Microsoft's WGA 19 Hour Outage Exposes a Company Out of Ideas

Update: Ars has picked up this story as well...

You've seen what is happening to Microsoft before. A company runs out of ideas so they end up cannibalizing their main source of income to try to squeeze more money out of their existing customers.
AOL is a company well into this phase in its life cycle. A few years back, they made the business decision to make it much harder to get out of their ISP/Content plans. Why? Because that is all that they got.  The MBAs said "we need to stop people from leaving. This is the best thing we can come up with."  Instead of making a compelling service that would drive new customers and keep existing ones (like how about delivering TimeWarner movies over the net for a reduced cost?), they opted to cheat their current customers out of some cash on the way out the door.  Their reputation was irreparably damaged and their continued downward spiral is a testament to this.

Mobile carriers are obviously as guilty of this practice as any other business without an innovation game plan. Besides high-speed access and wider coverage areas, what other services do you want from a mobile carrier? Music and content? Leave that to the TV networks and record labels. Innovative phone services? Skype, Vonage and the various SIP providers are killing the traditional carriers on features and a large portion of their customers (us included) are biding their time until these services become available over wireless. There isn't a wide part of the value chain to add to. So where to innovate? How about core competency?

Delivery.

Things like great customer satisfaction, easy plans, expanding service area and data speed,  and inexpensive roaming come to mind. In lieu of offereing these pluses, the mobile carriers have made a practice of signing customers in for long term plans, locking their phones and imposing stiff penalties for leaving early. Why do most customers want to leave? How about keeping customers with great service? 

There has to be a service model that fits in this mindspace as well as a communications strategy that tells customers that they should sign up because we, as telecomX are innovators - so much so that we aren't worried about you leaving. In fact, our confidence in our product/service is so high that we won't threaten to screw you on the way out by locking your phone or giving you a huge cancellation fee. When/if that model hits the streets, I think we will see a large migration. Hopefully a WiMAX/4G era coupled with smaller Internet/communications devices will bring on this era.  That is unless the mobile carriers are able to successfully block their customers VOIP traffic.

This is obviously the case with AT&T, which is spending money on attorneys suing people who unlock their iPhones rather than spending money on infrastructure to keep customers from going to the other carriers or providing reasonable roaming rate agreements. For some reason, the customer satisfaction/retention quotient has been miscalculated by these companies. Or perhaps they just really believe consumers forget being screwed. Or maybe someone in PR/Branding needs to speak up?

Which brings us back to the Microsoft example. This is a bad sign for Microsoft and the software industry in general. As more companies move to the SaaS model, the temptation to focus resources on lock-in – not innovation – will be strong. Hire more lawyers and MBAs and cut back on developers and thinkers because the benefits of lock-in are easy to calculate over innovation, a much grayer area.

Microsoft's customers are upset and rightly so. They paid (too much) money for their Vista or XP license, had to go through a rigmarole of serial code and licensing red tape to activate their computer and, in the process, send Microsoft their personal data. They also probably got it loaded with crapware. What do they get for this inconvenience? They get error messages saying that they are crooks and they need to pay MS (again) to validate their software and in the mean time, their computers were partially disabled.

This example can also be brought to the Exchange/SharePoint model.  Microsoft is offering a very low barrier to entry but once they have your company's data, it is next to impossible to extract.  Will their competitors follow suit?  Unfortunately, they probably will because technology decision makers aren't considering this when they vote with their dollars.

From a strategic standpoint, we can probably assume that this is Steve Ballmer's work, not Bill Gates'. Bill Gates is a developer. Ballmer is a marketer. During the Bill Gates era, Microsoft was willing to let the X percent of customers pirate the software, realizing that people would get used to their software and when they were in a situation where they had a paying choice, they would purchase the software that they were used to. The New Microsoft and its WGA (Windows Genuine Advantage) are leaving that mentality behind to squeeze some more money out of their customers. Instead of innovating (How about making Vista a better standards compliant OS?) and showing confidence in their products, they are locking everything in. Although difficult to calculate how much so, this practice has the effect of leaving an extremely bad taste in their customer's mouth and will likely spur migrations to Linux and the MacOS.

This is one area where Apple (and Linux distros like Ubuntu) kill MS. Apple's OS registration process is quick and simple (did you know you can opt out by hitting apple-Q?) and doesn't require long, painful serial numbers. It also won't go bad on you when the company's servers head south. Apple does require serial codes on specifically pro software like OSX Server/Final Cut Pro/etc., but these titles are obviously aimed at a much more mature, specific and resource-affluent market and are not tied to some servers in Cupertino.  Apple still lures its new customers in with the light, easy experience - which is paying off.

Maybe, in the technology industry, the saying shouldn't be "the best offense is a good defense", it should be "the best offense is the best offense". Innovate!