Between a rock and a cloud place

It’s Friday… time for something lighter.

There comes a time in every businesses lifecycle when it has to realize that it has been surpassed. That is the challenge of running a technology company. You try to lead and run with one leg but the other leg is dragging you back with all your relationships, legal woes, criminal behavior and the blood of enemies. In such times you have to figure out what is the best thing for you to do. Stand still and make the best out of your circumstances or try to run and hope that nobody digs too deep and sees beyond the marketing.

Earlier today Sarah and I chatted for quite some time about the challenges Microsoft sees today in the marketplace. Sarah was on SBS Show #20 (hey, we should do one of those together again!) and has a very popular blog, is a writer for RWW.. she is by no means perfect: she carries a Blackberry and is a huge fan of Mesh. And as some of you are aware, my opinion of Mesh is:

Microsoft Mess: Translucent blue theme for FolderShare combined with a rather crippled version of logmein.com functionality, sprinkled with missing features, beta tags and overall admission by Microsoft that it cannot compete in Web 2.0

Sarah feels that this is a double standard.

Of course it is!

I don’t know about you, but I tend to hold a $60 billion a year software company to a higher standard than a Silicon Valley startup with three dudes and a gfx d00d in the basement. But that’s just me.

Is it fair that people distrust Microsoft while completely falling head first in love with everything that Google does? Of course it isn’t fair, people should not be distrusted just because they are convicted felons with lawsuits over anticompetitive behavior across every continent except Antartica.

Is it fair that Microsoft is being slammed for their S+S move and going more direct? Of course it isn’t fair, but the people complaining are the ones that played a major part of that $60 billion dollar a year business.

So what can Microsoft do?

That advice is going to cost a few million dollars.

But I’ll tell you how Microsoft is going to continue to fail in its efforts until it can look in the mirror.

Microsoft wants to compete in the new world with the old tools.

It wants to find friends in the new places but it’s new friends don’t want to hang out with its partner base.

That’s the darn truth.

Microsoft wants to be relevant in the Web 2.0 world but it wants to bring over all the baggage of its current tools and systems that the Web 2.0 generation rejects.

Microsoft wants to compete with Gmail with Exchange. That doesn’t work. Exchange is too cheap (for partners to resell at a wage that sustains their business) and too expensive for people that want a free solution.

The consumer and business isn’t wrong. They have options for free and while most cannot hold a candle to Microsoft in terms of feature set, they may be good enough to get the company up and running.

But surely after company grows enough it will need Microsoft tools, right? Right? They will need a server, they will want to invest money, they will try to clean up and.. right? Well, let’s look at Microsoft’s main competitor to Vista. Is it Linux? LOL. Is it Mac OS X? Oh, it’s Windows XP? You mean to tell me people will just take something that works over the latest and greatest that doesn’t even though its several generations ahead of everything else on the market in terms of security?

That is the part that Microsoft is scared about.

Microsoft knows that when a company chooses a platform it takes a lot of effort to get them off it. Why do you think they constantly gloat about how many Notes deployments they took over? Why do you think they keep on harping on Oracle so desperately? Because they want the platform.

Google either doesn’t make or loses remarkable amounts of money in its many properties simply designed to get you to click on ads. They are an ad company.

Apple, in their own right, is now the king of mobile computing. iPhone gives them a platform for applications that no other company has.

So where is Microsoft? They are not a consumer favorite. They are not a bleeding edge favorite. They are not a very stylish or cool company. They are a business solution.

As far as business solutions go, they are the best.

But Microsoft’s failure, and ultimate undoing, is that it is at its core a company that wants to dominate everything. It cannot settle for being second best. It cannot settle not to own the defacto standard and concede that to PDF, it cannot accept Flash everywhere so it must come up with Silverlight, it just cannot tolerate one ounce of competition.

And now Microsoft finds itself at the crossroads.

We are the defacto leader in the commercial software space.

But our client’s don’t want that.

And in its effort to be the biggest, best, first and only solution everyone should ever consider for anything, Microsoft finds itself making more enemies and less and less friends.

That is not a company or a climate that I would bet on.

Microsoft can continue to exist as the best and biggest software company that makes business solutions. Microsoft can even design the online application suite that works and draws users to them slowly.

But Microsoft shareholders are not patient.

Microsoft management is not patient.

Microsoft made $60 billion in revenues last year. Google just cracked $5 billion yesterday. Microsoft is jeopardizing its $60 billion company to curb the dominance and rise of the $5 billion company that only exists to sell ads and systems to support those ads.

Can Microsoft and it’s shareholders be happy with the $60 billion a year? How quickly will we see a call for the change of management at Microsoft as they keep on losing the share of their cash cow and become less and less relevant in the Web 2.0 ad cloud?

Microsoft lacks leadership and Microsoft Mess proves that – instead of something new and fresh at the core it’s same old Microsoft – crippled acquisition, feature and functionality incomplete until Version 3.0, poorly integrated across the range of current applications but a big promise of SDKs and a plea for someone to please pay attention to it.

“The point is, ladies and gentleman, the greed – for lack of a better word – is good. Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed, in all of its forms — greed for life, greed for money, for love, knowledge – has marked the upward surge of mankind.”

It also served the upward surge of Microsoft and got it to $60 billion a year.

But will Microsoft realize that it now needs to change…. because as motivating as the quote above is, the guy who said it ended up in jail and lost it all. Will Microsoft?