InformationWeek

If the Department of Justice implements your suggestions, Microsoft may actually become a respected name once again. It will make much better products because if it doesn't, it will suffer in the marketplace. There can be nothing more horrifying to a CEO than that.

Regards,
John H.

Dear John:
Microsoft should not taint itself with the appearance of anticompetitive actions. It didn't get to the position of dominance in the industry by being incompetent. It is, however, repeating the same mistakes that AT&T made before it was forced into divesting the Bell operating companies.

Your column is one of the most enjoyable in today's computer trade press. Keep up the good work!

If you wish to share any of this note with others, I'd appreciate you keeping my identity confidential. The folks for whom I work are definitely impressed by Bill Gates and his money, and would not appreciate my opinion.

Thanks,
Jim

Dear Jim:
Thank you for your comments. You make a very good point about pre-installed software, although I would modify your suggestion somewhat. It would be too difficult on the consumer to insist that manufacturers not sell computers with pre-installed software. Rather, it makes sense to unbundle the pricing for installed software. Further, I would require that they offer to install software for any operating system or applications suite requested by the customer at a price that reflects the cost, plus profit. Doing so would go a long way to leveling the playing field.

1) Specifically, these factors dispute your cost increase claim: When Microsoft enters a market, it typically drops the bottom out with low-end pricing, putting pressure on high-margin vendors. Office did this to Lotus Development and to WordPerfect with a suite at a lower cost.

The operating-system increase is primarily due to a switch from Windows to NT, with which costs about double. Microsoft offered us a choice between two operating systems, one of which was more stable and worked as a server. As a market, we chose to buy the more expensive product.

The fact is that prices come down when Microsoft enters the market, and then go back up not because the company raises them, but because we choose the most expensive of multiple Microsoft editions. Whose fault is that?

2) Crashes of this five-year old operating system are another issue. In fact, I think they're the real issue.

The company is amazingly good at moving markets and building increasingly appealing integration on top of an immature operating system that still crashes too much. Its momentum is increasingly forcing you to move critical systems to a platform that you see as risky. In that case, the real message to Redmond is very, very simple. Do whatever it takes -- split up the company if you have to -- but get the foundation stable, Microsoft. It's long overdue!

Isn't that what all your concerns boils down to? A single major, valid issue?

Sincerely,
Bob

Dear Bob:
Your points are well-reasoned; however, once Microsoft gains dominance in a market, it keeps its prices high. While it is true that Office, for example, started out by dropping the price in the office productivity market, it now sells at three to four times the price of its competition. Check it out in any store. Given the hardware and software cost declines in competitive areas over the years, it is difficult to ascribe operating-system price increases to anything other than Microsoft's dominance of that market.

I am, indeed, very concerned with the lack of operating-system stability. I think Microsoft doesn't produce a very stable product because it doesn't have to in order to sell its product. It reminds me of American auto manufacturers, who seemed unable to produce cars without legions of defects before there was significant foreign competition.

I wonder if you can enlighten me, or know of any place I might be able to get more information on best-practices capital allocation for IT projects. I would also be interested in case examples of companies practicing them. I work for a systems integrator/consulting company, and we would like to play our part in spreading good IT practices to our clients and prospects.

Thank you.
Susan T.

Dear Susan:
If you want to pick a single topic that will get the attention of both IT executives and those who monitor the financial purse strings of a company, it's capital allocation. Deciding on how to decide to spend money in a large company is a huge philosophic problem, right up there with figuring out the number of angels who can dance on the head of a pin.

There are several sources for obtaining information on IT capital allocation best practices. I think you'll find some interesting articles have been published in InformationWeek and The Harvard Business Review in recent years. Some enlightening research has also been done by the Society for Information Management as well as boutique firms such as Gartner Group, the Corporate Executive Board, Concours Group, and others. However, I have used what I think is a very sensible best practice for IT investments that doesn't require a significant investment in time or money.

I have advocated for years that there should be no difference between a company's process for allocating IT capital and other capital projects. One of the most persistent issues in the IT world is business alignment. Business alignment means making sure that your IT issues and priorities are consistent with those of your business people. One way of doing so is to make sure that the decision matrix for spending money in IT is exactly the same as the one used for business projects. If you can convince your clients and prospects that they are best served by mirroring the rest of their company in how they justify their expenditures, you'll be doing them a huge favor. I guarantee they will find it easier to explain the benefits of their proposed projects and their lives will be happier as a result.

Software like WordPerfect, which had a commanding lead in word processing, and the then No. 1 spreadsheet developer Lotus Development, found it inexplicably difficult to get their products to perform. At the same time, Microsoft's products, while not necessary functionally better, worked well and were able to share data. By the time WordPerfect, etc., caught up, the marketing and pressure tactics from Redmond had caused the massive implementation of suites (primarily Microsoft Office) and the abandonment of not only the best-of-breed approach to meeting business needs but also creativity and innovation. We do need open APIs or perhaps all of Windows in the public domain. Microsoft surely is strong enough to compete on the basis of its other products.

I enjoyed your article; I would like to see CIOs and CEOs of substantial companies taking the same position and voting with their purchasing dollars.

Jim

Dear Jim:
I, too, at the time found it mystifying that the products that competed with Microsoft's applications somehow had all sorts of strange problems working with Windows. Perhaps you remember the old joke about the Windows 3.1 beta needing to go back for further improvement--it still worked with WordPerfect.

I agree with you that what we need is a level playing field so that consumers benefit. The price of computer hardware has dropped an order of magnitude (look at hard drives) while the price of the operating system has actually increased. It would be best for the industry if Microsoft were required to publish their application programming interfaces and file formats.

It certainly would be good if CIOs and CEOs were to take the position that you advocate and vote with their purchasing dollars to encourage an open environment in our industry. There is no question in my mind that Microsoft is strong enough to compete in such a situation. However, as I noted in my column, because of compatibility issues, it is difficult to choose other than the Microsoft Windows/NT operating system and Microsoft Office. Ultimately, those of us with corporate purchasing responsibility must make the least-objectionable choice in picking software, which is not necessarily the same as the one we would like to pick on the basis of long-term good for the industry as a whole.