TL;DR: Personal rant about Freemium versus Licensing in a software powered world.

Authors note: There is no doubt that many of the ideas discussed here contrast and conflict with each other and the article doesn’t necessarily reach a satisfying conclusion or propose a solution. Don’t be put off by the vociferous tone. Passion thunders when it writes and I invite you to challenge what is said because I have no interest in “shutting you down” or “being right.” I want to help you articulate your thoughts on the matter, so you can help me articulate mine.

My beef with Microsoft’s new CEO inaugural email to all employees, ultimately boils down to the fact that Nadella said, “our industry does not respect tradition — it only respects innovation.”

I think this one idea completely dissipated the power of his message, insults the influence that Microsoft talent still exerts on the tech industry, and prostrates the company before false competitors.  

Microsoft Actually Has a Strong Business

This article by Jay Yarow from Business Insider has pinpointed the source of my disappointment with more business acumen than I have. He says:

“Nadella should be pounding the table at every chance he gets to say that Microsoft is an enterprise company, not a consumer technology company.”

As Yarow explains, Microsoft’s commercial group earnings grew by 10%, whose net worth is double that of its consumer group earnings – which shrank at a similar rate.

Put another way, Microsoft’s core customers clearly respect tradition and don’t give a flying fox (deliberate) about innovation. Microsoft has a very solid foothold in the enterprise market and does not need to continually spite its face by courting consumer markets.

The enterprise market is far from being sown up by Google whilst Apple struggles to make a dent in it. They both have very different approaches to computing, design and the application of technology and own their overlapping customer bases respectively.

Microsoft is the same – there is some overlap in customer base but customers are still buying their products for, presumably, separate reasons.

Get Rich Or Die Trying

To say that the tech industry does not respect tradition fails to acknowledge the roots of the company’s success. Namely that it pioneered a different approach to software at a time when a nascent industry had a choice between at least two different opinions on how to thrive – go open source or go in whatever the opposite of that might have been – like software licensing, the Microsoft way.

There will always be advocates for another way, but that does not mean that Microsoft’s approach wasn’t valid then and isn’t valid now. Clearly, some of the best tech talent in the world made a bunch of decisions about why it was sensible to take the software licensing approach.

Perhaps, at that time, software licensing was the quickest way to build a business to generate revenues? You know, to secure the best talent in order to continue being the leading innovator. That would be a reasonable motive.

Upsetting the Apple Cart

You can’t put the cart before the horse and “innovation” rides on the back of “tradition.” To extend the metaphor, Microsoft and IBM have been the horses that have got the tech industry to where it is now. I wish Nadella had just owned that. Tradition isn’t always the old way – it might be the best way too.

The licensed tech industry employs hundreds of thousands of people globally and has created a middle class with cash in their pocket – this is something to celebrate and reinforce.

If that was implied in the email by ’empowering people to do magical things,’ that sense was completely lost; when it could have been a valuable reminder of the foundation of our digital age. If you are going to invoke tradition in a speech, don’t simultaneously eschew its historicity.

The economic burden (and associated trade offs in opportunity) of technology development is something that Microsoft employees understand better than most. There’s a reason they build things the way they do and there’s probably many intertwining strands of computing tradition that they adhere to.

If you are left wondering what Microsoft’s employees have contributed to an extremely complicated body of thought, just read Jaron Lanier‘s book, “Who Owns the Future?” While you’re at it, seek out current and former staff members Stefan Weitz, Duane Forrester, Duncan Watts (all current) and Mel Carson (former). They are some of the smartest people I have ever talked to about algorithms, web search, connected devices and social media.

Personally speaking, I’ve learned 10x more from chatting with Microsoft team members than I have ever had with top brass at Google. I’m not saying that it’s simply a matter of character, it’s not. Regardless, they’re awesome guys but part of their sheen is that they are permitted to talk more freely because Microsoft is the underdog online.

Which puts the company in the privileged position of being able to bring a lot of commentary on the state of the web as they have less interests to protect.

Our industry desperately needs this. Every internal pioneer should be heard and supported, regardless of whether they’re on the ‘winning’ team (it’s too early to define the winners, anyway).

What Nadella should have said is that most people earning money are making money using Microsoft software. They might not be millionaires but they’re able to buy houses, cars and put their kids in school because Microsoft provides software that helps them do their jobs better.

I wouldn’t call that magical; I would call that reality.

When Free is Not Freedom 

Our generation is definitely due a reminder of the fundamental discourses belying computing that has ushered in the digital age. Lanier nails this in the aforementioned book, which I paraphrase extensively below.

In a nutshell, he makes the point that the ‘cloud’ might be a technological inevitability, but that doesn’t automatically make it what is best for society.

Lanier argues that because of all the free services on the web, no one really owns anything. We’re just paying for access. Yet we are paying the same price for access to something digital as we would have had to pay to physically own it in an analog age.

The consumer is kinda getting ripped off  nowadays. Buying products used to have resale value – a purchase could be an investment of sorts. But now, consumer purchasing power is tantamount to shoring ourselves up against our own obsolescence.

We’re all effectively renting when we think we are buying. The cloud is great, but it’s not that great. When we pour our money into the cloud, the worth of our cash evaporates.

When Sharing Dis-empowers

Furthermore, Lanier continues, the cash value of middle class services will continue to shrink under the influence of big data and global finance because super computing now controls everything – especially the price we pay for things. Or more importantly, don’t pay for things.

The fragments of social data we share when we tell companies what we like to read, watch and do are given in exchange for the free services we’re allowed on Google and Facebook’s farm. Nonetheless, we end up paying eventually because the cost of entering or competing in the market continues to escalate to insurmountable running costs.

funny-facebook-fails-oinkonomics

You’ve probably seen this cartoon already but may only get it intuitively. Former Microsoft employee, Jaron Lanier, properly explains why this is the case.

Silicon Valley culture expounds a whack enlightenment philosophy of sharing and empowerment, that is forcing a situation which no longer allows any interested parties, entrepreneurs or Fortune 500 CEOs, to think moderately or different anymore.

It’s not too far from the truth to say that many web companies can’t really compete now – they must collaborate and target their exit investor. We must be over-reaching and happily exclaim, “go big or go home” but once you’ve got investors you’re back working for the man. It’s go big and then go home. You probably can’t see out the complete vision of your tech company once you have been defensively acquired.

All of which exerts a downward pressure on the average man on the street’s ability to sell their skills just for what they are worth. The creative person is perilously close to being fully disintermediated from their own means of earning.

Fed on fantasies of startup fame, we are incentivised to share our best work for free in huge ring fenced digital environments that we cannot influence with our individual economic power.

So, it’s no surprise that we just want to get rich, quick, because that is the promise of following in the footsteps of Facebook, YouTube, Google and other Silicon Valley entreprenuers. Yet, under a ‘Googly’ philosophy of sharing, we’re driven towards “quick wins” and risk completely ignoring the realities of building viable businesses that give back to the economy and create sustainable wealth.

What Everyone Traditionally Hates About Microsoft Could Be What We Need

Licensing is a business model that sustains the creative classes. Microsoft and Apple have both built their businesses upon licensing. If Apple can own the consumer market, by ’empowering’ its customers to become amazing creatives who are proud to sell their creative works through iTunes, iBooks and the Appstore, why can’t Microsoft do something similar in the enterprise market?

I totally agree with the suggestion below from Yarow’s article. Microsoftis gigantic customer base could be the weed, or creeping vine, that helps to further push entrepreneurship through the increasingly walled gardens of Google and Apple.

Microsoft has done almost nothing on the iPhone or Android. Microsoft Office should be an amazing suite for the iPad, iPhone, and Android. Internet Explorer for Android should be better than Chrome for Android.

Microsoft sells thousands of licenses. That is the ‘cloud first’ ecosystem that could make a difference. Their licensing infrastructure could help sustain a middle class. Especially, if it became a worthwhile channel for us to pay to reach and sell services into all devices, not just Microsoft ones (for example, via in-app purchases within their apps on Android & iOS). 

Silicon Valley’s Bluff

To summarize, Nadella’s email was a bland and soupy mish of the enlightened corporate speak that has become the de facto voice of Silicon Valley. He reiterated some really tired ideas that have endlessly circulated our current intellectual climate – sharing and empowerment – and in doing so, failed to highlight the real talent that Microsoft brings to the tech world.

I think Nadella had a great opportunity to call Silicon Valley’s bluff and fight for a totally different corner in the philosophy of computing.

My sense is that the web is steeped in ennui at the moment and, as a generation, we’re over it and have lost, dare I say it, a “will to power.” The email was not fighting talk at a time when a usual suspect list of entrepreneurs are getting fat on the farm. Licensing is probably not solution (and is definitely the least popular), but it stands for a middle road in technology companies directing the future.

It may just be my own stinking character that wanted to see a gladiatorial showdown, but I feel that the tech world is crying out for someone to bring a bit of pain.

Or at least upset the balance. We need a new perspective.

My bet is on Mark Zuckerberg or Marissa Mayer to put some noses out of joint in 2014.

Do you think we need a new perspective? Throw down a challenge in the comments.

Longneck and Thunderfoot offer thought leadership services to turn your company executives’ opinions and insights into authoritative content that starts meaningful sales conversations. Learn more about thought leadership here.

Author Jonathan Allen

Jonathan Allen is a search and social marketing specialist and formerly the Director of the award winning search engine news publication, Search Engine Watch. Under Jonathan’s stewardship, Search Engine Watch grew from 600,000 pageviews a month to over 1.4 million and in May 2012, won the Gold Azbee National Award for “Online Excellence, New or Relaunched Web Site” from the American Society of Business Press Editors.

More posts by Jonathan Allen

Leave a Reply