Microsoft's Bid for Yahoo! - 12 Feb 2008

I assume most of you have heard that Microsoft, a week ago, presented a $44.6 billion takeover bid to Internet giant Yahoo!, an offer that Yahoo!'s board just yesterday rejected because it "substantially undervalues" the company. I also assume that most of you believe this deal has nothing to do with IT or the enterprise: After all, Yahoo! is overwhelmingly a consumer destination online and has little if anything to do with business users. Right?

Not quite. I feel that Microsoft's attempted takeover of Yahoo! has everything to do with you, your business, and the way you'll interact with computers, services, and data in the future. Sure, Yahoo! is big on the consumer-oriented stuff. But they also own Zimbra, makers of what is widely regarded as the most capable Web-based office productivity suite, a product category that I and many others think of as cloud computing. We've discussed cloud computing here in UPDATE before, most recently in "Windows Live ... for the Enterprise?" ( ) in which I noted that it was only a matter of time before Microsoft finally embraced cloud-based computing. The danger, of course, is that the company will do so too slowly. Because its customer base--especially its future customer base--has already embraced cloud computing.

Yes, cloud computing sounds like yet another trendy buzz phrase. And yes, I suspect most people reading this are going to resist the notion that services and data storage, increasingly, are moving to the Internet cloud. But anyone who's had to configure multiple PCs will admit that the dream of seamless centralized management is still largely a dream. And for those who are less technical--or working within the resource constraints of a small business--the notion of letting someone else handle all the grunt work is just too significant to ignore.

More important, perhaps, the next generation of users has already embraced cloud computing. They check their email from any Web browser, any cell phone, and other devices. They manage and share calendars online. They reach out to others with similar interests on social networking sites such as Facebook. They create and collaborate on documents on the Web. They communicate with others, regularly, even constantly, in a variety of ways that make even email look like a 1970's-era rotary phone by comparison: I'm talking Short Message Service (SMS), Multimedia Message Service (MMS), video chat. And they're "mashing" disparate data sources online into custom UIs that give them the info they want, where and how they want it. For this new generation of users, being strapped to desktop versions of Outlook and Word is as confining as the pre-Internet era was to us. We're the dinosaurs in this equation. And the meteor that's going to take out our way of life is cloud computing.

Now, Microsoft isn't trying to purchase Yahoo! just for Zimbra, although I suspect that's certainly part of the equation. Generally speaking, the software giant is trying to reach a scale at which it can more easily compete with the clear market leader in this segment, Google. There will be talk about email and IM, search and advertising, and other areas in which Google and a combined Microsoft/Yahoo! will more easily align competitively. But what this is really about is the future: Yahoo!, unlike Microsoft, really groks cloud computing. It's part of Yahoo!'s DNA. And Microsoft realizes that although Windows, Windows Server, and Office are quite successful today, it has been unable to make the transition into cloud computing because it's too easy to protect its core businesses, which generates billions of dollars of revenue every month.

Microsoft must walk a fine line between what works today and what will be expected by its user base going forward. As users of Microsoft's systems, our decision is similar: Do we remain in the past or take scary steps into an uncertain future? My bet is on cloud computing. And Microsoft's bid for Yahoo! proves that it, too, is betting on that same future.

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