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Weekly Column

Risk Is for Losers: Google is taking no chances with Universal Search.

Status: [CLOSED] comments (33)
By Robert X. Cringely
bob@cringely.com

No president could spend money like Ronald Reagan could spend money. His greatest legacy, in fact, was spending so much on defense projects like his "Star Wars" anti-missile system that the USSR was torn apart economically by simply trying to compete, thus ending the Cold War.

Reagan could have worked at Google.

At this week's Searchology conference at its headquarters in Mountain View, California, Google announced its move to what the company calls "Universal Search" -- the integration of images, video, and other data types (who would ever have thought that "news" was a data type?) into what was formerly just the results page for Google text searches. With Universal Search, if you want to know about a particular movie there is a fair chance the top results may actually INCLUDE the movie, in its entirety.

Universal Search is Google's attempt to destroy its major competitors who, like Gorbachev in the waning years of the USSR, have to follow suit and start spending money they don't have if they want to even appear to still be in competition with Google. This means for these companies more software development, more sweeps of the web, as well as the greater likelihood that among their top results will be pages located at Google properties like YouTube.

It has to burn Yahoo, MSN and the others to now have to drive traffic to YouTube, but that's what will happen if these search competitors choose to continue to compete head-to-head, which they will.

There is literally no downside for Google in this strategy. Say it effectively dilutes the text search results. Well all that means to Google is that we searchers will more often have to jump to second and subsequent pages of search results with every one of those jumps generating more revenue for Google.

So the cost of even being in the search business is about to go up dramatically, which just might drive Yahoo into the arms of Microsoft after all.

Google would benefit from that, too.

There is nothing Google would like better than for Microsoft to buy Yahoo, simply because the assimilation of an acquisition that big would paralyze both companies for months as they struggled to get to know, then to get along with each other as Google surges forward.

Yet such a merger could still happen for even bigger reasons: 1) Terry Semel at Yahoo doesn't really understand how to run an Internet business, and; 2) Microsoft needs an identity change and corporate personality transplant in order to get its stock price up where it deserves to be based on company financials.

This latter part is quite interesting. While the Microsoft brand has great value most places, its value has been low on Wall Street for years, primarily because of the company's legal troubles and reputation as a bully. What better way to alter that perception than by changing the company name with a big acquisition -- a HUGE acquisition? Just changing to something like Microsoft-Yahoo would be enough, I suppose, though I prefer almost any other combo, especially my personal favorite "Microhoo."

A stock deal for Yahoo at almost any price would pay for itself overnight if it was accompanied by a name change or, better still, a change of heart. And who is going to object? Not Google.

Google can take these bold moves like Universal Search because it has the mojo. The company has the cash and the cast to pull this off. And it is confident that search users will follow. And if they don't? Then Google just switches back to the old text results.

There is no downside.

Nor is there a downside for Microsoft claiming this week that open source software companies are infringing 235 Microsoft patents. What are we going to do, stop using Windows? Hardly.

Patent attorneys I have talked to say Microsoft has little hope of scaring larger open source companies into cross-licensing deals with these legal threats. A couple companies might jump, and maybe that would be enough, especially if Redmond is about to negate any bad publicity through the aforementioned merger and name change scam.

But since Microsoft sees no downside from this behavior, why not give it a try? There's a sucker born every minute, you know.

And that brings us -- hopefully for the last time in a long time -- back to IBM, a company that taught Microsoft everything it knows about how to leverage a patent portfolio.

After my columns of the last two weeks IBM is very unhappy with me, though the horror stories I get daily from IBM employees tell me I am doing exactly the right thing.

Last week, for example, I published an internal e-mail message to IBM employees specifically reacting to my first column, calling me mistaken. The people who signed that message apparently aren't even among the people who do the actual work at Global Services, and they vaguely promised, well, nothing at all to IBM employees.

It's like having the Marine Commandant say that everything is going fine in the Air Force.

Last week IBM also posted more than 15,000 new positions on Yahoo HotJobs. If these jobs are real and IBM foresees stable employment numbers, won't 15,000 existing IBM employees have to leave?

IBM's problem is simple to describe but difficult to fix because changing a corporate culture is hard to do.

The bigger the company the harder it is to change. One problem is that the people who most embody the culture are the ones who get placed in high positions. When Lou Gerstner came to IBM the company was in trouble. In desperate times change is easier. But Lou didn't have a long-term plan for a new and improved IBM. His efforts were solely to solve the short-term problems. Sam Palmisano, being schooled in the "old IBM," was probably the worst kind of choice for the next leader because he brought with him all the cultural baggage of the old IBM.

Sam's gang has been consolidating power and building empires. They have built teams too big to be effectively managed. This is compounded by the fact IBM's internal business systems are really bad. They were conceived in the mainframe days and were not very good back then either. It is possible to manage big organizations, but you have to have good processes and good management systems. IBM has neither.

One of the ironies of IBM's systems is that when Lou took over there were over a dozen different accounting systems. It was very hard to get an overall look at the company financials. Lou forced everyone to use the same financial system. Today IBM uses fewer internal business tools, there is one travel system, etc. However most of the systems are mediocre at best. There is no grand vision to provide a new generation of great business tools. The result is that IBM's leadership is operating in the dark.

A few years ago IBM published some information on the cost of its internal email system. It was astonishingly high. We can go on all day giving examples of bad management at IBM. Their IT systems are equally bad and contribute to the overall problem. Firms with really bad IT systems are the ones who don't know how to run a business. That may be at the heart of the problem -- IBM is too big and its culture is too inbred. It has lost the ability to run its business well.

IBM instead cuts staff and cuts spending existing contracts -- the ones that are often too big to be very profitable. When spending is cut, customer satisfaction scores decline, too, setting new records for the number of accounts in "red" or "crisis" status.

At this point IBM customers will try to scale back or refuse to sign contracts for future business. With no pool of new customers, the company will decide to further milk the contracts they already had and turned to offshoring.

Maybe IBM management finally looked at the current contracts, their termination dates, signing and re-signing rates, and finally figured out there will be a big decline in business in the next few years.

So with or without LEAN, IBM is facing big layoffs. Maybe it will take something like LEAN to end up with a viable company in the end. Who knows?

As one IBM employee told me, "It is hard to say if it will be worse to be laid off or be stuck working your ass off in a demoralized, understaffed environment in which benefits, training, and pay are shrinking and NEVER increased. The real cuts need to occur at the management and executive levels, which are bloated with clueless business school types whose benefits, training, and pay are constantly increasing. This is really a class issue: the executive class constantly reaps benefits while the bottom feeders do all the work. The bottom line is that the people writing these memos are protected and don't care."

Mr. Palmisano, tear down this wall!

Comments from the Tribe

Status: [CLOSED] read all comments (33)

Great metaphor, but factually untrue. Reagan did not bring down the soviet union through massive defense spending. the soviet union brought down itself through decades of instutional neglect and bureaucratic paralysis. So maybe it is a cautionary tale for google after all

Andrew Jacob | May 25, 2007 | 1:11PM

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safasdgf | May 25, 2007 | 6:20PM

Ok, the forum finally works. This is better at least.

The only reason Soviet Union has failed is that oil prices went down and the government didn't have money to buy goods and stuff on the West. Everybody went hungry and then angry and then there was an attempt for revolution and that was it. America played zero role place in that crash. Don't tease yourself.

Second, Soviet Union had plenty of bombs -- enough to destroy US and the world several times all over. What was the reason to build more???

Third, Microsoft has more money and resources to compete with Google. And while Google is talking about universal search, Microsoft is doing it -- go to http://search.imagine-live.com/ and try it now.

And last, but not least -- Google still has no idea how to make money. They are just buying and copying others. And I clearly do not see why you people are so happy with them. They have no ideas to make money, no resources and no guts. And soon the brightest people will leave them just because FYIFV.

Pretty boring.

Andrew | May 25, 2007 | 6:30PM