These are hardly the most innovative products. Sure, the "ribbon" interface introduced in Office 2007 was a fairly significant change -- I'm a fan, others hate it -- but under the hood, Office 2007 is still just an office suite. And remember all those innovative new features that were going to ship with Windows Vista, née Longhorn? The most exciting ones seemed to fall by the wayside.
"Microsoft, after a decade of acquisitions and R&D spending, is equally dependent on its cash cows for revenue as it was a decade ago," says the Crandrea Group's Craig Montgomery in a blog post titled "Could Microsoft Become the Next General Motors?" What's more, he says, the company has "the mentality of protecting the cash cows," while truly innovative products tend to wither on the vine. (That's if you consider the Zune innovative, I guess.)
Up to this point it's hard to argue with Montgomery's findings. What bothers me, though, are the Crandrea Group's proposed solutions. "It is critical that Microsoft utilize its R&D budget and focus on improving its core products," reads the group's strategy statement. "Rather than deploying capital to create new products, it is crucial to direct capital to improving existing products to secure consumer confidence and loyalty."
In other words, the problem isn't that Microsoft's attempts to innovate have failed. The problem is that Microsoft tried to innovate in the first place!
Whither software innovation?
See what I mean about investors focusing on short-term gain? And yet in a shrinking economy, the urge to circle the wagons, hang onto existing customers, and downplay cost centers is only natural. The larger the vendor, the more it stands to lose as customers tighten their belts.
But if Microsoft decided that its $7.5 billion would be better spent on security patches, bug fixes, and incremental upgrades, what would that say for the $3 billion that Oracle spends on R&D each year or the $6 billion that IBM spends on R&D annually across all of its hardware and software product lines? If the big vendors divert funds away from "pure" R&D in favor of safer ventures, just where is the next wave of software innovation going to come from?