Is Bill Gates the Cat with Nine Lives?

Conventional wisdom says tech companies rise and fall with the waves of innovation that lash the shores of the technology business. There are so many examples of this that I won’t bother to repeat them.

But there is one cat out there that has so far avoided that fate.  His name is Bill Gates and his company, Microsoft, is being talked about quite a bit in the blog world and the business rags this week.

Let’s go back and look at the three lives that Microsoft has had so far.

PC 1.0 – Bill invented PC 1.0 when he got IBM to adopt his OS (not even sure it was his OS, but we’ll leave that one alone) as the standard for the PC platform.

PC 2.0 – Apple created PC 2.0, threatening Microsoft’s dominance.  Bill retooled Microsoft to respond to the threat. The result was Windows and Office, the two franchises that even today power most of the Company’s revenue and profits.

Web 1.0 – Netscape made the browser mainstream threatening Microsoft’s dominance of the desktop.  Now the browser was the place people lived on a computer. Bill went after Netscape with a vengeance, bundled Internet Explorer into the Windows OS, and put Netscape out of business and got himself in trouble with the Feds.

So far, this cat has had three lives.

So now we’ve got Web 2.0.

Is this cat going to get a fourth life?  That’s what inquiring minds want to know.  It’s a $280bn question.

Web 2.0 – Google invents the ultimate disruptive free web service with search and shows how it can be monetized like hell with paid search.  Every entrepreneur worth their salt takes the LAMP stack and builds a lighweight web service to try their hand at the same trick.  This isn’t cool for Microsoft at all.

So the question is whether Microsoft’s response, coming next year in the form of Vista (fka Longhorn) and supplemented with .net, Avalon, Ajax, and a host of other interesting web service oriented technologies, will bring them back to the leadership position they believe belongs to them.

My friend Brad Feld spent a day at PDC and came away saying that 2006 will be the year of Microsoft.  Read his post, because it got me thinking, and it might get you thinking.

Earlier yesterday I had lunch with a friend who predicted that Vista will put a lot of these lightweight web services out of business the way that the Windows/Office juggernaut put a lot of PC software companies out of business in the early 90s and pissed the VCs off mightily.

So some smart people are clearly thinking that this cat has at least four lives.

But I am not so sure.  I didn’t go to PDC, I didn’t work at Microsoft, I am not "technical", but my gut says that we are in a different place now and its going to be much harder for Bill to put this genie back in the bottle.

People ask me why all these smart developers are leaving Microsoft.  I don’t think its the "rats leaving the simking ship" phenomenon because Microsoft is not a sinking ship and even if it doesn’t have nine lives will live a long time on its Windows/Office franchise.

I think its because software is becoming "organic". I believe Google started this movement. They released a free web service that people responded to in an emotional way. That created a phenomenon that drew developers and users to the Google franchise. Google opened up their APIs so people could build businesses on top of them. Now they have a whole ecosystem.  This has happened with other software platforms too – Craigslist, Flickr, Skype, etc.

Microsoft may want to be part of this "organic" software world, but its not in their DNA.  And I think many of their leading technology minds get this new way of being and want to be part of it.  So they leave, some to Google, many to do startups.

Consumers get this too.  They don’t want to be locked in any more.  Microsoft is the master of lock in.  They want open software, open source, open potential.  You don’t have to look any farther than Firefox’ market share to see this happening in the consumer market.

CIOs might not get this yet.  I think Microsoft’s franchise is the CIO going forward because they are risk adverse and are the least likely to move to this new developing organic software model.  But consumers will lead the companies they work for into this world whether they like it or not.  And eventually people will be using wikis and web based email and calendaring apps in their offices and Office will slowly matter less and less.

That’s my view.

So does this cat have nine lives?  It depends on the quality of life he’s looking for.

I can see an IBM-like scenario for Microsoft in its fourth and possibly fifth life.  But I can’t see them at the top of the technology hill planting their flag again for the fourth time next year.  It’s just not going to happen that way this time.