers are still hacking their way through the jungle trying to discover if such a thing really exists or whether it's wishful thinking on the part of the financial director.

Before Christmas I was told that software companies had a very narrow view of ROI that failed to embrace the "big picture" view of what constitutes a good return and what doesn't.

The first signs of a new conservatism among customers emerged in 2002, when they realised that spending as much of 40% of a company's revenue on IT wasn't demonstrating a proportional leap in profitability or an improvement in processes.

Of course, there were exceptions, but 2002 was a hard year for many businesses and an even harder year for the IT sector, and 2003, as Holway suggests, looks set to follow a new direction, one more likely to contrast the hard-nosed pragmatism of our Victorian ancestors to the rather more ambiguous promises made on behalf of IT.

Microsoft back on the expansion trail
With that small matter of a court case behind it, Microsoft is now free to use its considerable savings rather more freely than it has in the past.

Navision and Great Plains Software were two recent investments that did not tread on too many toes in the enterprise space, but remember that Microsoft is sitting on more cash than many of the world's smaller economies and is now in a much better position to decide where it should be expanding next.

There's little doubt that there will be a war of attrition with Sony Ericsson in the gaming and telecoms sector, but with IBM now a truly global services business through its acquisition of PWC, I wonder whether Microsoft will seek to break out of the pure software business into technology areas that we wouldn't normally associate with the company.

A hundred years ago, this might have been something along the lines of "Those Wright brothers are completely crazy but offer them $100 and a contract just in case they get off the ground".

Open source and the big players
Will this be Linux's year? I still have my own doubts about the success of open-source computing in its purest form because it appears to contradict the interests of its larger supporters, the IBMs of this world.

What we are seeing is the industry gradually splitting into two camps. On the one side, Microsoft and the proprietary view of software development and on the other, the big global services players like IBM and EDS, who may be happy to give away the software but will charge you for the service and support that goes with it.

This is, I know, a terribly simplistic view of what's happening, but I wonder if the Robin Hood morality behind open-source computing can survive the economic pressure of being championed by Sun and IBM as an alternative to Microsoft.

Linux will, however, continue to pick-up market share as will the applications server market. If this happens, I wouldn't be surprised to see Microsoft seriously considering porting some of its most strategic products, such as Exchange, to the Linux platform - a strategic master stroke worthy of Napoleon - but probably not this year.

Improvising through the gloom
My final prediction is that the recession in the IT industry will continue to bite, regardless of any good news surveys I read in December. I was speaking to journalists at one of the largest PR parties of the year in Fleet Street and there was a prevailing atmosphere of gloom.

Perhaps a war in the Middle East will jump-start the economy and the stock market, but if we remember back to the last occasion, quite the opposite happened.

I believe 2003 will be more of a year of clever improvisation than grand innovation, making the best of the IT tools that companies have today in order to make them leaner and more competitive once this bear market bounces back into a growth cycle. This New Year will be as tough as last year but budgets and belts will be more than a notch tighter.

What's your view?
What do you predict as the big issues of this year? Tell us in an e-mail >> reserves the right to edit and publish answers on the Web site. Please state if your answer is not for publication.

Sponsor a madman!
Over the years, and for different charities that include the NSPCC and Ravenswood, Simon Moores has run across the Sahara desert, sponsored by Symantec, taken a mountain bike over the route of the Exodus with the support of Microsoft and climbed a mountain carrying an Apple Newton.

In 2003, if his exhausted physiotherapist allows, Simon is looking for a new challenge, a new charity and a new sponsor. Are any CW360 readers interested in acting as sponsor? Contact Simon at [email protected]

Zentelligence Setting the world to rights with the collected thoughts and opinions of the futurist writer, broadcaster and Computer Weekly columnist Simon Moores.

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