Microsoft…hanging by an email client?

Microsoft is, and has been for a decade, the owner of the world’s most valuable monopoly. They have a market cap of $375B, resulting from FY2007 revenues in excess of $51B (with approximately $15B of that coming from windows, and $16B of that from Office), all at a gross margin exceeding 80%. Given these tremendous resources, it is surprising, to say the least, that Microsoft’s software quality is bordering on intolerable. In my circle of high-tech friends and colleagues, there is general exasperation arising from the user experience of Microsoft’s latest software:

• Vista, while prettier than XP, is not any more usable or productive. Yet is a resource hog (some analysis shows that it only runs 1/3 as fast as XP), it still has bugs, and, annoyingly, it seems to be endlessly patching/upgrading itself.
  
• Office 2007, like Vista, seems to have no substantial improvements from Office 2003. (The Groove product is, I think, the sole exception – more on that in a future post). The most noticeable “improvement” to the new version, the so called Office “ribbon”, is not very popular, as many find it more difficult to use than its predecessor. Outlook too remains nearly unchanged from the 2003 version.
• Microsoft’s browser, Internet Explorer, is a dinosaur that constantly fails in its struggle to keep up to date. Every sophisticated user I know has abandoned Internet Explorer in favor of Firefox. Firefox is an arguably better user experience; it has an architecture allowing for the easier development of superior plug-ins, and accordingly has a larger library of superior plug-ins. Firefox is, amazingly, an open-source product. How can an open source solution outperform a product with massively greater resources behind it? How can Firefox be noticeably more stable than IE, when IE is developed in an environment with full access to proprietary information about the underlying operating system? Yet it’s so, and widely known to be so.
  

The upshot from the recent Microsoft user experience is that longtime Microsoft users are actively seeking ways to dump Microsoft because of the perception that there are other, better solutions to their software needs. In the decades-old Apple/Microsoft rivalry, it seems that, now, for the first time, even long-time Microsoft devotees are trying to find ways to defect.

Here’s the thing that’s even more amazing than Microsoft’s bumbling execution: perhaps the single biggest thing (beyond the many switching costs that do exist) that seems to be preventing abandonment of Microsoft in the business world is the functionality provided by the combination of Outlook and Microsoft Exchange. Exchange is the de facto collaboration platform in the business world. By market share, it has no close competition. And, there is no non-windows client that works as well with Exchange as Outlook. So, if you want Exchange – and every business does – then you want to run Outlook as well, and then you’re forced onto the Windows platform, which in turn means you’ll buy Office.

Think on it: $30B of annual revenue from Windows and Office software, at an 80% margin, is dependent on the fact that there is no good non-windows email client for Exchange.

Any guesses on how long this will last?

How badly must Apple want Microsoft to port an Outlook to their platform, and how badly does Microsoft want to delay this? Why doesn’t some enterprising entrepreneur develop an adequate email/Exchange client? Why doesn’t Apple develop their own email/Exchange client?

PS – Please help me make even more money off of Microsoft’s poor execution by driving up the price of long-term MSFT puts, which I’ve already bought.