The biggest threats that Microsoft faces over the next five years to maintaining its market leadership position are its Windows installed base and its need to recruit, motivate and retain key staff.
While the PC is not invulnerable, neither Java nor Linux provide enough benefits to encourage users to change their desktops on a wholesale basis, and other technologies such as network devices will coexist, according to Michael Gartenberg, Gartner Group analyst at the market research firm's 'Windows NT in the Enterprise' conference in Palm Springs on Wednesday.
"Microsoft needs to say, I met the enemy and the enemy is us. It's own products have raised the barrier for going forward - 16bit technology is not inherently bad, but the implementation of it was poor. But if Microsoft can't get the 20-30 per cent of the market still using it to move, how can it get people to get off Windows 95? Migration costs are high and if the benefits don?t outweigh the costs, then marketing becomes ineffective," he said.
But the software giant needs to continue its never ending upgrade cycle to maintain revenues and therefore its stock price. Otherwise it risks losing key personnel and will face problems in recruiting new ones.
"What if Microsoft misses a quarter? Wall Street will hammer it and if the stock price dies, employees will start wondering why they're working 90 hour weeks for 30 per cent less than the market rate. Microsoft has to maintain a 30 per cent growth rate to maintain its corporate culture and so it?s looking to its interactive media initiatives to generate new revenues or to users for upgrades," Gartenberg explained.
While he predicted that Microsoft would continue to be an important force in the industry, he said it was unlikely to repeat its dominance of the desktop, although this was no reason to see it as a failure.
It would, however, increase its focus on marketing over the next few years to encourage users rather than enterprises to introduce upgrades into businesses by the back door.
"Enterprises need to seize control of the upgrade process or cede control to Microsoft," he concluded.
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