Out-of-touch with what's hip and happening

The loss of access to startups has proved damaging to Microsoft, as competitors rely on free software

Microsoft’s engineers and executives spent two years creating a new line of smart phones with playful names that sounded like creatures straight out of ‘The Cat in the Hat’ — Kin One and Kin Two. Stylish designs, an emphasis on flashy social-networking features and an all-out marketing blitz were meant to prove that Microsoft could build the right products at the right time for the finickiest customers — gossiping youngsters with gadget skills.

But last week, less than two months after the Kins arrived in stores, Microsoft said it would kill the products.

“That’s a record-breaking quick end to a product, as far as I am concerned,” said Michael Cronan, a designer who helped drive the branding of products like Kindle for Amazon and TiVo. “It did seem like a big mistake on their part.”

The Kins’ flop adds to a long list of products — from watches to music players — that have plagued Microsoft’s consumer division, while its business group has suffered as well through less-than-successful offerings like Windows Vista and Windows for tablet computers.

In particular, the Kin debacle is a reflection of Microsoft’s struggle to deliver what the younger generation of technology-obsessed consumers wants. From hand-held products to business software, Microsoft seems behind the times.

Part of its problem may be that its ability to intrigue and attract software developers is also waning, which threatens its ability to steer markets over the long term. When it comes to electronic devices, people writing software have turned their attention to platforms from Apple and Google.

Meanwhile, young technology companies today rely on free, open-source business software rather than Microsoft’s products, so young students, soon to be looking for jobs, have embraced open-source software as well.
“Microsoft is totally off the radar of the cool, hip, cutting-edge software developers,” said Tim O’Reilly, who publishes a popular line of software development guides. “And they are largely out of the consciousness of your average developer.”

A rare hit
The Xbox 360 gaming console and its complementary online services have been a rare hit with consumers. Still, being hip matters only so much for Microsoft, whose profits remain the envy of the business world. Microsoft’s software like Windows and Office remain the dominant standard around the world and afford the company an ability to experiment wherever it pleases. “When you look at the overall numbers and who buys and uses our products, I think our track record is pretty good with all demographics,” said Frank X Shaw, Microsoft’s head of communications. “We really do think about serving billions of people and are on a playing field that nobody else in the industry is.”

In May, Microsoft announced a shake-up of its consumer and entertainment division with the retirement of the group’s head, Robert J Bach, and the departure of an important designer, J Allard.

Steven A Ballmer, the company’s chief executive, now has the heads of the main consumer and entertainment-oriented products reporting directly to him. While Ballmer has been praised for increasing Microsoft’s main, old-line businesses, he has come under increasing fire for failing to read changing trends in the market and capitalise on them. Nowhere is that more apparent than in Microsoft’s come-from-behind strategy in the consumer device market.

In 2008, Microsoft acquired a startup, Danger, that had built popular mobile phone software, hoping that technology would revitalise its waning phone software business. But Microsoft stumbled as it took longer than expected to create a new product with the technology. In April, Microsoft finally introduced the fruits of this labour when it unveiled the Kin phones.

In contrast, Google, a chief Microsoft rival, also bought a mobile technology startup — Android. Both Android and Danger were co-founded by Andy Rubin, who joined Google.
Google has since turned the Android software into the foundation of a fast-growing mobile phone empire with carriers all over the world releasing products that use the technology.

Microsoft, however, has folded the Kin development team and put them to work on Windows Phone 7, yet another mobile phone platform, expected later this year.
The list of Microsoft’s consumer product failures grows each year. Its line of intelligent watches — come and gone — often ends up as the butt of jokes, as do its tablet PC software products, Windows Vista operating system and Zune music player. The company also cancelled its Courier tablet PC project shortly after the Apple iPad tablet went into stores.

“Kin was killed abruptly because no one was buying it and there no was no credible reason to believe anyone would,” this person said. Fewer than 10,000 Kins were sold.
O’Reilly said the quick cancellation of the Kin may demonstrate that Microsoft has finally seen the depth of its woes when it comes to attracting consumers and younger audiences.

Now waking up
“This should be seen as a success for them,” O’Reilly said. “They grew fat and happy, but are now waking up to their different competitive position.” He traces part of the problem back to the company’s developers. Microsoft spends a great deal of time and money shepherding a vast network of companies and people that base their livelihoods on improving and supporting Microsoft’s products. These software developers and technicians have bet their careers on Microsoft and largely benefited from that choice. In addition, they have helped keep Microsoft relevant during the various ups and downs in the technology market.

The vast majority of technology startups today rely on open-source software, distributed by Microsoft competitors, for the core parts of their technology infrastructure. And so the technology-minded people coming out of college have started learning their craft on free software and betting their careers on non-Microsoft wares.

The loss of access to startups has already proved damaging to Microsoft as companies like Facebook and Twitter that rely on free software have grown from fledgling operations to Silicon Valley’s latest booming enterprises.

Microsoft has tried to court young developers and young companies. In November 2008, it created a pair of programmes that give students free access to Microsoft’s business and developer software. In addition, Microsoft allows some startups to run their operations on its software at no cost over a limited period of time. About 35,000 startups have been involved in the programme since it began, the company said.

“For the most part, Microsoft has been great to work with,” said Mark Davis, the chief executive of Virsto, a software startup that received aid from Microsoft. “It’s funny to be in Silicon Valley and say that.”

Others, however, laugh at the idea that Microsoft requires the startups to meet certain guidelines and jump through hoops to receive software, when its free software competitors simply allow anyone to download products off a website with the click of a button.

“We got introduced to Microsoft through our investors,” Davis said. “They don’t do this for just anybody.”