The Wings of Microsoft: Clipped or Pinned?

Hi,

I read this article recently, and was impressed with the insight.  I'd
thought I'd pass it on.  I admit that I had some problems getting the
electronic version from MC, so if there are any errors, I apologize.
(After all, that's why we use PCs for e-mail.  You can always blame the
folks at Eudora or Microsoft [an AS/400 customer - never forget]).  Lee
Kroon, the editor,  asked that I preface the article with the following
paragraph:

The following article by Thomas M. Stockwell originally appeared in the 
January 1998 issue of AS/400 Technology SHOWCASE magazine, a publication of 
Midrange Computing.

The Wings of Microsoft: Clipped or Pinned?

It's happening! Finally, the U.S. government has charged Microsoft with 
unfair business practices and is seeking to penalize the Redmond, 
Washington company a million dollars a day until it stops. Regardless of 
your personal opinion regarding the quality of Microsoft's products, the 
inventiveness of its software engineers, the genius of Bill Gates, or the 
worthiness of the entire Microsoft organization, it's becoming clear that 
Microsoft has taken sleazy advantage of its prominence in the PC operating 
system marketplace. It has used its clout to stifle outside creativity, 
dampen competition, bully OEM vendors, and treat its captive customers like 
sheep slated for slaughter. At the heart of the Justice Department's suit 
are two important legal questions. First, can Microsoft force companies to 
purchase a product (Internet Explorer 4.0), regardless of the desires of 
the customers? Second, can Microsoft prevent companies from complaining   
about these practices to the government through its licensing agreements? 
Microsoft, for its part, claims that it's just enhancing its operating 
system environment and protecting company secrets. The Justice Department 
says Explorer 4.0 is a de facto violation of a previous consent decree and 
that the Microsoft licensing agreements are designed to thwart any effort 
the government makes to regulate the industry. For those of us who use the 
Microsoft Windows platforms in our businesses (and that's nearly everybody) 
these questions represent more than a legal battle; they strike at the 
heart of IT strategies, visions, hopes, and dreams.

Separating Good Software from Bad Business Practices

The industry has spoken: Microsoft makes good software. We use it daily to 
help our organizations become more productive, to open new markets, to 
empower our users, and to make good business decisions. Most of us spend 
the majority of our time working inside one or more Microsoft software 
products. It might be the Windows operating system, an Excel spreadsheet, 
or a network powered by NT. Even if our organization's main computer is an 
AS/400, we're still aware that Microsoft is mapping our road ahead because 
it dominates the computer software industry.
For most of us in IT management, this dominance has created an interesting 
question: Has our company really standardized on individual Microsoft 
products, or has it merely standardized on Microsoft itself? If we look 
across the organization onto each desktop and into each network server, the 
question takes on a more sinister dimension. What would happen if Microsoft 
actually lost the Justice Department's lawsuit? What if Microsoft were to 
undergo a meltdown of the type that was inflicted upon AT&T 15 years ago? 
After that lawsuit, organizations found themselves in turmoil because AT&T 
was forced to reconfigure, disconnect, and re-establish the hardware and 
software of every telephone communications network in the nation. Could 
such a reconfiguration of our computing networks and our desktops be 
dictated by a similar government intrusion? What would happen to our 
information systems if the U.S. government severely clipped Microsoft's 
wings?

It Could Never Happen! Or Could It?

It could never happen, you say. The government could never effectively stop 
Microsoft. The user community would be up in arms, laws would be passed 
exempting the software giant, and pressure would be exerted from the 
highest echelons. Perhaps, but it's worthwhile to remember that our 
companies don't legally own the software that runs on our PC networks; we 
merely license it from the Microsoft Corporation. This places our 
organizations at the center of a slippery debate about undue influence. Is 
Microsoft unduly influencing our business decisions? If so, the Justice 
Department's anti-trust suit has a strong precedent. Some students of 
history remember it clearly. The memory of the 1956 United States vs. IBM 
lawsuit is looming larger and larger these days.
In the early 1950s, the Justice Department's Anti-trust Division took IBM 
to court for unfair market practices in its punch card tabulating machine 
business. The lawsuit alleged that IBM had achieved its dominant market 
position by excluding potential competition. The complaint exposed a 
strategy by which IBM was achieving its market share by acquiring patents 
and inventions made by others, by acquiring potential competitors, and by 
running service bureaus to prevent customers from seeking products from 
competitors. There are some striking parallels today as Microsoft continues 
to acquire other software companies and ramps up its strategies with the 
Internet Explorer and the MSN Internet Service.
IBM's past business practices have other similarities to Microsoft's 
current way of doing things. At the time of the lawsuit, IBM would not 
actually sell its equipment to customers, who were bound legally by a lease 
contract, similar to a licensing agreement. According to that agreement, 
IBM could actively prevent its customers from altering or customizing its 
machinery. If a customer attempted to add new features through OEM 
accessories IBM could confiscate the equipment and claim that its product 
and property had been corrupted. The customer was further locked into Big 
Blue's strategy because IBM controlled the used equipment market, 
preventing the resale and reuse of older, obsolete models. It even 
prevented spare parts from being sold to upgrade or repair older machines 
and kept close inventory control over the actual circuit logic and 
materials used to run the machines. IBM claimed that it needed to control 
these elements of its architecture in order to assure compatibility and to 
deliver the services that its customers demanded.
This is very similar to Microsoft's claim that it needs to maintain control 
over its own operating system environment, allowing it to vouchsafe how 
other software works within its operating system. It is doing this, 
Microsoft claims, because it knows what its customers really need.
At the time of the United States lawsuit against IBM, most customers were 
convinced that the manufacturer's wings could never be clipped. No one was 
complaining that IBM made bad equipment, and most customers accepted IBM's 
lease agreements as the price of doing business. Corporations were not 
concerned that their computing platform didn't actually belong to them. 
After all, they were buying from the best corporation in the business and 
IBM's solutions worked. So what was the problem? Issues of compatibility 
were nonexistent because computing standards were firmly dictated by IBM 
itself. But most importantly, that's the way CEOs liked it: Decisions were 
easier, costs were controlled, and the future was clearly defined. The road 
ahead was paved and painted with big billboards that all read IBM. 
Consequently, there was consensus among the technical and business gurus of 
that time: The Justice Department's actions were unwarranted, misguided, 
and abusive. But in truth, business had not really standardized on IBM 
products at all, but on IBM itself. Business was happy with this lack of 
choice because it was a comfortable and comforting fact of life.

The Case for Undue Business Influence

What finally made the government's case compelling was that IBM's market 
share had grown to 95 percent. According to the complaint, IBM was so 
preeminent that it was actually defining and controlling the environment of 
its own marketplace. In other words, it was not responding to demand, but 
manipulating the market to its own advantage, telling customers what they 
needed and forcing them to comply. This was not only a violation of a 
public trust, but a danger to the nation because business and industry had 
grown dependent upon the infant technology called computing. The government 
could not stand by idly and watch this danger grow.
This case was actively litigated for four years before IBM finally agreed, 
in 1956, to its famous consent decree. In that decree, IBM consented to a 
series of remedies that opened the market to OEM vendors and ended an era 
of discrimination against users of competitive equipment. This in turn led 
ultimately to the rise of competitive platforms, diversity in computing, 
and finally to the PC revolution of the last 15 years. This consent decree 
actually survived for 40 years until last summer when the U.S. government 
finally vacated its complaint. That's right! Bill Gates has lived his 
entire life under the IBM consent agreement, while for the last 40 years 
IBM has been, in essence, under house arrest.

Old Signs Along the Road Ahead

Today, those of us who remember the IBM case sometimes look around and try 
to imagine where the road IBM was charting would have led us. It was not 
the world we see today, but it does have some striking similarities. It too 
was a world populated by massive computing architectures, centralized and 
controlled by a single corporate entity. It too was a client/server style 
of environment in which all things were defined by the needs of IBM's own 
central computing requirements, fed to its own internally defined systems 
structures, orchestrated to meet its own corporate marketing strategies, 
and designed to hit our organizations with progressively higher dues as it 
rolled in the newer models of machines, year after year.
Just a few years ago, this image of corporate excess was still sending 
shivers down the backs of most PC enthusiasts. Open systems and choice 
were the battle cries of every IT professional in the industry, including 
Bill Gates. But today, what IBM failed to achieve with its discredited 
business strategy for hardware sales, Microsoft is now embracing with its 
Internet strategy for Windows Internet Explorer 4.0 and Windows 98.
This leads us to the real meaning of the suit of the U.S. Justice 
Department against Microsoft. This is not a suit of David vs. Goliath, but 
of Good Products vs. Bad Business Practices: good products in the form of 
the software that Microsoft delivers, bad business practices in the guise 
of corporation-based standardization and mandatory embedded products. And 
it's not just Microsoft's fault, but our own meaningless addiction and 
dependency upon Microsoft as the single vendor with a vision of our IT 
future. There are countless other vendors offering new opportunities for 
automation and innovation; companies such as IBM, Lotus, Netscape, and even 
Apple. Unless we in IT wake up to the reality of our standards-based 
addiction to Microsoft, we will be headed for a terrible post-Microsoft 
hangover. And unless Microsoft stops abusing our gullibility with illegal 
anti-trust marketing strategies, it will probably lose the lawsuit and be 
severely restricted in the future.
That's what happened to AT&T and IBM, too. I, for one, hope this does not 
happen to Microsoft. Nevertheless, it's clear to me with every mandatory 
software product embedded in each upgrade and software patches that further 
tie my company into a closed proprietary environment that Microsoft is 
definitely becoming a rogue player in a community of heterogeneous 
operating systems. It's clear that Microsoft is not out to push the 
envelope of productivity, but only to push its own operating system 
hegemony.
I hope the company wakes up and changes its ways. It would be sad to lose 
the brilliance of its talents. However, unless Microsoft changes its 
marketing manners, it may discover its wings are not only clipped by the 
Justice Department, but pinned by consent decrees that could last for 
generations. It has happened before in our industry and I fear it's about 
to happen again.

Thomas M. Stockwell is a senior technical editor for Midrange Computing and 
the editor of the Client Access/400 Expert newsletter. Send Tom email at 
stockwell@ midrangecomputing.com.




Al Barsa, Jr.
Barsa Consulting, LLC
400 > 390

Phone:  914-251-9400
Fax:    914-251-9406


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