Microsoft Takes a Deep Breath, Releases 7

by Brendan Smith

The long-heralded release of Microsoft's new operating system, Windows 7, at last dropped yesterday, and that whooshing sound you hear is likely a gentle sigh of relief washing over Redmond. Reviews for the new OS have been largely positive, helping Microsoft put some of the negative atmosphere caused by the Vista OS aside. Microsoft also announced better-than-expected financial results today, despite revenue and profit declines.

Competitors are not sitting still for the hoopla though. Apple has launched advertising aimed at getting users to buy a Mac rather than going through the upgrade process, which is easy for Vista users and not-so-easy for XP users, who must do a clean install and copy and replace all files they wish to keep. And IBM is also using the opportunity to introduce its own software suite, which it launched specifically for the African market, to consumers in North America too. IBM claims that its suite could save customers 50% off the cost of migrating to Windows 7. It's part of a "Microsoft-free" alliance with Canonical, Red Hat and Novell. The initial package was aimed at African government and education users, while the North American push is targeted towards business users.

Google has also recently stepped up efforts attempting to get computer users to do more in the cloud, where it in turn is being more aggressively pushed by Microsoft. Windows 7 may signal just the parting shot of a whole new war for users' affections.

CES Hype Ignores Emerging-market Innovations

The dust is still settling in Las Vegas after 140,000 techies gathered for the annual Consumer Electronics Show (CES) last week. A hotbed of trends, gadgets and futuristic predictions, CES hints at the year’s soon-to-be hottest products and establishes solid predictions for the direction of the industry. This year’s show, responding to increasing media attention, attempted to shine a spotlight on solutions designed for developing countries. With industry representatives from the One Laptop per Child initiative, Qualcomm, Voxiva, AMD, Intel, Microsoft, and Cisco, CES hosted “Technology and Emerging Countries: Advancing Development through Technology Investments.” Even with the emerging-market star power of some of the world’s largest companies, coverage of the session was noticeably absent from CES press reports.

The absence of media attention on technology solutions for developing countries is not surprising. CES, traditionally, has been focused on the bells and whistles of the technology industry. The demand for sexy gadgets and flashy form factors keeps announcements comfortably far from reality and, as a result, only a fraction of the technology gizmos demonstrated make it to market. Successful emerging-market solutions are less often about flashy technology and more about shifts in business models to address day-to-day user needs. While new business models for and investments in emerging markets are not of particular interest to CES bloggers, they continue to be of interest to Wall Street.

Strategic investments that drive growth and true innovation in developing-country markets may be overlooked in the coverage of this year’s CES, but IT analysts are responding to them favorably. IBM, for instance, was rewarded by investors this week when their earnings report showed continued strong growth in emerging markets, making up for a slowing tech spending in the US. For companies just getting into the emerging-market game, there is still time to generate near-term revenues through smart investments. But newcomers are advised to ignore the tech-show drama of “devices in search of a market”, and balance technology innovation with business models and internal restructuring that will enable emerging-market growth.

Also in the news:

• NComputing takes on enterprise
• Apple loses negotiations in China
• OLPC to make XO laptop available in United States

Emerging Markets First, Traditional Markets Second For IBM

This week’s nugget was buried in a New York Times article by Steve Lohr on the lowering of IT-spending projections for 2008. The article contained the complete text of a memo by IBM’s CEO Sam Palmisano to the company’s senior executives. In the memo, Palmisano describes a major change in strategic direction – IBM “will focus first on how to capture all the growth in emerging markets, and then adjust our plans to serve the more traditional markets appropriately.” Palmisano underscores IBM’s continued investment in Brazil, Russia, India and China (BRIC), and announces a $1.6 billion initiative to capture growth opportunities in other parts of Southeast Asia, Eastern Europe, the Middle East, Africa and Latin America. A special emerging-market-based group will drive the initiative, which Palmisano expects to contribute significantly to the company’s revenues by 2010.

Palmisano deserves credit for recognizing the near-term opportunity “beyond BRIC” and providing strong leadership on strategic growth in “second-tier” developing countries. He has a proven track record of backing up past announcements with solid action. The number of employees in India, for example, has increased 40% to 73,000 in a year, reflecting the company’s rapid growth in the region. The BRIC countries have yielded a compound growth rate of 22 percent since 2004. Despite this success, Palmisano clearly understands the importance of bracing senior management for a strategic shift away from more comfortable traditional markets. “This is quite a change in mindset,” he says in the memo, “but that’s what is required to exploit today’s most exciting growth opportunities."

The overt change in focus by IBM and others (Cisco, GE, Microsoft, Nokia) presents an opportunity for regional offices to contribute more directly to the corporation’s strategic direction. With a spotlight on growth opportunities in their local markets, senior leaders in those countries (whether they are from the local area or moved there by the company from abroad) can contribute to company growth by influencing how products and services should be designed to meet local needs and preferences. For IBM to be successful in emerging markets, it will require a sustained commitment to innovation and understanding local markets. The details of Big Blue’s new emerging-market growth initiative will govern its degree of success, but the announcement alone is a bold step in the right direction.
Also in the news:

• Nokia Village Solution due out in Q108
  Cisco WiMax focus on developing countries
• China-based Hasee enters low-cost PC market