One year after guilty verdict, industry ponders changes at Microsoft
For all of its size and influence, Microsoft Corp. has been built to react rapidly to changing competition, user demands, computing models and, yes, legal pressure.
At no time in its history has that ability to cope with change been tested as it has in the year since the government found the Redmond, Wash., company guilty of illegally wielding its monopoly power. The company has faced, and still faces, the possibility of a breakup; it has had to rebuild relationships with software and hardware partners; it has had to cope with the demand for Web-based services?and the competitors that run them?that has emerged; and legal pressures are still there despite the impending ruling from the U.S. Court of Appeals for the District of Columbia.
How has the company reacted to these tumultuous times? As always, there?s no consensus among its partners, customers and competitors about how much Microsoft has changed its ways. Its most vocal critics claim that the more things change, the more they stay the same. But most partners, customers and even competitors say Microsoft is bending? against its will, perhaps? but bending nonetheless.
After a year of doubt about a court-ordered breakup, there?s a new optimism surrounding the company since it fared well in the Court of Appeals in February. Coupled with plans for new operating systems and the slow but sure rollout of its .Net software-as-a-service strategy, one could say Microsoft is as powerful and confident as ever.
And therein lies the rub. Has Microsoft really changed or merely dodged a bullet and momentarily adjusted to accommodate conventional wisdom?
Its latest endeavors, .Net and HailStorm, have become lightning rods for measuring just how far Microsoft has come in terms of opening itself up to user needs and competitive interoperability. On these issues, friends and foes are sharply divided.
Ed Black, president of the Washington-based Computer & Communications Industry Association, whose members include Sun Microsystems Inc. and America Online Inc., said the HailStorm strategy is a blueprint for another antitrust case.
?They?re going to leverage this, and connect that and bundle things together. It?s pretty blatant on its face,? Black said. ?This behavior is an egregious continuation of Microsoft?s anticompetitive strategy.?
At the same time, loyal Microsoft IT shops said the company is changing for the better and giving them what they need. For a long time, Massimo Villinger, CTO (chief technology officer) at Lockheed Martin Information Systems in Orlando, Fla., pushed Microsoft to allow its software to interoperate with other platforms. But his pleas fell largely on deaf ears.
Lockheed Martin, which runs Windows on more than 100,000 desktops and across all its servers, is one of Microsoft?s most loyal and long-term corporate customers. It was one of the first companies to roll out Microsoft Exchange more than five years ago and was an early adopter of the Windows 2000 platform.
As such, Villinger had the ear of the decision makers in Redmond. They finally seem to be listening, and changes over the past year have been enthusiastically welcomed by Villinger and other customers.
?As a multiplatform organization, interoperability is critical for us, so it?s most gratifying to hear of Microsoft?s readiness to abide by industry standards, embrace XML [Extensible Markup Language], SOAP [Simple Object Access Protocol] and participate in the standards bodies,? Villinger said.
Too much to lose
Microsoft?s partners concede that customer demand and market factors are forcing Microsoft to work toward cross-platform interoperability and to embrace standards and access?rather than an altruistic desire to do so.
?Customers need, and are demanding, cross-platform interoperability, and Microsoft is looking to build some horizontal standards based on Web-based standards,? said Pat Gelsinger, vice president and CTO of Intel Corp.?s Architecture group, in Hillsboro, Ore. To the degree that Microsoft attempts to close those horizontal interfaces, it will lose its fundamental value proposition vs. competitors, Gelsinger said.
Microsoft is aware of just how much it stands to lose if it does not adapt. Villinger said he will be ?most disappointed? if Microsoft breaks its interoperability promises, as it did with Java. Lockheed would ?not tolerate? such behavior, as it would be ?very negative for us and the entire industry to have different versions of XML,? Villinger said.
But the CCIA?s Black is skeptical about the promises. ?What you have here are a lot of products and tools that are giving access to, and use of, the Web with a Microsoft-only flavor,? he said. ?Put these pieces together and throw in the new HailStorm stuff, and you have more Microsoft tools to force more people into a total homogeneous environment.?
Other skeptics agree. John Terris, a Microsoft developer and senior programmer with Kendall Placement Group Inc., in St. Louis, said he foresees a repeat of what happened with Java. ?They may release something for other platforms, but it won?t work the same,? Terris said. ?If you?re strictly a Microsoft shop, it?ll work great for you. But if you?re a non-Microsoft shop, it either won?t be as stable or as fast.?
Microsoft officials disagree. Brian Arbogast, vice president of Microsoft?s personal services division, said there can be no lock-in because HailStorm is based on open standards such as XML and SOAP. ?The way these services will get ubiquitous usage is through open protocols and open access,? Arbogast said. And Microsoft?s Brian Valentine, senior vice president of the Windows Division, also stressed that the company was committed to XML, SOAP and all the Internet protocols going forward.
On other fronts, observers said Microsoft has eased up on the restrictions it imposes on its OEM partners and accepted the inevitability of standards and interoperability. But, friend and foe alike said, this is not because it wants to but because it is being forced to by current market conditions.
Carl Ledbetter, CTO at Novell Inc., of Provo, Utah, whose One Net strategy is competing head-on with Microsoft?s .Net vision, agrees that Microsoft is being forced to change rather than doing so willingly.
?Its behavior has changed but only in a very small way. The fact of the matter is that we now have multiple operating systems, and any browser will get you to the Web. Microsoft has come to realize this and is adapting its strategy accordingly,? Ledbetter said.
Sam Patterson, CEO of software component supplier ComponentSource Inc., a Microsoft partner in Kennesaw, Ga., said the Redmond company is now far more open on the contract side than it has been in the past. ?We see them being a lot more flexible, and there?s a lot more room for negotiation in the contracts we work out with them now,? Patterson said.
Indeed, Gelsinger said Intel?s relations with Microsoft are more favorable and positive than at any time over the past decade, even though areas of friction remain. ?We support Linux, which is obviously a threat to Microsoft and a point of contention between our two companies,? he said.
However, Ken Wasch, president of the Software and Information Industry Association, a Washington trade group, contends Microsoft?s business practices have not changed at all. Its vehicle for exercising monopoly power remains its OEM partners, which are ?no more free today than they were three years ago,? Wasch said.
The SIIA, which has 1,200 members including AOL, Apple Computer Inc. and Novell, said that, from a contractual basis, Microsoft has not liberalized its business practices to permit competing technologies.
?From a technical basis, they also continue to aggressively pursue the tying of products to one another, creating the inescapable conclusion among end users that they ought to have Microsoft products from the back office to the browser because, if they don?t, this will cause a significant deterioration in performance,? Wasch said.
Despite some new feelings of openness, legal scrutiny appears set to continue, particularly since Sun and AOL have said they will step up their lobbying efforts with the Department of Justice and the attorneys general involved in the antitrust case currently under review by the Court of Appeals.
While legal experts do not expect Microsoft to be broken up, they said the appeals court may well reverse and remand on the issue of damages and remedy.
?The Court of Appeals could avoid some vexatious issues about market definitions and which facts to review by reversing and remanding the case to another District Court judge on remedy. Once there, a negotiated settlement is quite likely,? said Stuart Gerson, an antitrust expert and head of law firm Epstein Becker & Green P.C.?s national litigation practice in Washington.
The latest .Net and HailStorm allegations could well be presented to a new District Court judge as further evidence of the need for a strong remedy against Microsoft if the case is remanded, legal experts said.
Some corporate customers see echoes of its preantitrust behavior in Microsoft?s .Net and HailStorm initiatives. By embedding Passport authentication technology into its core products and services, then launching products such as HailStorm on top of it, Microsoft is repeating its competitive practices of the past, the CCIA?s Black said.
In addition, since the trial began, Microsoft?s monopoly has shown no sign of abating. Research shows that its monopolies in the operating system, Internet browser and office application markets have grown strongly.
?I don?t believe Microsoft has changed at all,? said Michael Sherwood, IT director for the city of Oceanside, Calif.
?They don?t open up their operating systems or other technologies enough, then they invite other companies to come over and develop products on top of Microsoft technologies. But those other companies are always at a disadvantage,? Sherwood said.
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.
He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.
He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.
He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.
He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.
He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.
His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.
For numerous examples of his writing you can search under his name at the eWEEK Website at www.eweek.com.