Microsoft Breakup: Fixing a Problem That No Longer Exists

 

By Steve Fox
Editor in Chief, CNET.com
(5/4/00)

I am not a lawyer, never been sued, don’t even watch The Practice. I freely admit that I’m not qualified to speak to the fine legal points surrounding the hopelessly tedious Microsoft antitrust case being presided over by U.S. District Judge Thomas Penfield Jackson. I’m not about to contest the legal validity of the judge’s "conclusions of law" either. He says that Microsoft did wrong, and I’ll buy it. Jackson’s a judge and presumably knows a legal conclusion when it bites him on the gavel.

But the remedy suggested by the Department of Justice and 17 states—breaking up Microsoft—is flawed for a simple reason that has nothing to do with the law: It fixes a problem that no longer exists.

Back when the battle of the two Washingtons (state versus DC) began, Microsoft didn’t play fair. The company routinely bullied competitors and developers alike to advance their Windows agenda. Because Microsoft owned the operating system everyone used, they were able to force near universal adoption of application software like MS Office (wiping out loads of competitors in the process). Later, sensing a massive opportunity, they integrated a free Web browser into Windows, hoping to force-feed their operating system to the burgeoning Internet audience.

And to a great extent, Microsoft succeeded in their monopolistic scheme. Windows is omnipresent on the desktop, MS Office reigns supreme in the workaday world, and Microsoft’s Internet Explorer is the most commonly used tool for people accessing the Internet. But because of the company’s very dominance, coupled with the spectacular rise of the Internet, Windows is quickly becoming almost irrelevant as a development platform. Microsoft’s days of dominating the computer world, and every piece of software developed for it, are numbered. Future growth in the software industry will happen on the Internet, not where Windows holds sway on the desktop

Even if Microsoft were to be broken in two, what developer would bother creating a new word processor for Windows? Hundreds of companies, however, are frantically developing applications that run over, and are delivered by, the Web. So-called ASPs (application service providers--check), hosted applications, and Web-based services—software you can use to automate your business’s sales force, book a last-minute flight to Vegas, or balance your books—is the new paradigm. In many ways, the sudden emergence of these applications and services mirrors the spectacular bubbling up of software we saw in the early to mid-Nineties, when developers not named Microsoft were cranking out a host of innovative new applications.

Today, though, the platform of choice has shifted from the desktop to the Web.. And in this new territory of Web-based applications, Microsoft has little traction; neither Windows nor Internet Explorer provide them with extra leverage. The company competes like everyone else, and not always that effectively.

Now, this by no means spells the end of the line for Microsoft. They’re awesome in development tools, have a thriving OS and applications business on the desktop (which certainly isn’t going away), and have great opportunities elsewhere, from set-top boxes to online content. And though Windows NT/2000 is in for a fight with Linux on the server side, given Microsoft’s infamous smarts and tenacity, they’ll probably continue to do pretty well.

Or even better than pretty well, especially if the government forces them to split up. Great size can be a detriment, particularly when the rules change. And it becomes increasingly difficult to win against small, hungry, nimble competitors when you’re the proverbial 900-pound [check] gorilla. For one thing, the bigger the organism, the slower it is to change or evolve. Take Redmond’s posture toward another promising new platform: the handheld (and, increasingly wireless) PC. Microsoft has insisted on pushing Windows CE, now renamed the Pocket PC operating system, as the operating system of choice, even as its competitor’s Palm OS keeps expanding market share. A split Microsoft, not constitutionally bound to Windows, might develop software for the Palm and potentially make a big bundle of money; a unified Microsoft just digs in its heels and throws its weight behind Windows. Will Microsoft’s unwillingness to develop for its competitor kill the Palm? Not a chance. Palm will continue to thrive, even as Microsoft leaves money on the table.

So the breakup of Microsoft might not be so bad for the company itself, its customers, or even its stockholders. But let’s be honest. Breaking up Microsoft, if it happens (and I’m guessing it won’t, thanks to appeals and other legal shenanigans) is not meant to remedy a situation. It’s meant as punishment.

Bad, bad Microsoft! Bad Bill! Bad Steve!

As long as we recognize that the Justice Department wants to administer a public spanking as retribution for activities long past, great. Just don’t say we’re taking these steps to curb Microsoft’s predatory behavior: Ever-advancing technology and rapidly changing market conditions have already taken care of that.

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