Better Business through Buying

The folks in Redmond have certainly been busy. Microsoft announced last week that it was creating online versions of Windows and Office, responding to Google and Sun’s OpenOffice with its own Web-based applications. It also bought a small file-sharing service and joined the Internet telephony party by buying a Swiss VOIP company. Now the software giant has reportedly taken the lead among companies vying for a deal with AOL. This would bolster Microsoft’s lagging MSN business with AOL’s content and recognition.

These moves illustrate how Microsoft, for all its size and despite its enormous R&D budget, still relies on outside companies for innovation. For the software giant to preserve its lofty status, it needs to constantly innovate. It tried to shake things up with a recent restructuring of departments, but that didn’t seem to be enough. Which brings us to the latest series of acquisitions. Microsoft continues to look for deals, whether it’s with a small VOIP company or a big name like AOL, to spark innovation.

Why is Microsoft’s internal innovation so meager? Is it a natural consequence of the company’s age? Will restructuring and acquisitions be enough to compete with the likes of Google?