Don't Expect The Giant To Blink

By Stuart J. Johnston

nyone who thinks that Microsoft will blink in the face of the latest onslaught from the U.S. Department of Justice and the 20 states' attorneys general might want to think about the following: The bedrock of Microsoft's soul is hardball competition, and the intelligence behind that drive is extremely shrewd.

If Microsoft blinks, the act of blinking may be just a feint, and the company is ever the negotiator. It may yet find enough minor compromises in its contract language that much of this problem will be defused over time, which will never satisfy angry competitors, but it just may let the DOJ look like it won something, just as the consent decree allowed the DOJ to claim victory four years ago. Remember, though, that the consent decree had little impact on the shape of the marketplace. So, for Sun Microsystems CEO Scott McNealy, or anyone else who advocates splitting up Microsoft, my advice is don't hold your breath.

Meanwhile, it remains to be seen whether some other recent contract issues may draw the DOJ's scrutiny. For instance, the newly revamped "BackOffice-compatible" logo program -- to be announced this week at Microsoft's TechEd developers conference in New Orleans -- requires that third-party software vendors make certain that their products not only work seamlessly wit h the BackOffice servers, but also with Microsoft Office. Simultaneously, the familiar "Office-compatible" logo program is being eliminated. It seems to me that it will be extremely easy for desktop applications suite competitors like Lotus or Corel to argue that requiring Office compatibility in order to get the BackOffice-compatible logo gives Microsoft undue leverage -- particularly since the "Office-compatible" logo is being phased out. That means that in order to get the logo, you have to work with all of Microsoft's products on both the server and the desktop applications. Does that give Microsoft an unfair advantage? You tell me.

Applications vendors greatly value the ability to put the "Microsoft Office-compatible" logo on their products. It's like the Good Housekeeping seal on other consumer goods. It's an assurance to consumers that what they buy with that logo will work with their existing software. Sure, there's an argument to be made that, as the BackOffice family of servers gets more popula r, enterprise customers will want to know that their software will work with BackOffice and with Office. But why eliminate the "Office-compatible" logo? It forces a lot of testing requirements on independent software vendors that they themselves may not think are warranted. Should they be forced to set up an entire enterprise network to test their products? Won't that have a tendency to force a lot of smaller, innovative firms out of the franchise of being able to achieve that coveted "Office-compatible" logo?

Secondly, with the impending launch of Windows Terminal Server (AKA Hydra) later this month, I can't help wondering if the DOJ and the states' attorneys general may not have some serious questions about licensing requirements that Microsoft is imposing on Windows-based Terminal vendors. To get a license to use Hydra's Remote Desktop Protocol and the special embedded version of Windows CE 2.x, hardware vendors must comply with Microsoft's dictate that Java Virtual Machines not be present on those ter minals. (It is OK to run a JVM in the user's session on the NT host, however.)

Microsoft's argument for this contract restriction is that doing local Java processing requires more processor power and local memory than Microsoft has decided is prudent. Microsoft specifically says that it wants vendors to keep the retail price of Windows-based Terminals under $500. When I asked a Microsoft official why that requirement was in the contract, the answer was that Microsoft does not want WBTs to compete with full-blown PCs. Doesn't Microsoft think that WBT vendors have enough competency in evaluating business opportunities to make decisions without being told what to do? Why does Microsoft feel it has to make business decisions for other companies? Surely they can't argue, as they have in the current case over the integration of the browser into the user interface and on controlling the Windows startup screen, that they want to assure customers "a consistent Windows experience."

On the other hand, Informati onWeek's latest survey of 200 IT decision makers uncovered a piece of information that might make the government a little uncomfortable as it prepares to go into battle. We've previously reported that Gates' protestations that Microsoft only incorporates features that users want was not being born out by InformationWeek surveys conducted over several months. However, with the latest and most aggressive government action to date, those numbers appear to be shifting substantially. Our most recent survey, which was conducted on the eve of the DOJ's latest suit in mid-May, found very little ambiguity about Microsoft. To them, Microsoft looks more like Barney than Godzilla.

Our latest survey found the percentage who want browser integration has jumped to 42% from 28% four months ago. Meanwhile, 34% say the do not want integration, a number that has held steady.

The most recent survey also found that while 58% think the government's investigation of Microsoft is warranted, that number has declined from 69% since last October. Meanwhile the number who feel that investigation is not warranted rose 12 points to 35%.

Now, you might think that with 58% still saying it's a good idea to investigate Microsoft it would be predictable that the number who feel "Microsoft's dominance" has a negative impact on IT as well as the number who are in favor of breaking up Microsoft into separate companies would be fairly high.

However, only 3% of IT decision makers feel that Microsoft's dominance has a negative impact in their world. A whopping 63% feel Microsoft's impact is positive and another 34% feel the impact of Microsoft's dominance is "neutral." So 97% feel the impact of Microsoft's dominance is either positive or neutral while only 3% feel it's negative.

On top of that, only 16% of respondents feel the company should be broken up, compared to 74% who feel it should remain in tact. Asked to give a number from 1 to 10, where 1 was a very negative impact and 10 was an extremely positive impact, the average ratin g for all 200 respondents was 7.3 -- overall positive.

While it may be easy to discount one or perhaps two of these result sets as being somehow paradoxical, and therefore invalid, it's virtually impossible to throw out answers to multiple questions that indicate the same tenor of feelings across the board.

The user community is obviously on Microsoft's side on this, overwhelmingly so. Even though they may not completely trust the company, it turns out that they trust the government even less.

I have a couple of theories about why some of these numbers turned out as they did. For one thing, I think that many people -- both IT and consumers -- admire Bill Gates. To them, he is an American success story. He has gotten to be the world's richest person by dint of personally putting in incredibly long hours of hard work, and by hiring some of the smartest people in the world to work for him. And by believing in a vision. In return, he has rewarded his workers handsomely -- from the top executives all the way down to the worker bees.

The other theory is that, in this age of constant discussion of the benefits of less government, there is a lot of native distrust by Joe Gigabyte of government intervention on his behalf.

Of course, there is a much more simplistic explanation that may make just as much sense: For IT, Microsoft's dominance produces consistent standards, even if they are imposed by a single company. And the software itself -- while reviewers and competitors criticize it as being of mediocre quality and lacking in innovation -- provides what users and IT need to do their jobs at a price they're willing to pay.

While I have no idea how the courts will finally sort out the cases against Microsoft, I suspect that the majority of Americans are rooting for "the bad guys." That will probably come as cold comfort for Sun's McNealy, Netscape CEO Jim Barksdale, and other competitors who have been pushing for government action. But that wouldn't be too surprising. After all, we've spent much of this century making folk heroes out of outlaws from Jesse James to Bonnie and Clyde to imaginary hero-villains like Spawn.

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Rich Levin: Run Time Rich fills you in on all of the latest products, issues, and trends in application development.		Stuart J. Johnston: Redmond Watch As our eyes and ears in Redmond, Stuart gives his perspective on the latest events at Microsoft.		Charles Pelton: Eye On IT Charles explores IT management issues and strategies that business and technology managers face.