I consider myself to be untrained, uninitiated, inexperienced, etc. in the domain of business analysis. If someone went to school for this kind of stuff (do university courses exist for this topic?), then I'd presume they know more of the theory, and have done more practical exercises than I have in analyzing the future viability of various corporations. But on public forums, where lay-people are arguing about whether Linux will kill Microsoft, or Google will kill Microsoft, etc., boy, is there ever a lack of insight.

Slashdot, using that sneaky tactic of disguising an assertion as a question, asks/states: "Microsoft's Biggest Threat - Google or Open Source? [...] Google+OSS: could this be the killer combination that finally breaks Microsoft?" Here's the response I posted:

To be a threat to Microsoft, you'd have to be a potential barrier to a large amount of future profits. Google is basically two things: (1) A search engine and (2) a wildcard, pouring money into almost everything. Microsoft is not strongly invested into the search area, so (1) is not a threat to it. In fact, Microsoft is more of a threat to Google in that respect, not because Microsoft is doing better than Google, but because Google is the "established champion", and Microsoft (among others, like Yahoo) are the encroachers who are trying to steal that title. As for (2), there's always a chance that Google will discover/invent the next big paradigm shift that changes everything, but then again, so can any other startup, or even maybe big companies like Apple or IBM, or hell even Microsoft themselves (the "Microsoft Surface" looks pretty sweet, for example, though I'm not sure it'll be big enough to be a paradigm shift). It's getting hit by a lightning bolt: a possibility, but not something you worry about from day to day.

OSS is a bigger threat, mainly because of free office suites, and to a lesser degree Apache. Most of Microsoft's money comes from OSes, then from Office, and then services associated around server technology like .NET, IIS, etc. Honestly, I don't think Microsoft is very worried about Linux on the desktop. I find Microsoft hard to read in terms of OS on the server side, so it's possible they may actually be *WORRIED* (e.g. managers thinking "Hey, if we don't do something, Linux'll win"), but I'm not sure. I *DO* know that Microsoft is getting anxious about their Office software, which is their second biggest cashcow. It's not any-one particular alternative that they are afraid of (e.g. OpenOffice), but that there seems to be a growing awareness of alternatives that they're worried about. I suspect they're aware that this particular type of software is about to become commoditized and are looking at appropriate strategies (e.g. moving to software-as-a-service, via that Office Live thing).

For the server side technology, Microsoft doesn't directly make money off of these (they give away .NET, IIS, etc. for free), but rather from surrounding services (e.g. certification, training, etc.) and products (e.g. Visual Studio). Note that this is the same business model that OSS software later adapted (give the software away for free, make money on the services), which is one of the reasons why I find comments about Microsoft being anti-OSS to be a form of over-simplified ignorance. Microsoft is a corporation, not a fundamentalistic ideal. If they can make more money through OSS than closed-source-software, they'll switch in a heartbeat. In the particular case of Apache vs IIS, it's like the Google scenario: Apache isn't a "threat", because Microsoft isn't strongly invested into that market -- Apache is -- and Microsoft is attempting to grow into that market, rather than to hold onto it (and they seem to be quite successful, much more so than they have been against Google: IIS adoption is growing very rapidly).

So what *ARE* Microsoft's biggest threats? Well, one of them is a little bit obvious when you look at their history, and what has caused them to lose the greatest amounts of money: Government and law. Microsoft is in a difficult position there, because their desktop business centers around pushing new and improved versions of their old product. Consumers, before they buy the next version of Windows, want to know what are the new and improved features, and if there aren't enough new and improved features, they won't spend the money to upgrade. However, if Microsoft adds too many new and improved features (e.g. by bundling a media player with their OS), they may get in trouble with certain governments (namely the British and US ones).

Software design jokes aside, Microsoft isn't dumb. They're already predicting, in the long term (10-20 years) that all of software will eventually become commoditized, and they have plans in place to move entirely in the software-as-a-service direction. The groundwork for that is already there with Office Live. They're still trying to figure out how to move Windows there (or many they already figured it out, but just haven't let on yet). The next 2, maybe even 6 releases of Windows will still be "plain, old software", but Microsoft knows that it shouldn't put too many eggs in one basket, and are looking for other primary sources of revenues, should the OS market collapse completely for them. And they've already found one, with the XBox.

This brings us to the second big threat to Microsoft: Sony. I think it's pretty clear that the XBox360 was a resounding success in 2007, even outselling the PS3 in Japan (an event described as being akin to snowing in hell) one month. Sony can still hit back, though. First of all, it's possible that the next gen (PS4 vs. XBox720?), Sony will devastate the competition. That's one problem with the console business, that past successes seem to mean very little (look at the past success of the PS2, which was the best selling console of all time, even now, and how that hasn't really helped Sony with the PS3). But even before next gen (which is still maybe 5 years down the road from now), there's a (you could argue small, but you couldn't argue zero) chance Sony might still win the this current-gen war. A lot of eyes are on Metal Gear Solid 4, for example, a PS3 exclusive. In the end, it's the games that dictate the console sales. The XBox360 best performing month was the same month Halo 3 was released. It's quite possible that when MGS4 comes up, it'll be enough to push the PS3 back up into the "threatening" zone, if not surpassing the XBox360 altogether.

At this point, some people may bring up the Wii. I just don't think the Xbox360 and the Wii have much overlap in terms of target audience. The Wii targets casual gamers and non-gamers, whereas the Xbox360 targets (non-casual) gamers, and hardcore gamers. Where there is overlap, the more affluent will probably get both (and the very affluent, perhaps a PS3 as well), but for if you're a gamer, and you could only pick one, you'll probably take the Xbox360.

That said, Nintendo showed that that there is a lot of profit to be made from this casual gamer and non-gamer market, and it's certainly possible that Microsoft might choose to tap into that market. But if they do, then like Google and Apache, Nintendo won't be a threat: Once again, they would be the current established champion that Microsoft would be trying to take down.

The challenger (Microsoft) would be dabbling a bit of money here and there, testing the waters, and if it turns out to be a total flop, it really won't end up hurting them much at all, hence the non-threat status of established kings like Nintendo, Google and Apache. Now, if Microsoft would doing very poorly, losing a lot of money, and frantically trying to find a new market to establish itself in, that would be a completely different issue, and in that case, then yes, established kings are threats. But when Microsoft is doing very well financially, and they are merely diversifying their investment to decrease risk, then these kings are so huge compared to the a new entry into the field, that they are more like terrain to navigate around, than opponents in and off themselves.

As I said, I consider myself to be a neophyte, so I'm very interested in hearing opposing ideas, opinions, arguments, etc. to broaden my mind in this domain.