Microsoft stumbles

Microsoft's attempt to sell AI has been going ... less than spectacularly. It seems that few people want to buy it.

This stumble by Microsoft is a good time to look back at how it has succeeded, and how it has failed, in the past. Microsoft has had a number of successes: BASIC, MS-DOS, Windows, Internet Explorer, Visual Visual Basic, Visual Studio and C#, and Azure. It has also had failures: "Bob" the friendly desktop, "Clippy" the original "AI" assistant, Visual C++, the Zune music player, Windows Phone (both hardware and software), 

Much of Microsoft's success has been built not on technical innovation or product quality. Instead, it was built on marketing and legal agreements.

The first success: BASIC

Microsoft's BASIC was ROM-able; it could be packaged in a ROM and sold as part of a complete PC. That made it attractive to PC manufacturers. A few early PCs used their own versions of BASIC in ROM, but Microsoft's was the most capable. (In this case, Microsoft did have the best product.) Microsoft BASIC became the standard (literally, too; it was adopted by ANSI) and everyone wanted. It was a success driven by the market but also by licensing agreements.

When a manufacturer didn't buy Microsoft's BASIC -- such as Apple -- Microsoft made a plug-in card complete with Z-80 processor and basic interpreter in ROM.

The second success: MS-DOS

Microsoft made a contract with IBM to sell it an operating system, and retained the right to sell that operating system to others. When the IBM PC was released, it immediately became popular as did PC-DOS. (IBM also offered CP/M-86 and USCD p-System for the PC, but higher prices discouraged their adoption.)

The success of the IBM PC, and the success of other computers running MS-DOS (early ones not compatible with the PC, later ones compatible) gave Microsoft a revenue stream and a unique place in the market. Microsoft started setting standards for device drivers and technology to access more that the PC's 1MB memory range.

This success was due to the licensing agreement with IBM, and later licensing agreements with PC manufacturers. Microsoft negotiated a fee for each PC manufactured, regardless of its operating system. Thus, manufacturers had an incentive to include MS-DOS with the hardware.

The third success: Windows

Microsoft gained power with Windows. Microsoft Office, and its superior performance due to API calls not available to competitors. The 'tar baby' effect, in which one Windows product (Outlook) required another Windows product (Exchange). (Or a number of products each requiring SQL Server.)

The fourth success: Internet Explorer

It became popular and the corporate standard. Many web sites advertised "best viewed in IE" and some web sites failed on other browsers.

But since then, Microsoft has had precious few successes. Its notable wins are Azure (capable but still competing with AWS and Google cloud services) and the Surface tablet (premium hardware that shows what is possible and keeps the Windows ecosystem alive). IE's success was relatively short-lived. Google's Chrome rose partly as a revolt against Microsoft. Now Chrome runs the web, IE is gone, and even Edge has Chrome inside.

Microsoft has not designed a successful product (one that became dominant) in the past two decades.

Now Microsoft is pushing AI, specifically "agentic AI". And by "pushing" I don't mean "hawking" but "stuffing down user's throats". Windows 11 is getting agentic AI functions whether you want them or not.

Microsoft's early successes gave them a lot of power in the market. With that power apparently came arrogance, not just a sense of "Microsoft knows best" but "you're going to take this new tech whether you want it or not". Which is just what Microsoft is doing with AI and Windows 11.

But now there are reports of people switching from Windows to Apple (or Linux) to avoid the coming AI. This indicates that Microsoft's market position is not as strong as it was, and that people (when pushed) will choose alternatives. Apple is a reasonable alternative, and even Linux and open source software is capable enough for many office and home functions.

If Microsoft wants to succeed, they must become humble and stop pushing tech onto people. They must shift their mindset from "we know best" to "we've got products that people want". Right now, they don't have products (at least with AI) that people want.

The end of the PC empire

Micron Technology, a large manufacturer of memory DIMMs for PCs, recently announced that it was exiting that business and is redirecting its efforts to memory components for AI server farms.

I think the impact of this announcement is not fully understood.

This change by Micron Technology indicates a larger shift in the industry: away from PCs and towards AI. Away from consumer PCs (desktops and laptops), and also office PCs. The PC, the king of the tech world for decades, has lost its crown.

The IBM PC, announced in 1981, legitimized the then-sputtering tech market for PCs. Before the IBM PC (and for some time after its introduction), PC makers such as Apple, Commodore, and Radio Shack all had to cobble their products together from components available from other systems. Instead of designing the display, the disk, the memory, etc., manufacturers had to survey the market for available components and then design a system with those components. Even the original IBM PC used a keyboard from IBM's System/23 desktop computer system.

But PCs were popular, and manufacturers couldn't ignore the market. They started designing components for PCs. When Microsoft introduced Windows and set hardware standards, the transition was complete: The PC was the center of attention. Standards were set (and followed). Supply chains were built to provide components that met those standards, with robust delivery schedules. One could easily buy components and build PCs.

Some thirty years later, component manufacturers are now looking at the market for AI servers, and they cannot ignore it. Which means that they will pay less attention to the PC market -- or ignore it completely, like Micron is doing.

(I'm rather skeptical of the AI boom, and doubtful that it is sustainable, but that is another question. Micron is placing its bets. I'm assuming that other companies will follow.)

What does this change mean for the PC market? At a minimum, manufacturers of PCs will find it harder to obtain components. Some components will become more expensive. Others will become impossible to find. PC manufacturers may have to submit custom orders for components, or find other sources. It is easy to predict that the price of PCs will rise.

But we may also see fewer PC models, and longer times between announcements of new models. We may see "limited run" announcements in which a new model is available for a limited period of time, or a single production run.

Apple will be somewhat immune to this effect, as they design most components for their PCs. Sourcing components (that is, getting someone else to build Apple-designed components in large quantities) should be possible because Apple's scale is such that one does not ignore it.

But other manufacturers (Dell, LG, HP, etc.) who have relied on the PC supply chain may find their business at risk.

For consumers, I think we will see fewer offerings: Fewer PC models, and fewer configuration options. (Which perhaps may not be such a bad thing. I am often overwhelmed by the number of possibilities when I look for a new PC.)