Bloomberg News

Microsoft Seeks End to Dinosaur-Era Software Upgrade Cycle: Tech

June 27, 2013

Microsoft Seeks End to Dinosaur-Era Software Upgrade Cycle: Tech

The Microsoft Windows 8 operating system is unveiled at a press conference on October 25, 2012 in New York. Photographer: Mario Tama/Getty Images

Microsoft Corp (MSFT)., which for decades has refreshed its popular Office corporate software just once about every three years, says it will soon switch to weekly updates.

It’s a radical shift as Microsoft overhauls its Internet-based programs, seeking to stay in sync with the fast-changing technology industry.

For much of Microsoft’s 38-year history, infrequent upgrades made sense for businesses seeking predictable improvements. That’s changed as nimbler entrants such as Dropbox Inc., Box Inc., Jive Software Inc (JIVE) (JIVE). and Google Inc. refine features and deliver automatic updates over the Web. That tinkering has helped lure customers and put pressure on margins at Microsoft’s biggest division, which accounted for $24 billion in sales last year, or a third of the total.

“Microsoft, on this every-three-year schedule for the massive wave of new products, looks like a dinosaur,” said Melissa Webster, an analyst at market-research firm IDC, based in Framingham, Massachusetts. “Three years is a lifetime in tech these days.”

That message has gotten through. Within a year, users of Internet-based versions of Office productivity software, as well as e-mail, telephony and collaboration tools, will have parts of their software refreshed weekly, Jeff Teper, an Office vice president, said in an interview. Microsoft has been moving toward more frequent updates with other programs, including Windows.

Later today at a company conference, Microsoft will showcase how software developers can build programs that take advantage of the Web-based Office 365, Chief Executive Officer Steve Ballmer said in a speech at the show yesterday.

Risky Switch

To pave way for the Office shift, the company is tapping the experience of a team of data scientists it gained in July with the acquisition of Yammer Inc. The 5-year-old startup convinced its customers the frequent updates were an advantage, because it gave them the latest and greatest features.

Moving fast also carries risks. While Yammer has 7 million users, 80 percent of them unpaid, Office has more than 1 billion, and the vast majority pay for the software. A half-baked or unpopular change in Office will be met with widespread scrutiny and complaints.

“This is where folks who have been at Microsoft for a while are envious of Yammer -- their mistakes go relatively unnoticed,” Teper said.

Quality Matters

Raman Padmanabhan, chief information officer for Xerox Corp. (XRX)’s business-services unit, has been briefed on Microsoft’s move to faster updates. He said he’s supportive as long as product quality doesn’t suffer. Xerox uses both Office and Microsoft’s SharePoint collaboration software.

“It’s all about service and quality,” Padmanabhan said. “You have to have a have a certain quality or it just kills your business.”

Office is the biggest part of Microsoft’s business division, where revenue increased 25 percent in fiscal 2012 compared with 2010 amid growth in areas like SharePoint, which helps workers collaborate, and Lync, programs that enable Internet-telephone calls. Office 365, a collection of Office programs accessible through the Web, is now a $1 billion business.

Yammer releases updates to users twice a week. Facebook Inc., by comparison, operates at a rate of twice a day. Yammer is moving to three times a week and ultimately intends to adopt a system of continuous updates, said Adam Pisoni, Yammer’s chief technology officer and co-founder, who now serves as general manager of engineering for Office.

Draft Picks

Microsoft and other traditional software companies would once spend months planning new features, and months more building and testing them. Customers knew roughly how often Microsoft would release a new version, and they were free to skip updates. Problem was, besides being slow, the system relied on engineers who often did a poor job predicting how customers actually behave, Pisoni said.

“What you realize when you begin to be very data-driven is a very large percentage of our ideas are bad,” said Yammer’s Pisoni.

Pisoni asked Yammer’s data chief, Peter Fishman, who has a Ph.D. in economics and started his career helping the Philadelphia Eagles make draft decisions, to make it a top priority to help Microsoft with its own data analysis. Fishman meets with the Office sales group, research and development and engineering teams. Some parts of Office already are doing things “the Yammer way,” with rapid updates that are closely tracked for satisfaction and user engagement, Teper said.

‘Foundational Shift’

“A lot of focus is on close to real-time,” said Bobby Kishore, an 18-year Microsoft veteran who leads engineering and operations for Office 365. “We just can’t rely on some focus groups. We have to be led by data. That is a foundational shift that is permeating through the organization.”

The Internet-based Office 365 software is already being updated on about a monthly basis. Microsoft is also trying to shift more customers to the online versions by putting the bulk of engineering resources behind upgrading those products, Teper said.

‘Microsoft understands the competitive threat,’’ said Webster. “They are feeling the heat.”

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus