Zune Again

posted May 28, 2009 by daniel

Just when you thought it had faded away, Microsoft comes back with a new zune. Apart from being brown, the original zune looked a lot like the iPod and the new zune looks like an angular iPod touch. It even has multi-touch, a web browser and plans for an app store.

Apple's iPhone and the iPod Touch are hugely popular so there's obviously a big market for these devices. Microsoft should be able to copy Apple's designs and build a solid competitor, except that's exactly what they tried to do with the original zune and it didn't work. The Zune Marketplace music store should have been a competitor to the iTunes Store and yet it wasn't. PlaysForSure wasn't a big success either. Microsoft has talented people working on software and hardware and yet they can't compete with Apple's consumer electronics — why is that?

Apple is a consumer electronics and software company. Apple was never good at selling their hardware and software to businesses. XServe, for example, isn't very popular. They are good at figuring out what consumers want, then designing an integrated hardware platform and operating system to serve the user's needs. Even their original business (before the iPod) was an integrated hardware and software platform. The key to their design strategy is building integrated hardware and software tailored to consumer needs.

Microsoft is primarily a software services platform vendor. They build software service platforms (Windows, .NET framework, Office, IIS, Exchange, SQL Server, DirectX, Windows Mobile, etc) for OEMs, ISVs, and in-house development. Typically, rather than selling products to consumers directly, Microsoft builds a platform such Windows, or PlaysForSure and sells (or licenses) that to OEMs (Dell, Sony, Toshiba, local computer shops, etc) who build the hardware and integrate it with the software and then sell it on to consumers. The problem is that the OEMs don't always do a good job of integrating the hardware and software, or OEMs will install crapware in Windows before selling machines. The out-of-the-box user experience can't compete with the integrated solution from Apple, so now Microsoft is trying to build their own integrated software and hardware. They've sold a lot of XBoxes, but they've also had issues like the red ring of death. The key to the Microsoft design strategy is building a powerful platform of interdependent software service tools. They aren't great at integrating hardware though, and what they really need is at least one hardware OEM that can integrate consumer hardware and software the way Apple does.

The problem Microsoft faces is a lack of focus; a company that tries to compete in diverse markets will have a tough time competing against a company that specializes. Their core competency is building service software, and by trying to build integrated hardware they're moving outside that competency and even competing with their OEM hardware companies.

Hardware isn't the only place Microsoft is out of their depth. They also view Google as a direct competitor. Google is an advertising company that uses search and services like email to draw in viewers for their ads. Somehow, Microsoft imagines themselves as a competitor to Google, so they've built an advertising and search portal with the unlikely name of live.com. They even made a $45 Billion bid to buy Google's competitor Yahoo! in an effort to get a larger share of the advertising and search market.

Why is Microsoft competing directly with a consumer electronics company and an advertising company? Apple recognized the value in Google's services such as search and mapping, so they struck a deal to integrate those services on the iPhone and iPod Touch rather than trying to reinvent those systems. Surely Microsoft realizes their strength is in software service platforms, and yet they continue to try to reinvent themselves in unrelated markets rather than forming partnerships. Even when they do form partnerships, as with PlaysForSure, they need to be in control. Perhaps their need for control is what drives them into other markets.