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The only thing Microsoft has to fear is the future

Microsoft names open source as one of its top three threats. If only it faced lesser threats....

Peter Galli over at eWeek was able to interview Microsoft COO Kevin Turner, and discovered that Microsoft is only worried about two of the biggest trends in software: open source and Software as a Service (SaaS).

Whew! I'm glad to hear that the threats to Microsoft only involve the two things that are completely taking over the industry.

To Microsoft's credit, however, it accurately describes these (as well as entertainment devices - i.e., XBox competitors) as both threats and opportunities:

We view those as the three real threats and opportunities for us as a company, and which we keep our eye on. Those are the ones we track and that we are working on today.

I just wish, as Rob Enderle says in the article, that Microsoft would stop acting as if the only way it can compete in these areas is by cheating. Microsoft is a great company - it can compete based on value, which is what Turner notes later in the interview:

The company does not view the threat as less or more, but as an opportunity to continue to differentiate every single day, to get our story and the facts out, create value with customers and partners, and make sure that we are bringing the truth to the marketplace....

Certainly when you are competing with the perception of free [software], you have to continue to see that you get the facts out. So we have to differentiate ourselves on value creation and what we can bring to the marketplace. So I think that what's different today is that customers are starting to figure it out and our technology solutions are better. Both of those dynamics have allowed us to really seek the momentum.

Well, no, I don't think the market is suddenly discovering that Microsoft's products are superior. But it is true that Microsoft offers a unique value proposition - decent to good technology at highly competitive prices - that few of its proprietary peers can match. The problem for Microsoft, however, is that an increasing array of free-software vendors can match, and even exceed, Microsoft in the value creation department.

In fact, Red Hat, not Microsoft, is routinely voted #1 in value in the industry.

Microsoft can do better, but I believe that change will be hugely painful for Microsoft - much more so than for Oracle and others who already make much of their money from maintenance (which closely aligns with open-source business models). Microsoft is a license company, and I'm afraid that the future is not bright for those who persist in making money in such antiquated ways.

Still, Microsoft is a smart company. It can figure this out. But I bet it won't until it sheds a heck of a lot of middle management that is wedded to the past.