With about 95 percent of the desktop software market under its belt, $7.5 billion in MS Office operating profits alone and sales bigger than the combined world's No. 2 and 3 software companies (Oracle and SAP), Microsoft's grip on the desktop software market seems unshakable.
The threat from open-source software such as Linux is still a pipe dream for most corporate, let alone home, users. And, just as with the 1980s conventional mainframe computer wisdom-nobody ever got fired for buying an IBM mainframe-it takes a brave home user or IT manager to deviate from the de facto Windows/Office desktop software combo.
Where then will the threat to Microsoft's proven monopoly come from? In our opinion, the biggest threat to Microsoft comes from Microsoft itself. Customers small and large are increasingly offended by Microsoft's stranglehold on the desktop market, for reasons of cost, security and lack of choice-the very essence of a free-market economy.
With PC hardware costs-driven by Moore's Law-still on a declining trend, customers are delighted-and encouraged-by the "more bang for less bucks" hardware ethos. Most fail to understand why the software side of the package fails to deliver the same kind of bargain. Add the fact that the constant need to download patches and updates bemuses at best and infuriates at worst, Microsoft is generating a groundswell of resentment that will eventually prove its downfall.
India and China
With IBM, Sun and others merely nibbling away at a bottoms-up operating system replacement approach, and some public-sector buyers simply saber-rattling the threat of open-source alternatives to drive a better bargain for their installed IT investment base, the impact on Microsoft's revenue-generating capability has so far been negligible.
A bigger threat, however, will come from emerging nations such as India and China, both of which have sufficient indigenous software prowess to develop homegrown alternatives and thereby ensure that they do not get locked into Microsoft's clutches, while simultaneously developing a major potential export opportunity.
Add to that the pending EU anti-trust ruling, and the medium-term outlook is increasingly stormy for the giant of Redmond. While the exact tipping point is still far from clear, the real-world customers with whom we routinely interact eagerly await the day they finally have a choice. And once that day arrives, the potential impact on Microsoft could prove cataclysmic and irreversible. Free-market forces will prevail, eventually.
Malcolm Penn is the chief executive officer of Future Horizons (Sevenoaks, England; www.futurehorizons.com), an industry analysis firm.