Microsoft: Pity the Big, Bad Wolf

I have a theory about the regulation of companies that get too big and too powerful: by the time government notices they really are so powerful, they are usually already in decline, having grown too big.

The EU on Wednesday levied a record €899m (£680m) fine - adding up to a total of €1.7bn in the past four years - against Microsoft for charging "unreasonable" prices for access to its code.

The EU competition commissioner, Neelie Kroes, wanted to pile on even more: another €600m for good measure. Take that, big, bad Microsoft!

Except, in my mind, Microsoft is turning into a bit of a laughing stock these days for trying to buy Yahoo, which itself is a company in rapid decline.

The reason Microsoft is desperate to do this is that, even after all these years, it still does not have a successful internet strategy. So it is trying to buy one.

But I say it is buying the wrong one, a strategy based on an old-media worldview in which we are all masses that can be bought and sold. Microsoft - like too many advertisers and media companies - thinks we think of the internet as just another TV. It believes it can own content and technology when, in truth, we own it now.

Microsoft just yesterday released some of its code under a new "open source interoperability initiative" that offers open interfaces, support for standards, data portability and cooperation with third parties.

Of course, a cynic might say that doing this only a day before its record fine was Microsoft's way to suck up to the teacher and avoid punishment; the cynic would have a fair point.

But it's also true that Microsoft needs to open up to play in the internet or it will continue to be left behind by the open and free movements that are taking over operating systems, browsers and - with Google's goosing - office software.

One could also see the move as a mark of desperation. Poor Microsoft.

In the US, regulators and activists continue to rail at media companies that they say have grown too big. But these media conglomerates, too, are pathetic shells of their former powerful selves, shrinking in audience and advertising at ever faster rates. The internet is killing their mass models, and they don't know what to do about it.

Their response, like Microsoft's, has been to buy up competitors, to grow bigger. But that strategy is not working: witness the collapse of the radio giant Clear Channel into a private company and the tragic gobbling up of the newspaper chain Knight Ridder and the cross-media synergy giant Tribune Company.

It might make more sense for the conglomerates to invest, like Microsoft, in new companies, or even in their own innovation. But they have lost the touch. Poor conglomerates.

Looking back, I could even argue that the breaking up of telecoms companies that grew too big only presaged the inevitable opening up of communications that led to the decline of the split-up telcos and their desire now to reconsolidate.

This should be a children's story, in which, at the end, we discover that the big, bad, scary monster is actually a pussycat inside, and a sad and lonely one at that. Paint these giants as dinosaurs with tears in their eyes.

And their regulatory conquerors? Are they knights in shining armour or are they the real bullies?

Either way, I'm not scared of Microsoft any more.

Comments

[Tom B]

I want to agree with you, but it will take a while before we live in a post-MSFT world. As long as people are still buying their only two profitable franchises-- Windows and Office-- they'll be "printing money".

It's pretty pathetic, really. 5 years to add "eye-candy" to XP and call it "Vista" and the dog still has the same performance, stability, and security issues. It isn't UNIX based, like ALL of MSFT's competitors are. I wonder how long it will be before the Luddites in Enterprise finally admit the Emporer has no clothes.

[commandersprocket]

Vista is an important release. It's MSFT first usable 64 bit operating system XP 64 was unusable. In the next year or two, I think we'll see one of the alternate RAM types (NRAM,MRAM, etc) take off and we'll see laptops and desktops with 16 or 32 GB or RAM (by 2010), Vista will be MSFT OS still, and everyone will be using the 64 bit version. MSFT has more than their OS business, their XBOX franchise hasn't won this round of consoles, but their next try is their third (at MS, third times the charm). Their silverlight software is interesting but it'll take another 2 years and 2 versions to take off. Bill stepping out of the spotlight is dangerous for them. If you look at tech jobs (to see where the market is heading) most of the jobs seem to be web jobs (the desktop is dead). MSFT has a working media OS with Vista, they're doing semi-innovative work with surface (surface could easily drive silverlight/expression and the desktop/rich client interface).
Mr. Barta, the ludites are still running windows applications and need a MS OS, they still default to word and excel, and they don't want to learn to use a command prompt. The emperor may not be wearing clothes, the problems you allude to are real, but for the end user switching is like changing from a car with a steering wheel to one steered with joysticks, and people just don't like things they perceive to be weird.

[Tom B]

"they still default to word and excel, and they don't want to learn to use a command prompt"

One assumes you haven't used UNIX-based OS's (such as Mac OS X) recently? Command line is pretty "1980's".

"Vista is an important release. It's MSFT first usable 64 bit operating system XP 64 was unusable."

I think not all versions of Vista are 64 bit-- correct me if I'm wrong.

[commandersprocket]

Mr. Barta, FYI I'm not a MSFT supporter, I have a clear view of the history of the company, their early anti-competitive practices against IBM's OS2 and DRDOS (each of which were better OS's IMHO). Their success has had more to do with shrewed business dealings than technical excellence (much of which was Bill Gates dealings, he may not be the technical genius many believe, but he has absolutely been enormously shrewd businessman).

You are absolutely correct Mr. Barta, not all versions of Vista are 64 bit. But hardware isn't quite ready for the changeover (there are currently no 8GB + laptops, and only a few motherboard chipsets that support 8 or 16GB on desktop machines). Vista is a fraction of what it should have been, most of it appears to be copied from OS X, but I still think it positions MSFT very well for the next couple years (I think their next OS will be late, a copy of a bunch of OS X ideas, and lacking the features they're currently planning on, and still will "win" the OS wars). Still MSFT has realized much better text to speech and voice recognition in Vista than just about anyone else (that, reasonably good 508 compliance, combined with the availability of their OS and software in every language under the sun, will continue to propel them forward as the standard).

I do have Mac running OS X, it totally rocks (imagine... a company where management actually cares about usability), but there is a PERCEIVED costliness (and certainly limited options) to the mac hardware that many users aren't able or willing to get over. (OS X also supports 64 bit, and emulators and VM's for Windows exist, but few users in the general computer using public have a good understanding of this).

I have found times when command line on other (not OS X) desktop *nix's (BSD, Solaris, and Linuxes) unavoidable and absolutely necessary. If Apple were to license their OS to Dell/HP/Gateway etc. I thing that things could become very ugly for Microsoft very fast, but as long as Apple views itself primarily as a hardware company I don't think that's going to happen. So, until we have a cloud OS with windows emulation (which I'm sure there are plenty of smart people working on now) I don't think there is any credible threats to MSFTs "mothership"... And I think they are in a position to purchase most credible competitors (or hire away their best engineers, like they did with Anders Hejlsberg from Borland).

MSFT biggest danger comes from their management team, they appear to stifle innovation, MSFT research come up with great ideas seemingly every day, but the lab innovations don't seem to make it into products very often.

MSFT can do things less well than their "competition"... because they have the inertia of standardization behind them. While they continue to fail on realizing the efforts of their talented engineering staff, they also overwhelm all their competition with their massive marketing spending (open any computing magazine and you're likely to find many full page MSFT ads).

Smarts don't drive the (corporate) IT industry, standards do. MSFT has become the de facto standard and they will remain so. If Ray Ozzie can get products and ideas from research to product they might even deserve to be the standard.

[Tom B]

"Still MSFT has realized much better text to speech and voice recognition in Vista than just about anyone else"

Text to speech has been widely available since at least the '90's and I don't see it as strategic. I know I don't use it often. Voice recognition is harder, but that' also been around.

"OS X also supports 64 bit," And that could drive Apple's presence from nearly zero in the server space to something more realistic. The thing that keeps Windows so prevalent in servers has NOTHING to do with performance or convenience or security; it' all about the running the godawful legacy Email platform, Exchange.

"MSFT can do things less well than their "competition"... because they have the inertia of standardization behind them."

MSFT also suffers because they can't QC the hardware; any idiot can make a white box PC, and many PC's from big name vendors, likewise, suck. Apple, thankfully, avoided this trap from day one.


"Smarts don't drive the (corporate) IT industry, standards do."

You don't mean "standards"; you mean "legacy" or "inertia". MSFT doesn't actually respect standards very well at all. Look at the inadequacy of the CSS rendering even in Internet Explorer 7. I think MSFT's big enemy is TIME. The quality gap between Windows and OS X, in my view gets wider with every release, and it looks like a chasm right now. What happens as more people of Ray Ozzie's generation leave IT as their jobs get outsourced to India? the loyalty to the Windows regime may begin to waver and it doesn't need to waver MUCH to mean HUGE profits for smaller companies, like Apple.

[blah-blah]

'it' all about the running the godawful legacy Email platform, Exchange.'

That product owns the Enterprise market and since you haven't used it, how can you make a judgement(Outlook does not count)?
I deal with it day in and out and I can tell you every version gets better and better.

'MSFT also suffers because they can't QC the hardware; any idiot can make a white box PC, and many PC's from big name vendors, likewise, suck.'

Very true but it's driven huge competetion and cheap prices of which the few that have a clue can benefit from. I don't want to pay $2000 for a performance games machine I can get for $800. I was heavily into computers with IBM 286s were $3000 because they owned the market and I don't want to go there again.

That said I don't see how any company including AAPL could support the amount of hardware variation available. It's a double edge sword.

'Vista will be MSFT OS still, and everyone will be using the 64 bit version'

That's true but 64bit is too far away. Developers are still using 16bit install routines. MSFT is paying for misjuding this one and AAPL will be/are taking advantage of this. The good side is that MSFT hates to lose especially in their home turf. They won't screw up Windows 7 and we'll all benefit from the first real competetion in years.

[Tom B]

"That product owns the Enterprise market and since you haven't used it"

I use it on the client side.

"Very true but it's driven huge competetion and cheap prices of which the few that have a clue can benefit from"

I'd argue that Moore's law has done more to lower computer prices than vendor competition.

Thanks for the comments.

[commandersprocket]

The biggest threat MSFT faces isn't Apple, Apple is and will remain a niche vendor. MSFT biggest threat is OSS. IBM knows this, that's why they spent half a billion plus on getting Eclipse up and running. But while open source has good programmers their usability/HCI and QA people are MIA. The big danger to MSFT is that a handfull of large companies recognize how much they spend to enhance MSFT and decide to invest the money to do the QA and usability