Photo by parl, 'Risk.’ Under Creative Commons Attribution-NonCommercial-NoDerivs License

This has been a busy week for Microsoft, and for me as well.  On Monday, Microsoft launched Internet Explorer 9 at South by Southwest (SXSW) in Austin, TX.  That evening I flew from New York to Seattle.  On Tuesday morning, Microsoft launched Visual Studio LightSwitch, Beta 2 with a Go-Live license, in Redmond, and I had the privilege of speaking at the keynote presentation where the announcement was made.  Readers of this blog know I‘m a fan of LightSwitch, so I was happy to tell the app dev tools partners in the audience that I thought the LightSwitch extensions ecosystem represented a big opportunity – comparable to the opportunity when Visual Basic 1.0 was entering its final beta roughly 20 years ago.  On Tuesday evening, I flew back to New York (and wrote most of this post in-flight). Two busy, productive days. 

But there was a caveat that impacts the accomplishments, because Monday was also the day reports surfaced from credible news agencies that Microsoft was discontinuing its dedicated Zune hardware efforts.  While the Zune brand, technology and service will continue to be a component of Windows Phone and a piece of the Xbox puzzle as well, speculation is that Microsoft will no longer be going toe-to-toe with iPod touch in the portable music player market.

If we take all three of these developments together (even if one of them is based on speculation), two interesting conclusions can reasonably be drawn, one good and one less so. Microsoft is doubling down on technologies it finds strategic and de-emphasizing those that it does not. 

HTML 5 and the Web are strategic, so here comes IE9, and it’s a very good browser.  Try it and see.  Silverlight is strategic too, as is SQL Server, Windows Azure and SQL Azure, so here comes Visual Studio LightSwitch Beta 2 and a license to deploy its apps to production.  Downloads of that product have exceeded Microsoft’s projections by more than 50%, and the company is even citing analyst firms’ figures covering the number of power-user developers that might use it. (I happen to think the product will be used by full-fledged developers as well, but that’s a separate discussion.) Windows Phone is strategic too…I wasn’t 100% positive of that before, but the Nokia agreement has made me confident.  Xbox as an entertainment appliance is also strategic. 

Standalone music players are not strategic – and even if they were, selling them has been a losing battle for Microsoft.  So if Microsoft has consolidated the Zune content story and the ZunePass subscription into Xbox and Windows Phone, it would make sense, and would be a smart allocation of resources.  Essentially, it would be for the greater good.

But it’s not all good.  In this scenario, Zune player customers would lose out.  Unless they wanted to switch to Windows Phone, and then use their phone’s battery for the portable media needs, they’re going to need a new platform.  They’re going to feel abandoned.  Even if Zune lives, there have been other such cul de sacs for customers.  Remember SPOT watches?  Live Spaces?  The original Live Mesh?  Microsoft discontinued each of these products.  The company is to be commended for cutting its losses, as admitting a loss isn’t easy.  But Redmond won’t be well-regarded by the victims of those decisions.  Instead, it gets black marks.

What’s the answer?  I think it’s a bit like the 1980’s New York City “don’t block the box” gridlock rules: don’t enter an intersection unless you see a clear path through it.  If the light turns red and you’re blocking the perpendicular traffic, that’s your fault in judgment.  You get fined and get points on your license and you don’t get to shrug it off as beyond your control.  Accountability is key.  The same goes for Microsoft.  If it decides to enter a market, it should see a reasonable path through success in that market.

Switching analogies, Microsoft shouldn’t make investments haphazardly, and it certainly shouldn’t ask investors to buy into a high-risk fund that is sold as safe and which offers only moderate returns.  People won’t continue to invest with a fund manager with a track record of over-zealous, imprudent, sub-prime investments.  The same is true on the product side for Microsoft, and not just with music players and geeky wrist watches.  It’s true of Web browsers, and line-of-business app dev tools, and smartphones, and cloud platforms and operating systems too. 

When Microsoft is casual about its own risk, it raises risk for its customers, and weakens its reputation, market share and credibility.  That doesn’t mean all risk is bad, but it does mean no product team’s risk should be taken lightly. For mutual fund companies, it’s the CEO’s job to give his fund managers autonomy, but to make sure they’re conforming to a standard of rational risk management.  Because all those funds carry the same brand, and many of them serve the same investors.

The same goes for Microsoft, its product portfolio, its executive ranks and its product managers.