Microsoft and the Status Quo

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U.S. District Court Judge Colleen Kollar-Kotelly's decision on November 1, 2002, in favor of the settlement between Microsoft and the U.S. Department of Justice has begun to clear the air after four long years of litigation. However, though the future of the Windows operating system seems secure for the moment, it is still not clear how the company's longer-term strategies will fare in a world that has radically changed since the lawsuit commenced.

Three significant events within the IT industry have changed the playing field since Microsoft was dragged into court: The dot-com bubble has burst, an open Linux operating system has achieved acceptance as a viable alternative, and the events of 9/11 have focused IT organizations upon the requirements of security. Each of these events has implications to Microsoft's strategy, and each exposes the organization's hegemony to criticism and potential threats from its competitors.

Low-Cost Development and the Dot-Coms

Remember when Windows seemed like an inexpensive alternative to the solutions offered by IBM and others? Microsoft's easy-to-implement operating system was the perfect framework for less-expensive business productivity application software. Similarly, an application developer could obtain an inexpensive suite of programming tools and rapidly create a solution that had tremendous reach in an industry that was hungry for new software. For instance, the Borland Corporation's fully featured Turbo Pascal compiler sold for less than $80 and put Microsoft's own compiler offerings to shame. Suddenly, software entrepreneurs had a platform that rocked!

Cheap programming tools allowed an underground of hobbyist and professional programmers to rapidly develop new packaged applications for a pittance of what Microsoft, IBM, and others charged. These highly functional packages were so numerous and affordable that a new marketing model evolved, called "shareware." Shareware allowed users to try a program for a period of time, and then--if it was useful--to register and license it for a moderate fee.

Perhaps the most potent example of a successful shareware product was an inexpensive little program that permitted document sharing over TCP/IP. Of course, that program was called the Netscape browser, the killer application that fueled the Internet explosion, created the need for Web servers, and culminated in the IT investment bubble we now call the dot-com revolution.

The point is that almost every technical IT advancement made during that time was based upon a simple formula: inexpensive operating system platform plus cheap, high-function applications equals innovation and rapid deployment.

By comparison, today the cost of application software written for Windows has risen substantially while developer tools to create them have skyrocketed. For instance, though the cost of an individual compiler may still hover around $100, the Microsoft .Net environment to which those tools are linked is more than 10 times that cost. Add those expenses to the licensing costs of a development server running the latest versions of the Windows server platform--plus the added complexity of the current programming technology--and it becomes clear that the impetus for developing inexpensive innovative applications has collapsed. Simply put, the cost of creating innovation on the Windows platform has seriously raised the threshold for new developers.

Linux--The New "Other" Development Platform

It's not surprising then that Linux--created in the spirit of the shareware marketing model through the GNU license--has captured the attention of so many. The platform is inexpensive, stable, and nonproprietary. In addition, IBM's promotion of Linux on its server platforms is starting to win converts within the business community, making it a true cross-platform operating system. This is competition that Microsoft must aggressively address in this post-DOJ-settlement era in order to ensure that the Windows environment will remain relevant.

Consider also that the DOJ settlement has required Microsoft to disclose 289 APIs--APIs that were formerly proprietary to its Internet Explorer, Media Player, Outlook Express, Microsoft Messenger, and Microsoft Java Virtual Machine. Clearly, Microsoft will no longer have the free reign it once enjoyed to control the development environment.

How Microsoft will rally support back to a Windows-based development strategy over the next two years will be crucial to its success. To date, the .Net offering, while providing the potential power to build successful e-business systems, has yet to demonstrate the flexibility in pricing or the scalability that's needed to compete against less-expensive, nonproprietary, Linux-based solutions. And though .Net is winning business converts against IBM's WebSphere offerings, there are now legions of Internet developers working in Linux on multiple non-IBM hardware platforms that are offering less-expensive, alternative e-business apps. Ultimately, it will be the value and the cost of the package applications themselves that will determine the operating system platforms that will be implemented.

And then there is the issue of security.

Delivering Secure Applications: Microsoft's Last Chance

If Microsoft believed that the DOJ settlement would return it to the days of the status quo, the events of 9/11 should have awakened it from its reverie. The greatest single threat to the long-term viability of Windows proprietary environment is its continuing problems with security. The terrorist attacks of 9/11--combined with repeated virus attacks targeted against servers running the Windows operating system--have driven Microsoft to publicly address the issue through a campaign to re-examine its entire software offerings for security risks. Yet, since that campaign began, numerous security holes have continued to surface. And, ironically, Microsoft believes that the DOJ settlement may actually increase its vulnerability to hackers as the APIs for its Internet products are made publicly available to be scrutinized.

In the past, businesses were perhaps less sensitized to the requirements of a secure information infrastructure, but today this issue is gaining currency, and the first competitor that can quantitatively prove its superiority in security over Microsoft--while still showing compatibility with Microsoft's Office productivity suites--will gain a receptive and eager audience.

Getting Back to Innovation

Each of these trends--the collapse of the dot-com momentum, the rise of Linux, and the continued conundrum of security--would be significant enough to require any vendor to adjust its market strategy. But the point is that Microsoft's strategies have--of late--been designed to maintain the status quo while its antitrust case was being considered by Judge Colleen Kollar-Kotelly. In the meantime, the world has been changing, the stakes have been raised, and the patience of its customers has been tried. Getting Microsoft back on the road to innovation amid all these unfinished battles will require more than a single ruling by a U.S. District Judge on a case that is now four years older. And the real question on everybody's mind is, who can wait?

Thomas M. Stockwell is the Editor in Chief of MC Press, LLC. He has written extensively about program development, project management, IT management, and IT consulting and has been a frequent contributor to many midrange periodicals. He has authored numerous white papers for iSeries solutions providers. His most recent consulting assignments have been as a Senior Industry Analyst working with IBM on the iSeries, on the mid-market, and specifically on WebSphere brand positioning. He welcomes your comments about this or other articles and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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