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July 8, 1998 Event
Microsoftian Dialectics Hardly anyone noticed in 1976 when twenty year-old Bill Gates registered the "Microsoft" trademark with the Office of the Secretary of the State of New Mexico to "identify computer programs for use in automatic data processing systems; pre-programming processing systems; and data processing services including computer programming services." Who would have known that this vaguely worded mission statement would result in the creation of today's software behemoth. With a market value far in excess of its racing sales numbers, Microsoft has built the world's foremost technology powerhouse. But not everyone is happy. Microsoft's competitors insist that the "evil empire" does not compete fairly. They argue that Microsoft's control of the PC desktop, and its associative financial clout, enable Microsoft to ruthlessly eliminate its competitors and force-feed computing choices to consumers. But like it or not, Microsoft rules. For the last twenty years, Microsoft's power in the computer industry has grown inexorably and unchecked. Very few companies have competed directly against Microsoft and prevailed. Yet for the first time, the future is clearly uncertain. The federal government, and the attorney generals of twenty states, have accused Microsoft of illegally preserving and extending its monopoly in desktop operating systems. The world has tuned in to this ongoing struggle between America's government and arguably its most successful company. But the biggest antitrust case in a generation is about more than the fortunes of one company; the future of computing, and all the industries that depend on it, is riding on the outcome. Issues Is the DOJ justified in its lawsuit against Microsoft? The Browser: Can Microsoft integrate Internet software into its operating system?
How would a Microsoft breakup affect the US economy?
Does Microsoft succeed because of its technology or in spite of it?
Does Microsoft outsmart or outmuscle the competition?
Has the success of Microsoft been intentional or fortuitous?
What is Microsoft's greatest strength -- innovation or marketing?
The Desktop: Can PC makers decide which products to feature on their own machines?
The Future: Who will control the evolution of Windows - Microsoft or a federal judge?
Microsoft Accused: Play Nicely, or Not at All
Key Learnings
THE COMPANY
Microsoft applies unfair business tactics, strong-arms PC vendors, and steals rather than innovates. But like the Italians forgave Mussolini because he made the trains run on time, many forgive Microsoft's domination of the market because the company helps achieve the goal of a seamless computing environment that integrates the OS, Internet, applications, and hardware.
Microsoft's products are rarely the best ones, but they are always the most effectively marketed. Their method of innovation can be described by two words: 1) acquisition and 2) imitation. A famous VC proverb for startups is: If Microsoft has substantial influence in your space, you better focus on another arena if you want funding.
As the economy becomes more global and Asia begins to innovate in the software arena, Microsoft gives the U.S. a key competitive advantage by setting the technology standards that will govern the world.
OVERTHROWING THE EVIL EMPIRE
The biggest threat to Microsoft may be the Internet Generation. This group of 88 million Americans between the ages of 2 and 20 represents a class of users who demand and exercise greater choice. They will not tolerate inferior, unreliable products, even if they are the cheapest and most-convenient to use.
The portal companies may be best positioned to eat Microsoft's lunch. If enough people shift applications usage such as email, calendars, and multimedia to the Web, the operating system will become a great deal less important.
Microsoft has a huge advantage of being able to tweak the OS to optimize it for its products. It has also been accused of trying to disable competitor's software products, so that they cannot run efficiently on the Microsoft OS. Microsoft should publish the specs of the OS in the public domain in order to even the playing field for its competitors.
THE ANTI-TRUST TRIAL
Where interoperability is deemed important, there is an increasing tendency for monopolies to exist, particularly when computers need to communicate or files need to be exchanged.
You can't regulate applications for the OS when many new applications haven't even been invented. Even if it were possible to sit down and figure out what products Microsoft currently makes that are legitimate to include in an operating system, it would be impossible to do so for future applications and products that have not yet been conceived.
To preserve the U.S. economy, the DOJ should use this trial to annoy and slow-down Microsoft with drawn-out lawsuits and increased scrutiny while stopping short of any meaningful or far-reaching regulation. This course of action is known as the "Oh, Behave!" strategy.
QUOTE OF THE NIGHT
"Drawing lines in the sand about software is arbitrary." -- J. Neil Weintraut