InformationWeek

March 8, 1999

Threatening The Dinosaur

By Stuart J. Johnston

icrosoft attorneys and executives have repeatedly made the claim in recent months that traditional "markets," as discussed in antitrust terms, no longer matter--at least in high-tech industries. Instead, they claim, what matters are "platforms." So while it might be true that Microsoft dominates 90% to 95% of the market for PCs, the argument goes, that dominance can't be called a monopoly because Microsoft's market share could be eclipsed at any time. That is, the PC could be replaced as the information appliance of choice by something--anything.

That, Microsoft claims, is why CEO Bill Gates and all his minions wake up every morning with knots in their stomachs, fearing that today is the day some new technology will wipe out the PC. This argument is something akin to the old theory that as the earth turned colder 50 million years ago, dinosaurs died off while much smaller, warm-blooded creatures--mammals--survived and became the dominant creatures.

Though I'm pretty sure that argument won't hold up as a defense in Microsoft's current antitrust trial, or among a lot of economists for that matter, there are some real-world reasons to at least examine the possibility that Gates & Co. may have a point.

After all, a couple of years ago, a lot of people, the media included, pretty credulously accepted the idea that network computers would soon displace PCs. With charismatic high-tech leaders like Oracle CEO Larry Ellison and Sun Microsystems CEO Scott McNealy behind the NC, the platform was sure to take off, right?

Well, actually, despite what sounded like a good argument for NCs--that they would dramatically lower the total cost of ownership--network computers were most notable for what they tried to leave out: Microsoft and Intel. And that was a factor in users' decisions when they did choose the thin-client option--to go with Microsoft's thin-client option over NCs.

Additionally, PC sales continue to grow in double digits year-over-year while sales of NCs are still sputtering along.

What would have happened if Microsoft hadn't responded to the perceived threat of NCs by releasing Windows NT 4.0 Terminal Server Edition? Microsoft always responds to such potential threats by trying to neutralize or co-opt them.

Java comprises another one of the highly-touted threats to Microsoft's dominance. It promises cross-platform portability, it's very popular, and Microsoft doesn't control it.

Microsoft tried to neutralize that threat by basically seizing control of the language and putting it on Windows. Depending on your perspective, Microsoft's move either enhanced Java to better take advantage of Windows' features, or polluted it so that it would ensure a Microsoft lock-in and neutralize the threat that it represented.

There are several other candidates that, over time, have been considered threats to Microsoft, including the browser and devices with form factors other than PCs. And of course, don't forget the Mac. Under Steve Jobs' leadership--and with a slew of cool new, see-through, candy-colored machines-- Apple Computer has made a comeback rivaled only by the Volkswagen Beetle. Yes, Microsoft still dominates the Mac applications market, but to some degree, the Mac operating system is still a challenge to Microsoft's overall dominance.

One of the ways that Apple "strayed" from the Mac path in the early and mid-1990s, a move that's partly blamed for the deep hole the company found itself in three years ago, was by championing other form factors. That is, former Apple head John Sculley got fixated on the Newton, a handheld information appliance whose main crime was that it came along too soon. The technology wasn't yet mature--indeed, it still may not be mature for another year or three. In fact, it wasn't just the technology inside the Newton that needed to be mature; so did an entire wireless infrastructure to support communications between it and the rest of the world.

Last fall's announcement by Microsoft and Qualcomm of a venture named Wireless Knowledge that will provide access to users' corporate networks via all types of form factors and devices--from smart phones to handhelds to notebook PCs--is just one of many signs that users are beginning to recognize that an information appliance doesn't necessarily have to fit into a certain-sized case and have a keyboard.

Microsoft has recognized that it could easily become the victim of what it just barely avoided four years ago when it almost missed the Internet. And the threats from more nimble, more aggressive competitors haven't receded. There are plenty of firms out there planning to roll out services to provide corporate network with access to alternate information appliances--and I guarantee that means there are a lot of people staying up at night trying to figure out how to topple Microsoft.

So, just like with the dinosaurs, Microsoft could be replaced by critters that are much smaller, need less energy, and are smarter than Windows. Does that sound like Linux? It could happen. Or it might be something that's only a glimmer in some bright kid's mind today--but a monster breakthrough three years from now. After all, at some point, the world market for PCs will become saturated. Given that Microsoft's mantra is not just to "ship or die" but also to "grow or die," if Microsoft can't glom onto whatever the next big thing is in time, that could be the beginning of the end.

Therefore, no matter how the trial turns out, I bet that what eventually brings down Microsoft, whenever it finally comes, will be its own inability to react quickly enough to some new and unforeseen information appliance technology trend.

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