Microsoft: Whats the Big Deal?

The bundling controversy over Windows XP has been blown "way out of proportion" by a few prominent companies that don't like Microsoft adding to its operating system technologies that compete with their applications, the company says.

The bundling controversy over Windows XP has been blown "way out of proportion" by a few prominent companies that dont like Microsoft adding to its operating system technologies that compete with their applications, the company says.

It may seem like cold consolation to Microsoft competitors, but Greg Sullivan, lead product manager for Windows XP, said there are thousands of developers creating applications for the Windows operating system, and the number of technologies Microsoft chooses to add to its OS is quite small in comparison.

"If you look at the PC industry as a whole and the work that Microsoft puts into supporting third-party innovation and development on the Windows platform, the set of companies and individuals working on innovative tools for the platforms so vastly outweighs the opportunities that companies [lost] because things became part of the OS," Sullivan said in a recent interview about Microsofts OS strategy. "The debate is way out of proportion to the reality."

But more than just a few prominent companies are unhappy with Windows XP, which will be officially released Oct. 25. Now that a federal appeals court has upheld a ruling branding Microsoft an abusive monopoly, the attorneys general of 18 states are calling for an injunction to stop distribution of Windows XP until the government can determine whether Microsofts inclusion of heretofore stand-alone technologies — including its digital media player and instant messaging (IM) technology — is anticompetitive.

"You decide to put something in the OS when you want to bury it alive," said one computer industry insider who asked not to be named. "Once you start thinking of things as being part of the OS, you can keep the [Application Programming Interfaces] secret and only make them internal to the company. That keeps external programmers from taking advantage of those features and developing new applications."

Still, not everyone believes that distribution of Windows XP should be halted. Giga Information Group analyst Rob Enderle said many companies, including the major PC makers, are counting on the new OS to help boost fourth-quarter sales.

Dave Farber, a University of Pennsylvania computer scientist who testified as a witness for the government during Microsofts antitrust trial, said the government and courts shouldnt be involved in software design. "But I have no objection at all if the government says, Your license agreements are wrong and illegal, and we wont let you release your program with those licensing arrangements. "

As it has throughout its antitrust battles with the government, Microsoft maintains that it is simply fighting for its right to continue innovating in the development of new versions of the OS that has helped it become the worlds most successful software company. Still, it is showing some sensitivity. Last week it reached a settlement with Eastman Kodak over its allegations that the OS was designed to give unfair preference to Microsofts digital imaging software.

The Kodak dispute is just one example of the challenges Microsoft faces as a developer of both the market-leading OS platform and a provider of software applications and online services. "In the Windows group, were always in the interesting position of providing the platform and at the same time recognizing that we might be stepping on our competitors," Sullivan said.

There is no one litmus test driving the decision to bundle, or integrate, technologies into XP, such as applications like the Windows Messenger and Windows Media Player that Microsoft has offered as software add-ons to Windows and made available on other OS platforms, Sullivan said. Rather, the decision to bundle is part of the evolution of the product and "based on meeting and exceeding the expectations of our users."

"Microsoft has to provide value and get people into the stores. They discovered a while back that saying, It has less bugs, doesnt get people to buy the product," Gigas Enderle said.

But IM vendors and digital media providers worry that Microsofts bundling of technologies into the OS will — as was the case with the browser — harm the market for their applications.

Many ask why Microsoft bundles its own applications with its OS when other OS vendors license add-ons to their platforms from third parties. Apple Computer, for instance, relies on Microsofts Internet Explorer to help its Macintosh users traverse the Web. Although it made IE the default browser on Macs as part of a 1997 deal that saw Microsoft invest $150 million in the company, Apple said it also saw no need to reinvent the browser; it offered Netscape Communications Navigator as the default browser up until the switch.

Microsoft, however, says counting on third parties to provide that functionality is not acceptable.