On the contrary, there are very many profitable software companies of all sizes. Writing software is a huge market that has grown very quickly and still provides large profit margins to many companies.
You might make an argument that Microsoft’s real advantage is the customer lock-in they achieve through control of a huge installed base of software and files. Even there there are many software companies in the same position. It’s hard to reproduce the advantage of having a large share of a large market. But that doesn’t necessarily make it unprofitable to acquire even a small share of the market.
I think you misunderstand my point. Of course there are many profitable software companies (I work for one of them!), in the same way that there are also many banks, hedge funds, etc. But all of these have hard-to-reproduce advantages (“moats” in the lingo). The reason Microsoft (or any other software company) is able to buy developer time and sell software at a profit is because they have social and organisational capital, because they have synergy between that capital and their intellectual property rights, because they have customer relationships, etc etc. It is not an arbitrage and it’s not true that just anyone can do it. Microsoft themselves are in fact a fine example of this; throwing resources in the fight against Google has not proven successful.
On the contrary, there are very many profitable software companies of all sizes. Writing software is a huge market that has grown very quickly and still provides large profit margins to many companies.
You might make an argument that Microsoft’s real advantage is the customer lock-in they achieve through control of a huge installed base of software and files. Even there there are many software companies in the same position. It’s hard to reproduce the advantage of having a large share of a large market. But that doesn’t necessarily make it unprofitable to acquire even a small share of the market.
I think you misunderstand my point. Of course there are many profitable software companies (I work for one of them!), in the same way that there are also many banks, hedge funds, etc. But all of these have hard-to-reproduce advantages (“moats” in the lingo). The reason Microsoft (or any other software company) is able to buy developer time and sell software at a profit is because they have social and organisational capital, because they have synergy between that capital and their intellectual property rights, because they have customer relationships, etc etc. It is not an arbitrage and it’s not true that just anyone can do it. Microsoft themselves are in fact a fine example of this; throwing resources in the fight against Google has not proven successful.