Has a fear of IT departments almost killed Microsoft?

In his normally Apple-centric podcast Hypercritical, John Siracusa recently tackled a different target: What ails Microsoft. While Windows 7 is doing better than Vista, the company’s dominance just isn’t what it used to be. Has the infamous Embrace, Extend, Extinguish business model finally run its course? Is Microsoft really circling (however slowly) the drain?

And are IT departments to blame?

The case against Microsoft

The main thrust of Siracusa’s argument is that Microsoft has spent the last several years just chasing: Chasing Netscape in the browser wars, chasing Sony in the console wars, chasing Amazon into the cloud, chasing Apple in the smartphone and tablet – wait, is it a war if one side can barely fire a shot?

Either way, things aren’t looking great for Microsoft’s long-term future, as smaller margins, customer unrest and new competitors rise. Siracusa points out that Microsoft hasn’t been passive through all this (see above), it’s just chased the wrong competitors. Were OS X and Linux really ever serious threats to Microsoft’s desktop dominance? No, but it poured massive resources into ensuring its continued dominance over them, only to have its core products made less relevant through other avenues (namely, web-based software and a revolutionized mobile landscape).

So not only was it playing catch up, but it was playing catch up in the wrong races. And the culture of Microsoft is such, Siracusa believes, that defining and executing well in new markets is almost impossible – thanks largely to its symbiotic (Is that an appropriately creepy word?) relationship with the world of IT.

If you’re not the customer, you’re the product

Siracusa notes that the personal market was never its bread and butter: Corporate IT was, whether it was mass-volume licensing deals, various server offerings or other big-money deals. Microsoft was so worried about this market leaving, the theory goes, that it would never push back very hard on its needs. Backwards compatibility to basically forever? Sure! A “classic” view so you don’t have to retrain your users? Why not.

And so the product lines became bloated, yes, but more importantly the company could not push out much that was creating new markets or ideas, since there was the risk it would cannibalize their own legacy businesses or tick off their legacy business customers. Because Microsoft prioritized pleasing corporate needs, even as the feature list grew (and grew), the products actually got to be worse or, in a good year, only incrementally better.

He then argues that Microsoft should have pushed back against IT – and it could have with near impunity. Nobody was going to leave Microsoft no matter what, so when it had the market in a stranglehold it should have set the agenda – not follow it.

But is that true? I was surprised at how poorly Vista did: A lot of IT departments did talk about ditching it, and many more just kept using XP with no plans to upgrade. Call it the “lost generation” of Microsoft: They didn’t tick off their customers by over-innovating, but by making a bad product, but the result was that IT did flex its muscle, and I wonder if it had tried to do so earlier whether one of the other enterprise players (HP? Dell?), so hungry for a high-margin opportunity, would have made a more credible attempt to compete.

I don’t know, but I think it’s a question open for debate. Let me know what you think in the commnets or at Michael@ITKnowledgeExchange.com.

Michael Morisy is the editorial director for ITKnowledgeExchange. He can be followed on Twitter or you can reach him at Michael@ITKnowledgeExchange.com.