Weathering the recession

In the red corner representing all that is good and sexy with the cloud/t’interweb, lets hear it for Gooo-oo-gle.

In the blue corner representing the grubby reality that most people actually do real work on desktop apps, just back from the 1990’s lets hear it for Microooo-soft.

Lets get ready to r-r-r-rumble….

Google sells ads. Very efficiently. Pay per click puts the onus on the advertiser to improve their conversion rate – but they only pay when people visit their website and see their sales message. (lets ignore click fraud). Google only get paid when people (potential customers) click on ads.

Other forms of advertising like telly, magazines etc are a big up front cost and a hard to measure conversion ratio – expect spend on this sort of advertising to plummet as we move into the depression.

Google ads are highly targeted, and can be managed in real time by the advertiser. Some advertisers, especially the ‘buy x at fleabay’ where x = whatever you searched for type (slaves, syphilis, fail – whatever), will reduce their spend, but many won’t. They will work on their conversion rate, and even if they give away 99% of their margin to google in fees they are still making some profit. At 100% they are still building/maintaining market share.

If advertising spend does plummet Google could sack off the half of its workforce that are working on freetard beta products that generate no cash and maintain its margin without materially impacting its future ad serving business.

I think Google will suffer, but not much, certainly not as much as these guys reckon.

Microsoft makes most of its money from desktop software (1/3 Windows, 1/3 Office, 1/3 all the other stuff they do, much of which looses a stack of cash). Lets just look at the 2/3.

Microsofts business is a big investment upfront in R&D and Dev costs. Those cost are sunk forever and cannot be cut. The ongoing cost is then mainly marketing and distribution, and a bit of support. Meanwhile that big dev cost has moved onto the next version (and next but one).

If customers don’t buy a version of Windows or Office, the vast majority of costs are still sunk, sure they can burn a few less dvds, and save a few pennies on FedEx, and hard to open packaging, but they don’t have much leeway to reduce costs to maintain margin. If they reduce Dev costs (of future versions) they are effectively eating next years seed corn.

Microsoft make the premium office suite, yet O2007 has largely failed to connect with the power user/dev community that should be driving adoption. I don’t think Office 2007 deployments are where they should be by now.

Not many people are claiming Vista has set the operating system world alight either (well Apple and Ubuntu have I guess!).

In a cost cutting world productivity gains is a hard sell. Bosses will be expecting workers just to stay later and be thankful they have a job at all.

I think MS have an uphill battle in the current climate to over-recover their costs (make margin)  as they have done in previous years. They have already played a lot of marketing cards so about the only tool left is deep discounts, and that is already happening. As the premium player against strong free/open source competition, a price war is a bad place to be.

In terms of competition who competes with Google on pay per click ads? Ya who? No one is the correct answer. MS paying searchers way more than they earn per click is not a long term strategy, and certainly not a robust one.

Who competes with MS on the desktop? In OS, Apple is doing well at the top end, Linux at the netbook end (and XP in a way). In Office, OOo are claiming 150-200M users, and increasing by 1.8M per week (20-30% of the Office suite market), and thats zero cost, as is sticking with the current version (unless you are on some Software Assurance type annual fee). Sticking with the current at least saves you a big migration cost either to O2007 or OOo.

On the plus side at least they didn’t squander their cash mountain on Yahoo. So they have a decent cushion. And I guess they have the option of hacking off some of the loss making areas.

In summary then (sorry this was so long)

I think Microsoft will get a bigger battering in this recession than Google. I expect more news of more sparkling discounts on MS products, and tactical withdrawal from some markets, in the coming months.

What do you think? And what do you think the impact on us independent devs/consultants will be?

I kind of thought Excel/VBA may pick up as its faster and cheaper than many alternatives, but I’m not seeing that, are you? There does seem to be a bit more Access work around though I reckon.



15 Responses to “Weathering the recession”

  1. alastair Says:

    I have had vista for about 3 weeks – don’t have any problem with it. quite like some of the desktop stuff and most of what I use installed and works with few problems. It has the look of a slightly updated XP, and I quite like the new games! The only moan is that they tried to disguise the log off and shut down stuff.

    Made the mistake of installing office 2007 complete with Access. I have been using Excel 2007 on and off for about 12 months but only really superficially. Trying to use it as a replacement for 2000 is a nightmare – So I intend to revert back to Office 2000.

    They talk up the BI development but it is so well hidden as to be a waste of space.

    Access and VBA use continues much as it always has. Professionally I have not seen any demand for the cloud stuff


    My business grew during the ’90’s Recession. This is different.

    IT departments now control the keys to the kingdom and they’re going to “gather the wagons in a circle” in an attempt to save their butts (and jobs). They’ll let the big firms in though because if things go really bad they might get a job there.

    No – it’s time to “batten down the hatches” to ride out the storm. I think on the other side of all this (whenever that happens) we’re going to see a massively different environment where we might see big opportunities – but in the short-term it’s going to be very tough. I hope enough of us survive, without having to do something else to feed the family, to be able to reep the benefits then.

    No cynicism here ….


  3. Dennis Wallentin Says:

    It’s obvious that the finanical crisis and the world wide recession strikes hard against the business for us small external developers. Like Dick, I hope that most of us will manage to survive but it will be much tougher now then back in the 90’s.

    From my point of view it’s a great time to invest and learn new technologies enabling us to get inside the IT-department’s door.

    SharePoint Server and .NET is actually recommended.

    Good luck everyone,

  4. Charles Says:

    I have not seen much sign of a slowdown yet, but when it does arrive I shall (finally) get busy on the next version of my software product and my website.

    Slowdowns give time to invest.

  5. Harlan Grove Says:

    Somewhat of a tangent, Microsoft has an add campaign (posters) going all over the light rail station near my office, and their slogan is ‘Windows [logo] Living without walls’. Why do I think the aptest picture to go along with that slogan would be a homeless person sleeping in the middle of an empty lot with no walls around?!

    Where I work, we finally upgraded from Office 97 to Office 2003 in 2007. A few (which included me) upgraded to Office XP (2002) in 2006. If that’s any guide, I certainly won’t have to worry about Office 2007, and maybe not Office 14 either.

    Also, FWIW, the company I work for (large financial services one) still uses Lotus Notes for e-mail and Oracle for database, with no plans to switch to anything else, and there are NO Microsoft server-based programs used anywhere within the company. Large companies, especially in financial services, aren’t going to be rolling out Microsoft server-based software any time soon. It’s unclear to me there’s going to be growth in SharePoint for years whether or not it’s a decent technology.

    I think it’s a safe bet that most financial service companies that haven’t upgraded Windows or Office yet aren’t likely to do so in the next 18-24 months.

  6. Chandoo Says:

    very well written Simon…

    I am a consultant with one of the larger IT firms and I haven’t seen any of my customers using Vista or Office 2007 till date. Even in our company very few machines have vista installed (just for testing purposes I guess)

    I am planning to become an independent consultant in the next year or so… but the situation is too depressing to think about it.


    I cannot imagine any more corporations upgrading from O2003 to O2007 now until everything gets happier out there. And by then O14 will be on the horizon or shipped.


  8. Bob Phillips Says:

    Like Dennis, I think it is a good time for us to be learning .Net and SharePoint.

    I have had a few customers who have upgraded to 2007, but none seem to have done it for any particular reason, just that it was the latest release. Loads more have Vista though. Personally, I haven’t installed Vista, have no intention of doing so, and will wait for Windows 7.

    As for who will fare better out of MS and Google, personally I would hope it is MS, I think Google are a horrible company with even less of an ethical backbone than most large corporates, but that’s a bit like saying who was worse out of Pol Pot and Mao Tse Tung. But, on a positive note, maybe MS will see the effect of the recession as a reson to do things propelry again, and correct Vista with a decent Windows 7, and correct 2007 with an vastly improved OW14.

    Ever the optimist …

  9. Simon Says:

    I’m glad I posted this when I did – they are already wielding the big axe:

  10. sam Says:

    I spent 11 years with 3 major corporates before becoming an independent consultant

    Through out those 11 years I never once feel the need to keep my files on the cloud nor did i come accross a situation where hundreds of users would want to edit a file simultaneously by opening it…If mutiple people had to enter data/read data simultaneously they would be doing it through a template/form/report connected to a database on a server….

    Shared Network folders with proper accesses set work fine for “collabaration”………so I am very skeptical of all the sitting in the “Cloud” products, sharepoint etc…

  11. Dennis Wallentin Says:

    Being skeptical to new technologies is a basic instinct, at least it should be! But SharePoint (aka MOSS) is a good solutions to provide users with a centralized document library and a centralized publishing internal web portal. VSTO makes better sense when associated with MOSS then as a standalone development platform. The Ribbon UI makes also better sense in this context.

    I also strongly believe that learning MOSS in terms of Excel Services can generate new native Excel business as well as being the “ticket” for us into the centralized IT-departments.

    Sure, the needs of information can always be solved in one or another way but SharePoint is a great platform and is also one of the fastest growing server platforms.

    When the book project I’m involved in is done the first thing I will do is to delve into MOSS which I also plan to be documented through my blog.

    Kind regards,

  12. Ross MIE Says:


    Sounds good Dennis. Where I work we are Lotus based, but we are looking at using there Quickr app/server which is akin SharePoint, I am interested to see how these types of technologies work first hand.

    I have read good and bad things about SP, in about equal measure. One of the more interesting points was that there was the opportunity to create, a bit of a complicated unmanageab mess with, they guy seemed to think that SharePoint could be the spread sheet versionitus(?) of the future?


  13. Dennis Wallentin Says:

    I find it amusing that MSFT cannot explain in plain English what server platforms like MOSS actually are. They are really good to invent new words which they mix up with some management language which in return sounds good.

    The last invention is OBA, Office Business Applications, that is promoted hard. I wonder what we have been doing the last 20 years with the Office suite…

    Interesting to hear that Lotus Notes is still out there although not playing the central role it once had.

    Kind regards,

  14. Doug Glancy Says:

    Simon, I enjoyed reading this.

    I have a question regarding the word “fail”. What does it mean in this context: “especially the ‘buy x at fleabay’ where x = whatever you searched for type (slaves, syphilis, fail – whatever)”?

    Also, it occurrs to me that if GUI is pronounced “gooey” then Fail UI’s acronym, “FUI,” is pronounced “phooey”.

  15. Simon Says:

    See more fail here:

    There was a big kerfuffle a while back because whatever you Googled came up as ad sense ads with ‘buy x at ebay’. The examples used were ‘buy slaves at ebay’. I’m not sure if you buy fail at ebay.

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