A crack in the Microsoft fortress?

At first, I couldn't quite believe what I saw. Surfing around the Dell computer website, I noticed that the company had decided to continue to offer Microsoft's Windows XP as one of the operating systems on its Inspiron line of computers instead of the new Microsoft Vista operating system alone.

Say what!?

In the past, Dell has been one of – if not the – most loyal foot soldiers when it came to offering Microsoft software on its products. The moment a new version of software was available, the old software disappeared faster than a snowball in a heat wave. It was these kinds of deals with computermakers that allowed Microsoft to gain the huge hold it has on the installed base of computer users.

So what did this mean? Was Vista – which had opened to so-so reviews and lukewarm praise from Microsoft officials – a total bust? Is Microsoft's hold on the planet slipping? (One posting that bounced around the blogosphere late last month argued that Microsoft is dead. The author later explained that he meant that the company was irrelevant.) Or did it mean nothing at all? Just a mosquito on the windshield of the Microsoft juggernaut?

Probably a little of all of the above. At least that's the opinion of two of the people who spend a lot of time thinking about and writing about Microsoft.

Robert Scoble, former Microsoft employee and author of the popular blog, the Scobleizer (http://scobleizer.com/), readily admits that he has a soft spot in his heart for the computing giant. But he's also disappointed in Microsoft's performance in recent years.

"I find that I'm getting a bit more anti-Microsoft, like some of the other bloggers, because the company is not living up to its potential," he says in a telephone interview. "Look at the resources Microsoft has." In fact, the company reported a lucrative quarter of earnings last week. "But they have so much trouble dealing with challenges from smaller companies. It's hard to figure out."

Mr. Scoble says that employees within Microsoft have told him that people are very unhappy because it takes so long to get anything done, such as work on a project or innovate.

Scoble himself worries that Microsoft seems too comfortable with its Goliath status in the computing world and seems to be content with creating copies of successful products already created by its competitors. The classic example is the much-panned Microsoft Zune MP3 player, a copy of Apple's megasuccessful iPod.

As for Dell's decision to offer Windows XP again, Scoble says it is the result of just how successful Microsoft has been at getting companies to use that particular operating system (OS) on their computers.

"Many businesses that run hundreds or even thousands of computers don't want to move to new stuff because of the cost. Switching 20,000 machines is a huge dislocation, and there is no upside," Scoble says. "And Dell is not going to turn away customers who don't want a new OS, for fear they will just go somewhere else, or just not buy at all."

Robert X. Cringely, a columnist for InfoWorld and writer of a popular blog (http://weblog.infoworld.com/robertxcringely/) agrees that the news from Dell is a mixed one for Microsoft. After all, he points out, Microsoft, based in Redmond, Wash., still makes money when people buy XP.

The more troublesome development, he writes in an e-mail, is Dell's decision to offer Linux, an open-source operating system, on some of its machines.

"I think what's more significant about this is that it signals: (a) Dell's independence from Microsoft – Redmond can't afford to retaliate against one of its biggest resellers; and (b) Dell's willingness to listen to its customers, which has been loooooong overdue," he writes. "The decision to continue supporting XP came out of its online suggestion box, Ideastorm.com, as did the decision to offer an open-source OS. A third reason is probably tech support. I am sure that Vista has been generating a lot of calls to Dell's support centers, and that selling XP will result in fewer of them.

"Will Gateway, HP, Toshiba, Sony, etc., follow Dell and continue to offer XP until MS pulls the plug [probably January of 2008]? That's the question of the moment."

But don't be deceived by talk of Microsoft dying, Scoble says. It's going to be around for a long time.

That doesn't mean the company is invincible, however, and developments like Dell's continuing to offer XP illustrate that point.

Scoble adds that big companies can still disappear. (Remember one-time giant Digital Equipment Corp., maker of DEC computers?).

If Microsoft can reinvigorate some of its old innovation practices and become as aggressive in acquisitions and mergers as in the past, then Scoble believes it will be fine.

If not, announcements like Dell's may prove to be the first crack in what has until now been an impenetrable dam.