I’m at a Citrix analyst event this week for the first time. For much of the last decade, I’ve been under the impression that Citrix was largely filling a need that should have been filled by Microsoft and that it only existed because Microsoft was more focused on competing with Apple and Google. But Microsoft has refocused on the cloud, and Citrix appears to be in the way. So why doesn’t Microsoft either buy Citrix or shut it down?
I think the answer is interesting and likely speaks to how you deal with a partner/competitor.
I was working with both firms at the time, and I covered the resulting litigation closely. In my opinion, Netscape pretty much threw down the gauntlet at Microsoft, and even though Microsoft attacked Netscape aggressively, nothing Microsoft did actually seemed to work. I believe the damage was done by Netscape to itself largely as a result of pivoting to attack Microsoft in its home turf. Marc’s perception is that Microsoft sucked the air out of their world, which is what killed Netscape.
Regardless, Netscape had a choice: they could ignore Microsoft, they could embrace Microsoft or they could attack Microsoft. They picked the latter, and it didn’t end well.
It should be a no-brainer that attacking when you are a vastly smaller company would end badly, even if the larger company didn’t execute well, simply because you’d be overmatched. Strangely, even Apple has done better when they ignored Microsoft and sometimes partnered with them then when they attacked. That’s the nature of wars: if you can at least avoid the conflict, your chance of survival is far better than if you attack.
Partnering closely can lead to acquisition. However, acquisitions consume massive resources, generally don’t work out well and can be hugely distracting to senior management. This means that the smart CEO, when given a choice, will generally choose a close partnership over an acquisition as long as the partnership is working. This arrangement provides much of the value with far less of the risk.
Granted, some folks tend to be control freaks and want to control everything they touch, so there is a risk to a close partnership with the wrong CEO. Fortunately for Citrix, Satya Nadella isn’t the wrong CEO.
Citrix’s new CEO Kirill Tatarinov immediately figured out that Citrix couldn’t fight Microsoft and that ignoring the company would be sub-optimal given the cross-dependencies between the firms. He executed a strategy where Citrix provided to Microsoft much of what they’d likely get in an acquisition in terms of benefit without the risks of an acquisition. That drops the interest in buying the company to non-critical and removes any interest in removing the firm because it is now more of an asset than a liability.
Citrix is now performing better financially. Its customer satisfaction appears to have dramatically improved, and its risk of becoming a memory seems far more remote. In addition, should they eventually be acquired, which remains unlikely, the close relationship with Microsoft should make that relatively painless for both the Citrix employees and Citrix customers.
Netscape effectively had the same choice Citrix did. Microsoft had no browser or Internet strategy when Netscape came on the scene. Netscape was approached to work with Microsoft and, rather than partnering or ignoring the firm, decided to go to war. It pivoted to enterprise software, a segment it didn’t understand, and crashed and burned as badly as I’ve ever seen.
I think Citrix is showcasing the path that Netscape should have taken. Its health and recent success is a showcase of how companies should behave more often. Wars may sometimes seem like the only choice, but that is seldom the case. In most cases going to war, in hindsight, is the least successful path for all parties. Remember, Microsoft was also badly hurt by Netscape’s avoidable decision.
Something to noodle on this week.
Photo courtesy of Shutterstock.