Russell Hoffman ("Host"), High Tech Today
Amy Wohl ("AW"), President of Wohl & Associates and Editor of The Trends Letter
Host: ...And my guest today is Amy Wohl. She's the President of Wohl and Associates, which is a research firm based in--Pennsylvania I believe?
AW: Yes, that's right.
Host: --And the Editor of The Trends Letter, which is a newsletter about the computer industry. And today we're going to be talking about Microsoft, and its effect on the industry, which has been great, and I'd like to welcome you to the show first of all.
AW: Well, thank's a lot Russ, I'm happy to be here.
Host: Thanks for coming on. Now, Microsoft has done, I guess, in my opinion, something no other company in history has done, which is, they've become a multibillion dollar company by selling something that really nobody needs--namely an operating system--
Host: --which is just a tool, a means to an end.
Host: They've sold a few other products and now they're out buying a lot of things, like the Bettmann Archives. What influences do you think are perhaps most important for the coming couple of years? What are they going to do to us next?
AW: Well, I think that the important thing to remember about Microsoft, is the reason they've had such amazing durability as a company, all out of proportion really to their size, and also to the kinds of products that they've sold at any one moment in time, has really been that they're very flexible, and they've been very clever about being able to peer ahead into the marketplace, see what's going to happen next, and make sure that they're going to have a piece of that thing that's going to happen next.
In order to do that, they've had a lot of failures as well as a lot of successes, but over a long period of time people tend to remember the things that they did well with, and to really remember very well the things that just sort of went away.
It's also important to remember that not all the things you just mentioned are actually Microsoft, although certainly Microsoft's money made them possible. The investment, for instance, in the Bettmann's Archives, is part of a company that's owned by Bill Gates, but which is technically not owned by Microsoft at all.
Host: Right, Right--thanks for correcting that fact.
AW: Bill has been buying up the digital rights to much of the artwork and images in the world. If we're not careful he's soon going to own every image in every museum (laughs) around the world--except the French. The French have been steadfastly refusing to sell him anything. And I'm not sure whether I mind that a lot or whether I don't. I guess it depends on whether he limits the access to the digital use of those images, or he charges a lot for them. I think I'd mind a lot if he did that.
Host: I fear that my complaint will be that he'll only offer low resolution versions of things, and to get high-resolution versions you'll have to spend a lot of money.
Host: And that that's how he'll--that's just my guess as to what he's going to do.
AW: Yes. But I suspect that that's only a small corner of his empire, and that the Big Important Next Thing for them, is something they've really already started to work on, and that's to figure out what they're going to do about what really is the biggest threat to the Microsoft Empire.
Host: The Internet.
AW: The Internet. Yes. Microsoft's real hold on the industry is really built around the notion that he who controls the operating system--not just in the sense of owning them but also in the sense of getting people to build tons of applications to those standards--and that's what Microsoft's really been successful at--really controls the computer industry.
And that's what Microsoft's been very good at. But guess what? When you get out into the world of the Internet, it isn't clear that operating systems count for very much. If you think about what Sun has proposed for the JAVA development environment, which suggests that when you download an object from the Internet, it's going to come with an executable, that places itself on your computer with all the code for the operating system that happens to be on your computer, to allow you to do whatever you want to do with that object, then maybe operating systems don't matter anymore. And, that's a really scary thing if you're Microsoft.
Host: The thing that's worried--well, me and everyone else, about that scenario, aside from that all of our applications that we've been writing will have to be rewritten, is the obvious scare is: Viruses, and those sorts of things. Do you think that that's going to continue to be--that there's going to be a catastrophy that wake's everybody up and scares everybody? Or are there going to be solutions to that?
AW: I guess there's sort of several way's of looking at this. First let me put on my consultant's hat, and say, that in my experience, everybody pays an insufficient amount of attention to the problem of viruses, just like they pay an insufficient amount of attention to the problem of backups, until something terrible happens to them personally, and then they're generally better behaved about it, at least for a while. So my guess is that, even having something terrible happen out on the Internet to other people, won't necessarily make each individual a well behaved person on the subject of viruses. It might on the other hand make some legislature happen that would make people better protected. That wouldn't necessarily be a bad thing.
I think that what's really going to happen, is that as usual in the United States, we'll look for engineered solutions, rather than legislative ones, so our answer to this won't be to necessarily pass laws. It will be for clever software engineers, and maybe even hardware engineers, to build filters that make it relatively safe for you to have a computer attached to the Internet. Because if we can't do that, then this isn't going to be really useful or fun. And because there are pretty decent ways of building virus filters. The trick is not to build one in 1995, and then assume that in 1997 or 1998 you still have a virus filter. You have to keep updating them because there are always bigger and better viruses coming along, and you to improve the antibiotics to make sure they're still effective.
Host: ...[break]... I'd like to talk about the Microsoft Network, which so far isn't really amounting to too much of an imposition on the other networks, but I know that one of the things that they do on the Microsoft network, or can do, that is not being done on the other networks, is that they provider of the information, whose products would then be downloaded by the users, can be paid each time the product is downloaded. It might be only a nickle or a dollar or whatever amount the provider thinks that he can get. This to me is a fairly significant change, and as a provider would make me want to go onto the Microsoft Network. Of course, you have to have 32-bit Windows and NT applications to get there--you know, before they'll let you. But, do you think that them playing this card might force the others--AOL and CompuServe and Prodigy--to go in that same direction, and how would that affect the Internet, where things are basically free?
AW: First of all, I think that it, certainly, was a clever idea of Microsoft's, to make a better deal with the providers than the online services have been offering so far. And in fact, many of the newer services that are coming online now, the content service providers like IBM and AT&T, and others--the new Grotner Advantage Service for instance--are all offering deals that are much better for the provider, and much closer to the deal that Microsoft is offering, where the provider gets to keep most of the money, and the network provider takes only a very small percentage rather than the other way around. And that's because they're playing catch-up. These other guys have been in the business a long time. If they want good providers they have to convince them that they'd like to try and play the game.
Also, to tell you the truth, most of the good providers weren't real interested in being on service where they got ten or fifteen percent of the revenues from what they were doing.
The Internet notion of giving things away for free, is only an interesting idea if in the final analysis, you have a way of making money out of the relationship you are then establishing, or out of selling some other product to the customer you get that way. So, it seems to me that a lot of what's going on on the Internet today is interesting social interaction, or marketing or pre-marketing activity or support activity, but it isn't necessarily profit-making business.
And, I suspect that over some longer period of time, a few years, we're going to start to sort that out, and was we sort that out, we will still have lots of things on the Internet--probably the predominance of things on the Internet will still be free, because it will pay large companies and even smaller companies, to give away lots of stuff in order to attract customers to see what's going on. but by the way, we will start having lots of things on the Internet which are not free. We will use it as a major delivery vehicle for paid software. Microsoft itself is already doing that, through several distribution services. We will see it as a major distribution vehicle for electronic information services which are not free. Not, you know, a piece of the newspaper as an adjunct to subscribers who are also buying paper newspapers, but rather high-priced opinion information services like the one we publish, being published over the Internet only to subscribers who have passwords to get them into the service. And, we'll also see all kinds of new services that could not exist except in an online, electronic, immediate access, immediate turnaround environment, come into being. Things that just don't have any meaning in a paper world at all.
Host: Responsive systems, would that be--like, Ray Charles getting information from people so they can sell them other products?
AW: Well, it'll be people collecting immediate responses to problems, and selling them to the vendor who's had the problem. Think about, for instance, if at the time when Intel created the Pentium mess, it had been possible to go out in an organized way onto the Internet, and talk to Pentium users and potential Pentium buyers and find out exactly how they were reacting to that, and give that information back to Intel. They would have been able to fine-tune their actions much better with that information. And then think about that multiplied by all the business decisions that companies are making every day.
Host: So what you're talking about in the Intel Example is that they botched the P.R.
AW: They botched the P.R. very badly because they didn't understand how angry people were. And they didn't understand what the real issues were, which was: That their action was perceived as incredible arrogance. And, if they had been able to get feedback directly from the customers--and direct feedback is what the Internet is all about--then, they would never have made that mistake. They would have been better informed.
Host: Getting back to what Microsoft does for a living, they recently started to purchase Intuit, then changed their mind, and I guess their keeping hold of their Money product, if I have the sequence right.
AW: Yes. It's a really complicated situation. First they made this huge bid for Intuit. They were going to kind of overpay them for the company to make sure they got it. And in order to make sure that the Federal Government would let them do that, or hope that the Federal Government would let them do that, they were going to give their Money product to Novell. They needed to find a safe home for it. And they'd never been really successful with it so they were going to give it to Novell.
Host: Probably hoping that it was a box with a snake in it.
AW: Sort of. And guess what? Novell was bundling Intuit with it's products, so they were going to start--stop bundling Intuit and start bundling Money with their product--it was very complicated! And then what happened was, it became unclear whether the Federal Government was going to let the deal go through, and it became clear that it was going to take a long time to get sorted out. And Microsoft felt that it couldn't deal with the uncertainty going on for a long time. And so, they walked away from the deal, is basically what happened. They said: "We just, we can't have this hanging over our head. There's too many other decisions to make. Even though we really want Intuit, we don't want it that badly." And, Intuit in some sense may be better off without Microsoft. They're still a highly desirable object. Somebody else might buy them in the future. They make lots of money on their own in any case. And so they went of into the sunset and Novell's continuing to bundle Intuit in their packages! (laughs.)
Microsoft in the meantime took Money back. Now they have the job of making Money look like this great product that they never intended to give away in the first place! That may turn out to be harder than they think. Especially because most of the financial intermediaries who wanted to do deals with Intuit rather than Money would still rather do deals with Intuit rather than Money. And that's because the big installed base of personal financial software users are still Intuit users. And so if you're a bank or a credit card company you'd really do a deal with Intuit.
Host: Plus they 'know' Intuit's really a better program or why would Microsoft have wanted to buy it in the first place?
AW: You know something, I don't really think that's the issue. I think it is a better program by the way, but, I don't think that's issue. I think the real issue is how many customers it has. Because the issue here wasn't whether it was a better program. The issue was, could Microsoft use Intuit to make itself a power in the Online Financial Services market. And it needed the installed base of Intuit to do that. Otherwise it was going to have a much longer harder row to hoe to get to a leadership position in that business, and that was really what it was trying to do. So how good the product was wasn't the issue, it was how big was the installed base.
Host: As always. What are they going to do instead?
AW: What are they going to do with Money?
Host: Are they going to do it with Money?
AW: Well, I think they're going to spend a lot of money on Money. That's basically what's going to happen now. Remember there's this Microsoft Magic, you know. They can bundle it with things. What if they decide to give it away to everyone who's an Office Suite user? What if they decide to have a giant giveaway program like the one that CA had last year, where you can have it for free? Well, you know--they gave away over a million copies of their Simply Money product for free.
Host: It's sitting on my shelf unopened as we speak!
AW: Yes! And it's well deserved, to be unopened (both laugh.)
Host: Okay! You're listening to High Tech Today with my guest today, Amy Wohl of Wohl and Associates, and we'll be right back after this short break! ...[break]... We were talking on break about Invisible Computing. And, people who have been saying for many years: "I can't understand computers. I can't work with them. I don't know anything they do"--have actually been using them for quite a while and are going to use them a lot more in the future. Let's talk about that a little bit.
AW: Well, it's really interesting how many computers people are probably using without even being aware of it at all. Whenever someone says to me: "I'll never use a computer" I always ask them to take their wallet out, because chances are, unless they're not a member of modern society, they have some of those pesky ATM cards in there. And those ATM cards of course, every time you use them, make you a computer user, because what you're really doing is entering into a timeshare network and interfacing actively with the computer through a sort of mediocre interface, and the nice thing about that interface of course is that it offers you a reward, assuming you have money in your account it will let you have some.
Maybe we should have computers on your desk that give you a lollipop or a quarter every time you hit the right key, and you'd get better interaction with these users who say they don't want to use a computer. I don't know.
Host: That's what Microsoft Bob did, isn't it?
AW: Well, no, actually, Microsoft Bob offered you these scurvy little animals that insist on walking off and onto the screen anytime you wanted to do anything. I have really strange feelings about Microsoft Bob. It's one of these things where Microsoft puts this highly flawed implementation of a really great idea because they want to be out really early. And then, they persistently trouble-shoot it in full view of the known world. And guess what: Over a period of say, three to five years, they'll figure out how to do it, and they'll end up having some considerable installed base for a user-friendly, I hate to say human-centric, animal-centric? Something-centric (laughs) interface. I think they have the right idea, they just have a terrible implementation of it. Recently, we've actually written a long article about that, and if any of your users want to call me at (610) 667-4842 we'll send them a copy of the newsletter article about that.
Host: Okay, let me give that number again. (610) 667-4842 if you want to get a copy of the article that Wohl and Associates, or rather The Trends Letter--
AW: It's a Trends Letter article about friendly interfaces and particularly about Bob. But, I think that, it's not just that we have people using teller machines, it's that all around you, there are computers that are much less visible than teller machines. When you go into the kitchen to heat a pizza in your microwave oven, there's at least one micropocessor in that microwave oven. When you drive your car to the office in the morning, unless it's a very old car, it's probably got a half a dozen or more microprocessors in it.
In fact, when I had a problem with my current car, which is a Swedish number, the 'care manager' told me with a long, sad look on his face, that I'd probably be better at fixing it than he was, because the problem was it had nothing but computers inside it!
I think that we're really reaching the point where a lot of the things we use on a daily basis are actually run by computers. We just are less and less aware of it, because they're not out there in front, waving a little flag in front of you, and saying "I'm a Windows operating system, I'm DOS, load me with your favorite application!" They are simply looking to you exactly the way a microwave or whatever always looked, but guess what? They're doing something, better, faster, or in a more automatic way than they used to.
Host: And they're still not communicating with each other...
AW: And they're still not communicating with each other and that's the next thing that's going to happen. In the last year a couple of interesting things have happened. First we had Novell announcing an initiative called NEST, which is an initiative to take the Netware operating system and create a soft of lightweight version of it that can be imbedded inside of things, for instance office appliances, all kinds of appliances, like your washing machine and your hot water heater and your shower--can talk to each other for instance, and make sure that there's enough hot water for you to take a shower before the washer goes on in a modern house. Now that isn't possible today, but it might be possible in a year or two.
Just recently, we had another bunch of vendors announce an initiative to create an operating system called a microkernal--this is IBM now--coming along, taking OS/2, and creating a version of it called the microkernal that sits underneath a whole range of other operating systems, not just OS/2 now, a whole bunch of operating systems running of a whole lot of hardware platforms. And a raft of vendors have lined up to use this, not in their computer systems so much, but more in the imbedded-processor products they build. Again, the things that hide inside of things and which will allow you to build all kinds of connected systems to do intelligent things invisibly.
Host: So people should of course expect to see more and more computers. They'll be there, they just won't quite see them.
AW: Right. On the other hand, you'll be seeing lots more computing, even if you don't see more computers, and the most visible thing I think you will see, is the revolution that will occur right in front of you in your living room as the race to converge the personal computer and the television set in your living room or your family room really surges forward in the next year or two. We expect to see an absolute fist-fight between the telephone companies, the cable companies, the personal computer companies, and Hollywood as they all try to figure out who owns that territory.
Host: Okay. We only have about a minute left, and I really wanted to ask about Blockbuster Video. It would seem to me that they're in a very precarious position. If we can start downloading--if we really can download our movies online, are they going to do what the railroads did, and not realize that they were in the transportation business, or are they going to figure it out, close all their stores, and do online services? You have forty seconds to answer!
AW: Well, I think that they could easily decide to sell popcorn in the stores and go into the service business instead of actually physically distributing tapes, and that would bail them out handily. We'll see if they're smart enough to do that.
Host: So they might be able to keep their shops open.
Host: You've been listening to High Tech Today with your host Russell Hoffman and my guest has been Amy Wohl, the President of Wohl and Associates and the Editor of The Trends Letter. She's been in this industry for, oh, I would say longer than I have!
AW: Twenty-one years!
Host: Twenty-one Years! Yes, seven years longer than me! And, I guess we're out of time. Thanks for showing up, and so long! We'll see you next week on High Tech Today!
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