Microsoft/Yahoo Marriage Spawns Online App Offspring
Microsoft/Yahoo Marriage Spawns Online App Offspring
February 5, 2008: With a Microsoft acquisition of Yahoo on the cards monopolisation fears are running rife, but with the acceleration of online applications tipped to hit the big time, it may be the best chance for Microsoft to remain relevant next to the Google giant.
In what would be the second largest media merger in history, (still well short of the $106 billion AOL-Time Warner merger) Microsoft has made a $44.6 billion bid for Yahoo. Labelled by analysts as a ‘hostile’ move,’ the bid would put Microsoft in the running for a portion of the online applications and online advertising market Google currently dominates.
Microsoft, possible realising its PC based application business will require a spruce up before SaaS, hosted services and open source really takes off in the enterprise, is building up its defences to ensure its continued market position long after PC software is laid to rest.
According to Ross Dawson, head of the Future Exploration Network, consolidation at the top end of the market could be the icing on the cake of accelerating the enterprise shift to online applications. “Microsoft is doing this in response to Google, probably because of the rise in the online advertising market,” he says.
With online applications now coming into maturity, Dawson believes Microsoft is well aware that it’s dominance in the PC based applications market is one the edge of soon becoming irrelevant.
“The pace of uptake and the revenue that can be gained means we’re rapidly moving to have mature and solid applications,” he says. “People of course need to be familiar with the idea, and for many corporate executives they’ve now been hearing about it for a year or so and may be ready to launch into it.”
For Microsoft, the acquisition would see them also acquire Yahoo’s recent $350 million purchase of Zimbra, an open source alternative to Microsoft Exchange. It’s an opportunity, says Dawson, for Microsoft to shift its traditional revenue stream from PC software to media and online advertising and possible assist in the development of their Web based email accounts.
Analysts at Ovum also second the idea that Microsoft’s best defence against the progression of richer Google Applications is to accelerate its own online services.
“The online engineering capabilities that Yahoo has will undoubtedly offer Microsoft the potential to bring new services to market, which counter-mines against the undermining efforts Google is pushing forward,” says David Mitchell senior vice president for IT research at Ovum.
Still, as Ovum suggests, the deal is far from secured and as the negotiation occur by proxy in the press, the real work on progressing consolidation at the top-end of town will happen behind closed doors.