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Microsoft's Hard Choice

About the author
Felix Cohen is the Director of Technology at openDemocracy; he studied Psychology at Bath University, graduating in 2006.

Microsoft has, apparently out of the blue, released technical details of most of its largest selling products which will allow competing companies and open source developers to create software that integrates far better with the Seattle company’s solutions. For example, Microsoft has released full details of the file storage formats it has used for its Office products, and has committed to allowing developers to be able to add new format functionality to the software.

The move came as a surprise to most observers as Microsoft is noted for being unwilling to cooperate with other developers, and labelled open source software as a “cancer” in the past. However, increasing pressure from antitrust legislation in Europe and a stabilisation of the server market means that this might have been the best time for Microsoft to become more open. The other news from Redmond was that they would be allowing students access to their entire development suite; from the Windows Server operating system to the development tools that are used to create software for both Windows computers and Microsoft web servers running pages and web applications.

Daniel Lyons, in his Fake Steve Jobs guise, notes, as eloquently and aggressively as usual, that this may be because MS is no longer afraid of FOSS (Free & Open Source Software). While the movement has made great inroads into the server market, MS appears to be making progress again. Since mid-2006, Apache (the most widely used free software web server) has seen its market share decline from around 70% to 50%, while Microsoft’s web server technology has grown from around 20% to 35% in the same period, reversing a steady decline in the years before then . Similarly, Red Hat, the noted open source success, has now stabilised as a business. They no longer see impressive returns, and stories of large companies moving over to open source solutions are now rare. In fact, it seems that most of the sales and opportunities for open source software have now been fulfilled, and companies are coming up against the law of diminishing returns in the desktop and server markets. The days of massive IPO’s for open source companies are over.

The advantage to Microsoft of suddenly appearing so welcoming to other developers is, without doubt, market share at the expense of overall revenue. There are starting to be compelling reasons for companies and individuals to drop support for MS’s overwhelming package of Windows, Office, Visual Basic and other effectively ubiquitous technologies. Many web based suites, such as Zoho Office, Thinkfree or Google Docs, are starting to become credible competitors to the Office suite, and offer new collaborative working and sharing tools that MS cannot support. Similarly, Apple is making impressive inroads into the desktop market and the iPod defeated Microsoft’s Zune without even a skirmish. The Xbox 360 is likely to be overtaken by Sony’s PS3 this year, and has never competed with the Nintendo Wii for sales. Microsoft’s biggest recent product launch, Vista, appears to have been an unmitigated disaster, as major PC suppliers demand the right to continue selling XP, and many large organisations intend to skip Vista and move from XP to Windows 7, whenever that will arrive. Microsoft Pocket PC is threatened by RIM’s Blackberry handsets and, the fashionista’s would have you believe, Apple’s iPhone (although reports of that handset’s enormous use online are undoubtedly skewed by the fact that it can browse the web thorugh wi-fi). Google’s Android, if it ever arrives, will also present a credible threat to Microsoft in the mobile arena.

Microsoft is now competing in an environment that is no longer the evil software behemoth versus the scruffy free software advocates, but the old-fashioned, entrenched Bell-a-like versus its new, agile competitors such as Google, Apple and even possibly Sun, following the acquisition of opensource darling MySQL. Even the Yahoo! acquisition is being seen as an attempt for Microsoft to acquire the developers and engineers it will need to compete on the web, a medium which has proven fairly resistant to Microsofts standards, although MSN and Hotmail still account for around 18% of daily page views online, compared to Google's 28%.

Many online commentators have made the assumption that this is something to do with Microsoft's corporate culture. Perhaps this is it; Microsoft has been in the business of making software, sold in enormous quantities, in boxes, to both businesses and consumers. The business of selling software in boxes and on CDs is very different to producing services that have value to purchasers over the net. Take 37signals, or Wordpress, both of whom are (yes, tiny in comparison) successful web businesses providing services, not software. The are responsive to their customers, open with their support problems and have established trust as a result of this. Microsoft has tied it's online offerings, especially Sharepoint and Office Live, into the acquisition of MS desktop software. In doing this, they have limited their accessibility to the wider web, and stopped opportunistic users from trying the product. One might have hoped they would learn their lesson from the runaway success of Hotmail, the free web mail service.

And that lesson is that MS can only create itself a monopoly if it operating inside of an ecosystem that is supportive of it. Windows' runaway success was due to Microsoft's decision to support the burgeoning IBM compatible PC market. While the IBM PC, and the x86 architecture on which it ran, was slower and less efficient than competing architectures from other companies, IBM's decision to release the specifications created an enormous market in spares, components and cheap knock off PC's. The ability of DOS, and later Microsoft, to run on this commodity hardware, was what guaranteed the success of Windows, and it is what has relegated Apple to always be a second runner (Gil Amelio's decision to allow Mac clones to be produced helped briefly, but MS was entrenched in the marketplace by that point, and eventually the clones diluted Apple's unique design and performance proposition, rescued only by Jobs' return and the first iMac).

Similarly, MS created an ecosystem of its own with the Office suite; admittedly a rather monocultural one, but once the Office documents had become the standard for business communication, and Visual Basic had begun to run the global financial markets, the success of MS was guaranteed. What MS has failed to do, despite the overwhelming share it has of the web browser market, is to establish itself at the top of the food chain in the web ecosystem. By failing to be open, failing to provide the tools required to build web sites and applications for free until far too late, it has allowed free software, and especially the LAMP (Linux, Apache, MySQL, PHP/Perl) stack, to set the standards of the web, and Microsoft has ended up playing catch up; the next Internet Explorer, version 8, will belatedly adhere to standards that other browsers have supported for years (and even then there are some caveats).

These two latest announcements are Microsoft’s attempt to wedge itself back into being the controller of the web. We won’t know if they have succeeded for several years, but it is an interesting move from the software giant. A post-Yahoo acquisition Microsoft, with open software standards and a commitment to providing tools for free to developers, might mean that Seattle maintains an advantage over feisty upstart Silicon Valley in the inevitable technology spending downturn. We should not, however, think that the nature of the beast has changed. Microsoft cares only about market share and turnover. These new ideas should help MS retain it’s place in the market, but lets not confuse them for anything other than greenwashing.

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