Microsoft's worst enemy isn't Linux and open source. Nor is it Linux's not-so-distant cousin UNIX. It's not IBM, Oracle, or Sun Microsystems, Redmond's well-known and outspoken rivals in the enterprise market. It isn't even Apple Computer, with its new pro-business line of server products. It's none of these. Microsoft's biggest and most dangerous competitor is Microsoft itself and the "good enough" software that it has produced over the past few years.
Probably the product that's the best example of how Microsoft past competes with Microsoft present is Windows NT Server 4.0, but other notable examples are Windows 2000 Professional and Microsoft Office 2000. In each case, Microsoft produced software that for many large business segments was "good enough."
Competition for the OS
That's not to say that these products didn't need to be improved. In the case of NT Server 4.0, the software definitely lacked several important enterprise management features that Microsoft addressed by producing Active Directory (AD) and Win2K. Nevertheless, a lot of businesses are still running NT 4.0 although it's now almost 8 years old. Why? Because NT 4.0 is good enough.
Although NT doesn't address the needs of the enterprise nearly as well as Win2K or Windows Server 2003, NT does address the needs of most small and midsized businesses. In fact, because NT is simpler, you could even argue—especially if you already own NT—that it might be a better fit for small business than Windows 2003 is.
The same thing is true of Win2K Pro on the desktop. With the exception of System Restore, which many people turn off, most of the new Windows XP features are oriented toward the home user and don't offer enough worthwhile business advantages over Win2K Pro to make most Win2K users move to XP. In addition to solving the stability problems that plagued the Windows 9x line of software, Win2K provided important Plug and Play (PnP) enhancements and device support that NT Workstation lacked. Win2K is basically good enough. True, XP has garnered big sales numbers. However, most of those sales haven't resulted from users upgrading from Win2K Pro, but from purchases of new computers, almost all of which are bundled with XP.
Competition in the Office
Microsoft Office 2003 and its predecessor, Microsoft Office XP, face a similar dilemma vis-à-vis Office 2000. Office 2000 was good enough to handle virtually all typical office functions, such as word processing and spreadsheets. You might even be able to make the case that Office 97 was the release that actually achieved "good enough" status.
Think about it: Just how many things do users need to be able to do with a letter or a spreadsheet? Frankly, the earlier versions of Office handle quite well all the jobs that I can think of. Outlook 2003 is the only component in the Office 2003 suite that makes a compelling case for upgrading. Outlook 2003's new, smarter offline connectivity to Microsoft Exchange Server is worth the upgrade—but then again, many small businesses and organizations that don't use Exchange won't care about that feature.
Divining the Future
Microsoft is no doubt keenly aware that the biggest competition for all its flagship products is the earlier releases of the same products. That fact is certainly the driving force behind the Software Assurance (SA) program. Microsoft needs to give users a reason to move.
However, several key product lines are at a point in their life cycle at which more features don't give users sufficient reason to move to new releases: The existing feature set is good enough. Earlier releases of these products have provided the core feature sets, and most of the new features that Microsoft has since added are oriented toward the enterprise or, in the case of XP, toward the home user. Moreover, many small organizations don't buy into the SA program. You don't need much foresight to see that this situation will intensify with Microsoft's next generation of products. Microsoft past will continue to be the worst enemy of Microsoft present.