[Ecommerce] Financial Times editorial: The Microsofties

[Thiru Balasubramaniam]

The Microsofties

Published: October 23 2007 18:59 | Last updated: October 23 2007 18:59

Microsoft has finally gone cuddly. The software giant has brought an
end to its battle with the European Commission and backed out of an
anti-trust appeal in South Korea. Microsoft is right to abandon its
rage against the regulators, but if it is to compete with its snuggly
new business practices, it will have to discover an innovative edge.

That Microsoft has backed down from further confrontation and agreed to
provide technical data on one of its products for a minimal royalty is
a triumph for the Commission. It is a qualified triumph =96 in this
specific case Microsoft=92s compliance comes far too late for some of its
competitors =96 but by grinding away for nine years Europe=92s competition
authority has won an important point of principle.

It was the grind that got to Microsoft in the end. At the height of its
legal wars with the US Department of Justice, the Commission and other
regulators around the world, it came to resemble a cut-throat law firm
with a software company attached. Managing all those lawsuits was
clearly not conducive to corporate morale and wellbeing.

If Microsoft is determined to avoid fights with regulators it will be
less able to integrate new functions into Windows. The colonisation of
one market using strength in another has been a primary source of
Microsoft=92s growth and profits.

Instead Microsoft will have to innovate and become more responsive. It
need not revolutionise software itself, but no longer can it rely on
Windows to catch up with rivals who are one or two years ahead. It will
have to be an alert and nimble supplier of code for each new niche.

Microsoft, unable to force its own software on new markets, will also
have to do better at making products that interoperate with rival
software. It has already taken big steps but could do more to conform
with popular industry standards.

Like any other dominant business, such as Wal-Mart or General Electric,
Microsoft will still draw legitimate strength from its dominant
franchises. Outright acts of bullying will now be punished but
competitors should not expect Microsoft to be too cuddly. Outside the
school gate, when teacher is not looking, Microsoft will still be boss.

A more normal kind of industry dominance, however, is welcome. The
software business is maturing. Microsoft=92s arc has already peaked =96
probably around the time of Windows 95 =96 and it will never be quite
such a force again. Anti-trust regulators should not let it slip back
to the business practices of that era. Microsoft, through innovation
and tough, fair competition, should show that it does not need to.

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
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thiru@keionline.org