Compatibility and Connectivity

Stephen DeAngelis

July 20, 2006

Yesterday Microsoft announced that its new Vista operating system, which is scheduled to be released next year, will be more competitor friendly. Although this kinder, gentler Microsoft is the result of numerous lawsuits and large fines (like $357 million EU fine announced recently), the result is likely to make Microsoft more resilient. According to an article in today’s Washington Post [“Microsoft to Open Vista to Competitors’ Software,” by Sara Kehaulani Goo]:

Microsoft outlined a dozen “guiding principles” yesterday to show that it will comply with demands from government regulators here and abroad who are closely monitoring Vista. … “It’s good that Microsoft is coming out with explicit statements of how they’re going to behave,” said Chris Swenson, director of software industry analysis at NPD Group Inc. But he noted that legal and regulatory issues are forcing Microsoft to “play by different rules” than in the past, when the company was more aggressive about dominating competitors. Eight of the 12 principles outlined by the firm are already requirements resulting from the Justice Department’s antitrust lawsuit against Microsoft, which was settled in 2001. Several of the requirements expire next year, but Microsoft said it planned to continue with them. A spokeswoman for the Justice Department said yesterday that Microsoft’s announcement “indicates that the principles of the judgment will continue to benefit software developers, computer manufacturers and consumers into the future.”

There are several reasons I say that Microsoft will be more resilient as a result of adopting this new strategy. First, it means Microsoft will likely remain a powerhouse in most markets (it risked losing the European market). Second, by clearly stating the rules by which it will play, it becomes a more trustworthy company. FInally, by making its products more compatible with others they become more attractive to consumers. Microsoft, simply because it is such a behemoth, will continue to be a target (like its retail twin Wal-Mart) by those disaffected by globalization.

“This is part of a very effective Microsoft charm offensive,” [Ken Wasch, president of the Software & Information Industry Association, which has been critical of Microsoft’s practices], said. As long as Microsoft continues to sell its operating system with its own browser and media player, “there’s no economic incentive” for a PC manufacturer to bundle Vista with a competitor’s products, Wasch said. “They get no pricing differential.”

Wasch notes that Microsoft will continue to wield tremendous power simply because its products are so ubiquitous. As a businessman, I’m sympathetic with Microsoft’s arguments that making things easier for competitors makes no business sense. However, as a futurist and supporter of globalization, I also understand that Microsoft’s brutish behavior tended to stifle the innovation required to coax the greatest possible benefits from IT systems. One can’t blame Microsoft for wanting to capture as much marketshare as possible, but having been as successful as it has been is one of the reasons that computer viruses are a big problem for PCs but not for Macs. Microsoft has made it easy for those with nefarious plans to concentrate on a single operating system. That probably won’t change anytime soon. Nevertheless, in the long run, Microsoft’s new strategy should prove to be a win-win situation for the company.