April 25, 2003

Is There a New Microsoft?

The Economist sounds extremely, extremely grouchy about the new, cooperative Microsoft--as if it has as much reality as the "New Nixon" had...

Economist: ...Remarks by Steve Ballmer, the company?s chief executive, speaking to the Wall Street Journal ahead of the April 24th launch of Windows Server 2003, suggest that Microsoft?s imperialistic instincts remain intact. Mr Ballmer declared that the new operating system would include many technologies in one bundle and links to other Microsoft products.

So, beyond the gesture of revealing more details of its coding, it doesn't seem as if Microsoft?s trusted strategy?enter a market, dominate and then exploit it?has changed that much. It is just that the market to be exploited is no longer that of desktops but of servers, those powerful network computers that are mostly used in corporate computing.

Moreover, although Microsoft said that it would loosen its licensing agreement to lower royalty payments and release information previously only available to those who had signed confidentiality agreements, none of the details of just how this would work are yet available, and rivals have learned to their cost that what Microsoft promises and what Microsoft delivers are not always the same. The concessions, remember, did not represent a spontaneous gesture of generosity, but came after months of negotiations with the justice department.

By allowing rivals details of how its operating system works with other companies? products, and vice versa, Microsoft can market its new server as offering some of the benefits of open software. But the firm?s old strategy of using dominance of one market to leverage into dominance of others is still there. Mr Ballmer said of Windows Server 2003: "The opportunity here isn?t just to get a higher percentage of servers to run with our server operating system. It?s also to sell more SQL [a database], more Exchange [an e-mail program], more management and more security." The database market is an area traditionally dominated by Oracle, whose founder, Larry Ellison, is an arch-rival of Bill Gates, who founded Microsoft with Mr Ballmer.

Posted by DeLong at April 25, 2003 02:51 PM | TrackBack


IIRC, Microsoft was caught violating anti-trust law, negotiated a 'we didn't do it, and promise not to do it again' agreement with the Justice Department, did it again, was found in court to have done it, and basically got away with it all over again.

Considering that, any expectation of improved behavior on Microsoft's part is unreasonable. When a corporation can get away with breaking the law, it shouldn't surprise anybody that they'll do it again, as needed.

Posted by: Barry on April 26, 2003 05:06 AM

There is, of course, no new Microsoft. For anybody else, this is both a blessing and a curse.

The curse part is obvious, so let's move on to the blessing. :-) The myth of Microsoft is that they will take over the world, and force us all to pay crushingly higher prices for the software we need to run civilization.

When pigs floss.

So, when Ballmer points out he wants to sell more SQL Server, and everybody gets all worried about Oracle, I think it's fair to point out that MS is probably only #3 on Oracle's list of people and things to worry about. #1 would be free software database systems, especially PostgeSQL, and #2 would be IBM. The problem Oracle faces in competing with "free" should not be underestimated, even though their market share isn't seriously threatened this quarter. IBM's solutions aren't, of course, free, but that company has shown a far greater interest in leveraging free software than most other large companies out there. I suspect in the short run that a company like Oracle will lose more share to MicroSoft, but in the long run they are dead. At least in their current niche.

Microsoft, in the mean time, faces more free software threats than Oracle by rather a lot. Again, in the short run, they will be fine. In the long run, I don't see how they'll keep the monopoly together. This is why they have invested heavily in businesses outside their core competency of software. I think XBox, rather than being another attempt to win world domination, was rather an attempt to help insure that the videogaming market would remain either only on very specialized hardware, or on a PC platform of Microsoft's own design. Now, and even more so within a year, you can buy a Microsoft-free PC at a place like Walmart that will do what most people care to...except to play games. If MS loses on the games front, I don't think they'll have any presence on the desktop within a decade. Fortunately for them, they do have a huge cushion to work with and gaming on (say) Linux is still quite weak. But that's an area where they are directly competing with millions of geeky teenagers, and that's one force I don't think they can beat into submission. The server market must seem (at the moment) a place that's safer and more comfortable. But I think they are really walking right into an ambush there. Not the kind of ambush that kills them instantly, but the kind where they are subject to potshots from hundreds of locations over the course of months and years. A place that, when they declare victory, they will find they have to retreat.

Posted by: Jonathan King on April 26, 2003 05:55 AM

Jonathan King says

"The myth of Microsoft is that they will take over the world, and force us all to pay crushingly higher prices for the software we need to run civilization.

When pigs floss."

Perhaps Mr. K has not noticed that Microsoft had (these are November 2002 figures) an 86% profit margin on the Windows OS and an overall profit margin of 31% last time I looked. They may not have taken over the world, but they are forcing us to pay higher prices. And an 86% profit margin looks pretty like a monopoly to me.

And then there's the open source thing. Something that is often missed in these discussions is that a monopoly can last for only a short time and still be a monopoly while it lasts. In fact, the holder of a short term monopoly has more incentive to charge high prices (get the money while it can) than the holder of a long term monopoly. Duration is not the issue.

Posted by: Tom Slee on April 26, 2003 10:12 AM

the Wintel "monopoly" is dependent upon one thing, and one thing only- a product that can compently do the job for a lot less money than any other solution. Wintel people, unlike Apple and Linux, dfo not have religious loyalty for their computer system.

Posted by: Secular Clergyman on April 26, 2003 01:09 PM
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