Dear Robert and Dan'l:

After an eWeek article questioning VC's 'loyalty' to .NET, Robert Scoble asks the assembled VC bloggers for their take. Hokay.

Since Rich Segal has already righteously pounded the bogus journalism of the original article, I'll take the fact that VCs don't rely on eWeek journos for hard hitting analysis as a given, and instead make this an exposition of my take on the state of play with respect to Microsoft in general. Take these opinions with some salt. I don't track (for instance) Longhorn on a weekly or even monthly basis. Since Robert is MS' interface to the blogging community, and my old friend Dan'l Lewin is likewise the interface to the Valley venture community, this one's for you:

Rich rightly observes the lack of VC loyalty to any particular technology. You all know what we are loyal to, right? That's right, long term capital gains. It's a reasonable simplification to say that VCs and venture generally makes those gains by betting 'on the change'. Static or stagnant markets and technologies are not our meat (unless we can disrupt them). To the extent that there's an aggregate pattern in our investments, it is a sort of rough referendum on which technologies are driving or at least surfing the change. It's again likely fair to say that while there aren't a lot of overt bets against .NET per se, there also aren't a lot of markers down that require it to drive a market to get a win. I think I could say that more strongly about Longhorn, and bit less strongly about Microsoft in the whole mobile arena. I offer three thoughts on the basis for this pattern of activity with respect to MSFT.

Longhorn is tactically and strategically compromised. Tactically because it is grossly late, and keeps shedding features. Any venture that relied on it has already died on the road somewhere. Any business or product plan based on it has serious cred problems. Longhorn is strategically compromised because it is still fundamentally a play on the desktop. It's been a decade since a major change erupted as a consequence of innovation on the desktop PC. That's a decade that's been marked by functionality moving off the PC and into the network, and now by user interfaces being partitioned from the desktop onto mobile devices. Intel has figured out that it can no longer rely on innovation on the desktop to drive the Moore's Law investment cycle, but Microsoft still seems to believe that its hegemony in that sector is a bankable asset.

Strategic leverage as negative indicator. I will skip the plaints about Microsoft's use of its desktop leverage as an entry advantage in other markets. You've heard it before. I will observe that its use seems to be a negative indicator of success of late. The desktop fulcrum has been overused and is crumbling. Relying on it has produced design choices that have had to be revisited, while tough competitors moved forward. Bottom line: Do you think the average VC would be happier today if they had made a bet five years ago on Longhorn dependent applications, .NET dependent web services, or a few XBOX titles? It's the market where MSFT was unable to use its strategic leverage where it's the most competitive. That ought to scare you.

Opportunity costs. Even a decade back, the desktop user interface and way of thinking was thoroughly broken, and I'm including the Mac. Applications as such had already quit mattering. Our lives were being fragmented into files, schedules and other bits in numbers well beyond the original design point of the desktop metaphor (I have Alan Kay's word on that). Since then it's gotten far worse. More of our lives are lived virtually - photos, music, IMs.... The storage learning curve beat out even Moore's Law, so we just keep everything now. Binding those bits of our lives to a particular device or body of code seems pointless, we're now used to having our resources 'in the net'. The next wave is taking this already hideous management problem, and moving our user interface onto mobile devices with far fewer affordances.

What have you done to help us as users? Staying too close to the desktop has let entrants like Google move right onto the pain point of the market without opposition. I hope Robert's right that MSN Search will be strong. Even more I hope the company has realized its strategic importance. MSFT has pretty much blown every search project since the late 80s, and has always treated services as a red-haired stepchild of its product culture. Is this the A team? Will they be able to trample the desktop product franchise when needed? Microsoft has been a prime mover in the 'success failure' that is today's networked media user experience. It may have one more shot at a high-beta play to be part of the solution. Maybe this is it, maybe it's just my own hobby horse. But, you want us excited again, Microsoft? Show us how you will change, and thereby change the market.

Comments

[rc helicopter]

Impressive blog! -Arron