The Earth Is Moving Under Microsoft

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The earth is moving under Microsoft

COMMENTARY: -- Microsoft has become a familiar fixture in the courtrooms of the world, but I believe that market conditions and real customers--not litigation--is what is forcing the tech giant to change its business practices.

Consider the past few years. The U.S. Department of Justice ruled against Microsoft for bundling its Internet Explorer browser into Windows and illegally cutting Netscape out of the market. By the time the courts ruled it was too late for Netscape, even though its browser had nearly 100 percent market share before Internet Explorer came onto the scene.

News reports say the European Union is set to rule that Microsoft illegally bundled its Media Player with Windows, cutting RealNetworks out of the market. RealNetworks is driving its own civil suit against Microsoft in California. A negative ruling for Microsoft in either of those cases may still be too late for RealNetworks, which has seen its marketshare plummet.

Now Microsoft has announced plans to add a special set of buttons to its browser that will direct users to its MSN search feature. Will Google and Microsoft also meet in court in the near future? Based on what I've been reading, I'm not sure it matters.

The changes I see in Microsoft are a result of shifting market dynamics that give customers buying power that they have not had in the past. Rivals long said that Microsoft limited access to its technology as a way to put competitors at a disadvantage and limit customers' choices. Now the company has changed the way it licenses intellectual property to other companies, making some Microsoft technology available to rival companies for the first time. Academics will have royalty-free use of much of its intellectual property.

Governments are pushing Microsoft to the edge. China, Hong Kong, Taiwan, Australia and Russia have signed agreements with Microsoft to investigate the Windows source code; the Indian government is in talks with Microsoft for a similar deal.

Microsoft must be feeling the pressure, because it slashed its prices in Thailand last year, despite a pledge to have consistent worldwide pricing. A Windows/Office package now goes for nearly $40 per user after the government there announced plans for promoting open source. In 2002, Microsoft cut the price of some of its software products by an estimated 26 percent after a six-month investigation by Taiwan's Fair Trade Commission. The commission investigated Microsoft's local business practices and questioned whether the company had abused its dominant position in the market to inflate the prices of its products.

Businesses may want to consider these caveats when dealing with Microsoft:

1. Investigate alternatives. Thousands of businesses and governments around the world are running so-called legacy systems or switching to the open source Linux operating system. This can save you thousands of dollars in licensing fees and gives you some protection from the security vulnerabilities associated with Windows.

2. When your business requirements require you to use Microsoft's Office productivity suite, demand that Microsoft allow you to buy only the software that you need. In a high-profile struggle last year, Microsoft offered to let the German city of Munich buy only Microsoft Word for some PCs, leaving off other applications in the Office suite.

3. Don't rely on conventional wisdom that Microsoft is the safe bet. Going forward, businesses will be at the mercy of a mandatory product upgrade path designed to support Microsoft's .NET vision. For example, companies using Exchange 5.5 and Windows NT are facing a forced upgrade because Microsoft is ending Windows NT support at the end of 2004. And the migration path off Microsoft sure isn't pretty. For example, moving to the future Kodiak messaging server will require deploying at least another Active Directory upgrade, another Office upgrade, the Yukon database, and new application development tools.

Customers are often required to buy multiple products just to get one to work. Consider Microsoft's CRM application. The disadvantage (or advantage, if you're Microsoft) is that users are required to use the entire Microsoft stack for Microsoft CRM to function.

In the final analysis, Microsoft talks a good game, but it's clear the company realizes the earth is shifting beneath its feet. Customers don't want to get locked into only one approach. They want the flexibility to use the hardware and software that best meets their business needs. Actions speak louder than words, and more companies and governments are voting with their wallets against the Microsoft monolith.

Bob Cancilla is managing director and founder of a 6500 member computer users group.