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October, 2001 FRONT END |
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File CHANNELS Politics
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While avoiding a break-up, Microsoft might have inadvertently invited bigger trouble. From Passport to HailStorm and .Net to Windows XP, all its new technologies are waiting for sanctions and settlement prospects with the DoJ appear dim. By Atanu Roy The US Department of Justice (DoJ) last month announced that it was dropping its goal of a Microsoft break-up. It also abandoned one of its original charges against the company-that of trying to prove that it was illegal for Microsoft to make the Internet Explorer browser a non-removable part of the Windows operating system. This issue of "tying" had been at one time the rallying point of the case against the software giant.
The DoJ, however, added that instead of seeking a break-up of the firm, it would seek "conduct remedies" to change the way Microsoft does business. It would also investigate developments in the industry since the Microsoft trial concluded. Thus, in giving Microsoft a "win", the government may have actually tightened the noose around the software giant. And the settlement prospects appear dim. What's at stake? The sanctions, the DoJ officials say, should be similar to those imposed-but suspended-by the earlier Judge Thomas Penfield Jackson. Those regulations, described in a court filing in April 2000, set prices for current and future versions of Microsoft Windows and impose severe restrictions on the firm's day-to-day operations. Originally designed to last only until a break-up happened, the Justice Department now hopes to make them permanent. If US District Judge Colleen Kollar-Kotelly agrees, the government regulations would be that:
That's not all. The government said it will "ask the court for a period of expedited discovery to investigate developments in the industry since the trial concluded". That means the DoJ wants to expand the case to look at technologies in the making, presumably .Net, Hailstorm, Passport and mobile computing-all areas Microsoft plans to dominate as extensions of its Windows monopoly.
No wonder then that Microsoft says those curbs would "wreak havoc" on it and on software developers. Steve Ballmer, the company's chief executive officer, said regulatory rules will be "just as damaging" to the company's business as a break-up. Hacking the eXPerience The development becomes important as Windows XP launch is scheduled for later this month. The new operating system is already drawing criticism for making MSN Messenger and Windows Media Player non-removable parts of the system. "Microsoft is always in a position to copy what you've got, bundle it with Windows, and give it away for nothing. That is their universal strategy," Larry Ellison, chairman of Oracle Corp., told TV channel CNBC. "They will keep bundling things with Windows and driving people out of business. I think AOL's got a real big problem." Both the DoJ and the states may plan to include Windows XP-specific regulations in what they ask the judge to hand down, for XP also brings in a new licensing regime and new Web services under the umbrella of .Net.
This month onwards, Microsoft dramatically changes how it licenses software to its big customers. Rather than paying full price, many such customers purchase software through one or two popular volume-licensing programmes. Under terms ending September 30, most companies could purchase upgrades either through a two-year maintenance contract called "Upgrade Advantage" or by buying one of four common version upgrades-the most popular option. Starting October 1, both plans were replaced with a new program called "Software Assurance". Now, because version upgrades are being eliminated, customers can no longer upgrade software at their own will. They either must pay an annual fee as part of a two-year maintenance contract or pay the full price for upgrades. And before participating in Software Assurance, Microsoft customers must be on the current version of the product to qualify.
Market research firm Gartner estimates that medium-sized businesses upgrading software every three years would pay anywhere from 33 per cent to 77 per cent more under the new plan than they did with the old. Four-year upgraders would pay 68 per cent to 107 per cent more. In a scenario of 5,000 desktops, a firm would see a licensing increase of $900,000 (Rs 4.3 crore) to $1.6 million (Rs 7.6 crore), Gartner concluded. Passport to monopoly Now add HailStorm and Passport to the equation, and you would get a fair picture of Microsoft's strategy to bind all IS managers in a web called .Net. .Net is Microsoft's platform for XML Web services, allowing applications to communicate and share data over the Internet, regardless of operating system or programming language. More specifically, there are five areas where Microsoft is building the .Net platform today, namely, tools, servers, XML Web services, clients and .Net experiences. Some of these new initiatives have already been cited by antitrust authorities that oppose Microsoft's use of a monopoly position in software as a lever into Internet services. Privacy groups too have argued that Microsoft could centrally track consumers' purchases and activities on the Internet. For instance, Passport, a critical part of Microsoft's Internet strategy, was developed to allow users to be able to log on just once and get access to multiple Microsoft Web sites and those of other companies that sign up for its service.
Passport is a foundation for an additional set of Microsoft services known as HailStorm. It is a Web-based service for storing and retrieving information. However, it's not just any sort of information that HailStorm is designed to manage, but specifically it is your information being stored for you. If you consider .Net as providing the infrastructure for the development of Web-based distributed apps, then HailStorm is built on top of .Net and provides some of the fundamental resources that a Web-based distributed application might need to share information between applications. Microsoft also plans to formally rename those initiatives ".Net My Services", reflecting the company's broad Internet strategy, called Microsoft.Net. But in the new scenario, Microsoft's grandiose plan might come to a screeching halt. Technology wins One severe headache the Redmond software gaint hopes to avoid involves the problems, including sinking revenues and endless legal skirmishes, that decades of antitrust regulation and litigation affected IBM-the computer industry's original monopolist (see box). "Microsoft's main job has been to focus on new software products and fortunately we have been able to do our best during the past few years," said Bill Gates in a recent TV interview. The chief software architect of Microsoft pointed out that protracted litigation was not an experience he would wish on anyone. Micrososft's troubles today may be more than they were before the "win". Whether the company's plan to enrol all its customers for an all-encompassing Web-based service fructify, only time-and a couple of lawyers-will tell. Meanwhile, technology remains a winner in the process. Was the bundling-bringing the browser (and now the media player) into the operating system-bad? They come with the OS, anyway. Nobody protested when Microsoft drove all TCP/IP firms out of business. They were charging $600 for desktop networking that Microsoft now gives away for free. The licensing scheme might be Microsoft's way to future-proof its revenue flow, but the ASP architecture to offer software upgrades and charge per use; storing information in your Passport wallet that will help you make safer online purchases; and creating a "trusted network" are technology advancements. If not Microsoft, AOL or Sun would introduce them. Consumers count most in competition. |
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