The inevitable death of the ecosystem

Ever since James F Moore’s 1993 article in the Harvard Business Review it’s been fashionable to talk about business ecosystems. A good example is the Microsoft ecosystem. Microsoft is the shark and third party tools are the pilot fish that eat Microsoft’s leftovers.

This analogy is wrong. Microsoft isn’t the shark – it’s a greedy fisherman. With one hand it throws bread crumbs to encourage the little fishes to grow while with the other it trawls the bottom of the ocean for fish large enough to eat. It catches the fish, but its nets scrape the ocean floor bare, ruining the ecosystem for decades to come.

Microsoft have abandoned their benign tending of the ecosystem. They have moved from helping it flourish to harvesting it. You can see this in many areas. In the developer tools market, rather than providing a set of core development tools they’ve decided to try to flog us bug tracking, source control, unit testing, load testing, enterprise modelling and collaboration suites. These were markets already well served by good, affordable third party tools. For the sake of a few thousand dollars per seat off enterprise customers too lazy or scared to investigate the other possibilities, Microsoft have shut down that part of the ecosystem.

In SQL Server, Microsoft are open about this, at least in private. Senior people in the SQL Server team have always made it clear to me that they want to put everything any SQL developer or DBA could ever want in the box. This will inevitably shut down the SQL Server ecosystem too.

Red Gate – the company I work for – is in a better situation than most. We’ve been going a while, we’re profitable, our revenues are growing and the people who work here are outstanding. Microsoft’s intentions, however, are clear: they want to own the entire SQL Server ecosystem. Anybody left standing in 5 years time will be there despite Microsoft’s efforts, not because of them. Although some companies – Red Gate among them – will survive the cull, many won’t. I do not envy the fragile companies in this market.

Microsoft’s actions are as futile as they are frustrating. They will trawl with their nets, destroy the ecosystem but reap little for themselves. Business intelligence, gaming, mobile phones, business accounting, CRM, development tools and SQL Server third party tools are all areas where Microsoft are now competing with their one-time partners. Judging by their current efforts, Microsoft will not win in many -if any – of the areas they are competing in.

The ecosystem won’t be destroyed overnight: it will wither slowly. Third parties will start to leave the ecosystem and they won’t be replaced. When entering new markets, companies will think about joining the Microsoft ecosystem and then won’t. By the time Microsoft realise what is happening it will be too late.

4 responses to “The inevitable death of the ecosystem”

  1. Veep says:

    Why should the ecosystem remain the same indefinitely? By your logic, the software economy should have collapsed years ago when Microsoft first started putting spell checkers in Word. “OMG! The third party word processing market will collapse!”. Or “OMG! The third party graphics engines market will collapse!”. Or “OMG! The third party XYZ market will collapse!” whenever Microsoft adds a feature to their products.
    My point is this: The market progresses and what is easily commoditized tends to become part of some suite or another that Microsoft offers. They almost never offer the absolute best of breed product in any category. However, what they do offer is an integrated package that supports most aspects of the domain in question. Therefore, yeah, they’re gonna ship a bug tracker. Some testing automation tools, etc. You think Fog Creek or Mercury are shaking in their boots though? No. They’re simply going to up the ante and offer yet more features/quality, etc. in their products so they can differentiate.
    If you’re against commoditization, then I suppose you’re eager to license 3D graphics engines to the tune of $50,000, right? Well, if not then you’re on board with commoditization and benefitting from it, so no complaints please.
    Furthermore, if you’ve been paying attention to Microsoft’s products at all, you would know that there is plenty of opportunities to innovate around VSTS (which is what I believe you are referencing in your post). To use your SQL Server example: sure Microsoft provides everything you’d ever need as a DBA; but ONLY if you’re using SQL Server. You want DBA tools that work with several backends (like many companies have in addition to their SQL Server tools), then good tools like that still cost good money. Other examples abound.

  2. Matt Lacey says:

    I disagree.
    Microsoft could never put everything a developer might want into a product, nor could anyone else. There will always be bespoke needs. As the number of total users grows, the number of people with the bespoke requirement will grow so that it becomes a viable market for someone. And there will be loads of these smaller markets. So many in fact that no one company could provide solutions for all of them. This is will be a change in the ecosystem, not the end of it.
    Competition, especially from someone with the huge resources, is a good thing for users. It will lead to improved products as the companies strive to differentiate themselves with improved functionality.
    Even if Microsoft create a version of SQL Server that has EVERYTHING in it. That’s going to be far to much for a lot, if not most, people. There will be markets for simpler solutions.
    “Yes, you could use SQL Server, but if you haven’t got six weeks to read the manual and learn how to use it, you could use our solution instead and be up and running in half an hour.”
    There will be markets for different solutions also. Just because a feature exists doesn’t mean that it is the only way to do something.
    “Yes, you could use feature XYZ of SQL server, but our software is faster, more configurable and can easily be customized.”
    Focusing, for a minute, on what would happen if Microsoft did eliminate the entire ecosystem. This would only serve to highlight the other ecosystems available. Similar to SQL Server is MySQL. Isn’t it growing in popularity faster than SQL Server? Isn’t one of the reasons for it’s popularity the ease of use? (Yes I admit that cost is probably a bigger attraction.)
    In a similar way, consider Internet Explorer. It was an ecosystem and it was very hard to integrate with it. It was massively popular but not particularly good. Then FireFox came along. Users saw the advantages of an alternative and went wild for it. Microsoft had to respond by playing catch up and is also encouraging and supporting those developing add-ons and other software to work within their ecosystem.
    I’d be worried, about Microsoft dominance, if I made a product that only worked with SQL Server and intended to never do anything else. But, then I wouldn’t be confident about a long term business plan anyway. With the pace of change in the industry, there must be flexibility and a distribution of eggs within baskets.

  3. Veep / Matt:
    In the past, Microsoft have done a great job of commoditizing expensive software that everybody needs (graphics, business intelligence and so on). They’ve also done well in adding cheap things that everybody needs into the box (spell checking, mail merger, intellisense and so on). Of course, this is Microsoft’s prerogative and good for the end consumer. What I’m seeing now is a change both in attitude and magnitude. Microsoft now seem to be saying they want to do *everything*, and they’re ignoring the long term costs of their actions.
    Of course, Microsoft cannot do everything all at one time. But why would third parties want to fill those niches temporarily when they know that Microsoft will just shut them down? This problem has already existed, but I’m definitely detecting a change in pace.
    I believe that Microsoft will push third parties into other ecosystems (Google / facebook / MySQL / firefox / wherever). In the long run, they’ll lose out.

  4. Veep says:

    If you’re right about the change in scope of ambition, then I agree: they’ll fail.