Microsoft’s Sneak-Attack on Apple: SkyDrive, Xbox Live Show the Way

Microsoft won’t compete with Apple by going head-to-head in the hardware business. But the software pioneer could still climb back into the fight by offering connected software services that work on every platform—including Apple’s.

That’s the read from Charlie Kindel, a Seattle-area entrepreneur and angel investor who spent some 20 years at Microsoft. In a discussion at Redmond’s Thinkspace co-working office, Kindel batted aside suggestions that Microsoft might launch itself into a serious hardware business, even with potential acquisitions like Nokia or Research in Motion lying around.

“That is not a business I believe Microsoft actually wants to be in. If they went down that route, it would mean they wanted to compete with Apple on Apple’s terms,” Kindel said. “And I have bunch of things I can say about Steve Ballmer. A lot of them aren’t very positive. But he is a very smart man. And I do not believe he’s so dumb that he would go and try to compete directly with his biggest competitor.”


What about the raved-over Surface tablet, which still hasn’t hit the streets? It will remain a “North Star” product intended to guide other manufacturers, rather than a major standalone product, because Microsoft doesn’t intend to sell the device anywhere other than its own few Microsoft retail stores and online. (You can read more of Kindel’s thoughts on Microsoft and hardware here.)

Instead, he said, Microsoft may be going after Apple’s dominance in computing “by playing a different game.” That means finally shifting away from its legacy business of licensing operating systems, and instead sprinkling consumer and productivity apps across the new computing ecosystems that have roiled the computing landscape since the introduction of the iPhone five years ago.

That’s a much different strategy than the money-losing Web-centric model of years past, which revolved around the Internet Explorer browser, consumer e-mail and search services, online advertising, and media portal websites.

One of the seeds in this new approach was seen earlier yesterday, when Microsoft released its SkyDrive online storage app for Google’s Android mobile operating system. The service was already available for iOS, “and on both of those platforms, it’s as good as it is on Windows,” Kindel said.

“So here you have a core service of Windows—the storage service for Windows—that runs equally well on the competitive platforms,” Kindel said. “Hmm, why is Microsoft doing that?”

His “reading of the tea leaves,” Kindel said, points to Microsoft finally moving away from its licensed operating system business model, which is in jeopardy as technology prices fall and new types of computing (think iPads in the enterprise) eat into the traditional dominance of Windows PCs.

In this newer model, Kindel predicts Microsoft is “going to try and monetize end users via a subscription service, where they get an annuity per user over time. And for that to work, it can’t just be Windows. As a matter of fact, to beat Apple, it has to work really well on Apple devices.”

Other early examples of Microsoft cross-platform services are the Xbox Live entertainment app and the OneNote productivity app available on other platforms.

You also have to note the recent re-jiggering of good old Hotmail into, raising many hopes that the premier business e-mail service could finally make the leap into a solid, widely available online service.

“You’ve got to imagine that Office has been built for iPad. It’s sitting there, it’s ready to ship, it’s on a shelf,” he said. “And all Microsoft is doing is waiting for Windows 8 to ship and get out there and get a little momentum so that it doesn’t pre-empt it, and they’ll release it.”

Here’s the video of Kindel’s full talk, which includes more on this line of thinking, great high-level breakdowns of the major players in mobile, and why he doesn’t think Amazon or Facebook will get into the smartphone business.

Video streaming by Ustream

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7 responses to “Microsoft’s Sneak-Attack on Apple: SkyDrive, Xbox Live Show the Way”

  1. Walt French says:

    Anybody reluctant to commit an hour to a talk, be assured: it’s every bit as good as the writeup above, goes much broader than the specific Microsoft issues noted here.

    Great work, Charlie!

  2. Mikael says:

    Anyone else a black serial killer?

  3. Ah man, I really wanted to read your article. You lost me at “Microsoft won’t compete with Apple by going head-to-head in the hardware business”
    I thought fanboism comes at the end.. normally.

    • Walt French says:

      It’s the same thing I’ve said about Apple competing head-to-head with the Google Nexus, and the only person who’s ever accused me of being an Android tool was himself an idiot.

      Charlie is quite happy to see Microsoft succeed. (I am, too, although I’m less optimistic.) You don’t succeed by tackling a market where you have a distinct disadvantage in most of the resources — culture, experience, relationships, skill sets. Why would Microsoft devote its VERY valuable talents to be a crummy #2 or maybe #3, tarnishing their reputation in their core areas to boot? What a huge waste!

      (I’ll say it again: the only way for Apple to succeed against a $199, barely-subsidized-by-ads Nexus7 is to up the game with a better bundle, one that they can sell at a higher price but that looks like the better deal to consumers. 8″, Retina, bundled iTunes card, 4G, whatever. But the tech world is littered with failures of companies that played the game of trading profits against market share — an article today noted the sad history of TI portables, having won the marketshare game by a Pyrrhic profit burn Can Apple find a way to hold a substantial share — at least a third — of the small tablet market? We’ll see.)

      We’re right in the middle of the rollout of Win8 devices; so far there’s a HUGE range of interesting hardware from a raft of manufacturers who see the chance of getting decent margins in the corporate marketplace. Microsoft will succeed to the extent that they succeed, and they can enhance the chance of that by building out the ecosystem around Windows, which drastically needs more modern apps, simpler cloud setups, etc., all of which Microsoft is good at.

  4. mtcoder says:

    It is worth the watch, and just happens to semi follow along with what most people have been sensing, where Microsoft is going to play the black sheep and take advantage of other platforms to sell it’s own. Oh you have Iphone no problem, here is xbox live, smartglass, kinetic app, office, and skydrive. why you ask, well when that person goes to his boss and says I want a new laptop, the boss says ok, here is your new Windows base laptop, cause apple costs way to darn much, and it now works with your iPhone / android. So instead of the shift to apple products, microsoft gets to sell an enterprise laptop again. If they come in cheap with their tablets, same thing will happen. $200 buck difference doesn’t make much difference to a small group, try $200 buck difference for 1,000+ staff, starts to suddenly become a key talking point, and if it works well with all the other eco systems out there. Guess who going to win the bid, the cheaper one will. Then as also stated MS sees pay-for-services as the next real money maker. Office 365 is prime example. $10 bucks a month gets you everything you want out of anything releated to Office, all with Microsoft handling the data storage and server headaches. Get a million a month users and you making 10 million a month, now have those users expand to the apple segment cause they use the services on their iPhone, and you explode your income, with little to no work your end. Doing pay for services though is all about user volume, key is to find that sweet spot, its better to sell 5 million subscriptions at 5 bucks, than to sell 4 million at 6 bucks.