Microsoft: Testing Market Limits
By Art Wittmann
A group of Network Computing editors recently spent two days in Redmond, Wash., chatting with the people from Microsoft about some of their future product plans. There was much to marvel at in those two days. The most marvel-worthy example was hearing a heterogeneous environment described as "one that contains Windows NT 3.5, NT
3.51 and NT 4.0 servers." (The product manager in question even said it with a straight face.)
 However, on a much more serious note, a number of us were struck by Microsoft's plans to further dominate the markets in which it plays. Microsoft has plans for all of its markets, including desktop applications, server operating syst
ems and server application software. I like its plans for the server market and can't wait to see how the folks over there do as they prepare to do battle with Sun, Hewlett-Packard
and IBM over the server application space. They have ingenious plans; now it's a matter of delivery.
Microsoft's domination of the desktop OS market is a nonissue--it controls that market and will continue to do so for the foreseeable future. The desktop application market doesn't belong to Microsoft yet, but it might, based on its plan to build Internet Explorer (IE) into the Windows97 operating system release. Microsoft got caught flat-footed on the sudden rise in popularity of the Internet, and now the company is addressing its oversight with a vengeance. I wonder if Microsoft's zeal for the Internet will (and possibly should) get the attention of the Justice Department.
Which Line Can't Be Crossed?
Life as an operating system provider involves walking a fine line. Every time an operating system company like Micr
osoft (or Novell or IBM or Sun) releases a system with new features, the small utility vendors are almost inevitably put out of business. The problem is that at some point, an operating system has to draw the line. There must be a clear line between the OS and the applications, which are the real reasons for using the operating system.
OS vendors with substantial resources (and Microsoft clearly qualifies) have an unfair advantage over other application developers. Early on in the life of an OS, it makes no sense for the OS vendor to close out application competition. The idea is to get everyone writing for your OS: mind share first, market share second. But as an OS matures, and the vendor looks for additional revenue streams, application development is an obvious way to go. But if owning the OS translates into an unfair advantage in the application market, then maybe the OS manufacturer needs to be reined in.
A second question that we must ask relates to Microsoft's uniqueness in the market. Microsoft
, like Intel, has a monopoly on desktop computing. Because Microsoft clearly has a monopoly and competes with those that make products for its operating system, Microsoft deserves careful
attention with regard to competition.
Whenever a monopoly is recognized, the government rightly attempts to determine if the monopoly is a natural one (examples of these are local phone, natural gas, electricity and cable services). Anytime a service must enter into every home in a community, you have a natural monopoly. Near monopolies usually get a lot of attention, too. Long-distance phone service is a clear example. Competition, along with standards for interoperability in the long-distance phone industry, has led to some fairly interesting marketing and product packages. So, is the desktop OS market a natural monopoly (and, therefore, subject to regulation as such), or should steps be taken to even the playing field allowing others to compete fairly with Microsoft? Or should the government and the courts stay out of
it and just leave Microsoft alone?
I'm not a lawyer, and I really have very little idea how the government decides whether a monopoly should be broken up or regulated. In the early '60s, IBM certainly parlayed its stranglehold on the "business machine" market into an equally tight grip on the business computer market. The government blinked then in part, I believe, because it saw some value to the existence of IBM's monopoly. The government also saw vulnerability in IBM: Burroughs and Unisys were able to compete for mainframe business, while Digital and others competed with minicomputers.
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