Xenakis on Technology

If Only Bill Gates Would Just Apologize

Written by John J. Xenakis for CFO.com, Jan 03, 2001.

Should Microsoft be split in two?

That's what the Department of Justice will urge the U.S. Court of Appeals next week, when it files a brief supporting last June's district court ruling to that effect.

The prospect of this kind of decision is a nightmare scenario for the company and for the computer industry. We're headed for a time when government bureaucrats with their parochial views will decide what features and device drivers will go into the next version of Windows.

At this point, it should be noted that Microsoft's predicament is largely of its own making. Despite the high quality of the firm's products, it did engage in anticompetitive behavior that warranted some form of punishment. But does the proposed punishment fit the crime? Moreover, is the Justice Department's proposed remedy in the best interest of Microsoft's corporate end users?

Perhaps the best solution is one that will return Microsoft to a competitive environment similar to the one that existed in the early 1990s, when it was competing with other software developers to produce world-class, top-notch products -- products that were so good that Microsoft would have still have killed the market if it had competed fairly and not broken so many laws.

In saying that, I'm specifically disagreeing with Ralph Nader and others like him who say that Microsoft doesn't innovate; it just copies other companies' software. The consumer advocates also believe they're qualified to appraise the computer industry.

For example, the launch of Windows 95 was one of the technological wonders of the world. Those who say that Windows 95 was just a software retread might also be expected to argue that the Egyptian pyramids were easy because everyone knows how to build sand castles. Windows 95 integrated thousands of disparate products from other vendors and got them to work on computers from hundreds of vendors. It was a world-class achievement which moved the computer industry years forward.

Similarly, Microsoft's application products, like Word and Internet Explorer, are sophisticated products that have set the standard for other vendors.

Unfortunately, Microsoft wasn't satisfied with producing the world's best products; it had to use marketing techniques that resembled extortion and racketeering, and indeed in December, 1999, the federal court found the company guilty of using anticompetitive tactics to cripple its rivals.

It's almost as if the company were behaving like an admired uncle who's done wonderful things for your family and many others, but who is embezzling money from his employer. Do you continue to admire his accomplishments, or do you condemn his dark side? And what kind of punishment does he deserve?

The problem is that Microsoft produced such great products that it gained monopoly power with them, and this has caused the company to get sloppy. The latest operating system, Windows Me, has been called a "pale upgrade" by the Wall Street Journal's Walter Mossberg. PC Magazine was more positive, but questioned whether it was worth the $110 street price to purchase an upgrade.

But who can blame Microsoft for producing a second-rate product? If it adds a major new feature that undercuts another company's product, then the Justice Department will jump all over it. So the company might as well put in a few non-controversial features, charge a fortune, and sit back and collect the profits. It's not Microsoft's fault; the government is making it behave that way.

Microsoft is in the grip of its own monopoly power and is turning into the post office -- do as little as possible, keep everyone employed, and don't rock the boat. Microsoft is becoming mediocre.

Unfortunately, most politicians don't understand that.

What's really sickening is that Microsoft is being drawn into this political milieu, where excellence just gets some politician mad and mediocrity is rewarded.

Which brings us to the depressing proposal to split Microsoft into companies. Huh? That means not one company with two monopolies, but two companies with two monopolies. Why would anyone think that was better?

Oh, I see. Government bureaucrats get to regulate both companies, so there are more politicians getting high salaries and building bureaucracies to do busy work. It's a politician's dream, and a nightmare for taxpayers and anyone who uses a computer.

What's needed is a solution that takes Microsoft's monopoly power away, so that the company can go back to making leading edge products.

How do you do that? It's actually simple, and it was a proposed remedy that District Judge Thomas Penfield Jackson rejected. Microsoft should be required to make the core source code for its monopoly products available to competitors. Microsoft and others would differentiate themselves by building unique features on top of the core capabilities, and true competition would return.

Confiscatory!" is the objection to this proposal voiced by Bill Gates in a press interview. But hey, when you break the law, you have to pay a price.

I've had the pleasure of meeting Bill Gates several times over the years, and although he has business skills that I can only fantasize of ever having myself, there's a big part of him which is, like me, pure nerd. If that part of him can ever get out front again, then he may actually like this proposal for its openness and simplicity.

The deal would be this: Bill Gates would apologize, and would agree to make Microsoft's source code available to the company's rivals. The DOJ would agree that Microsoft no longer has monopoly power and would drop all further litigation.

Microsoft would be back to where it was when it actually had to create great products to survive. Call me a nerd for saying so, but I think Bill Gates and Microsoft's employees will, in the end, be much happier in that environment than playing footsie with politicians.

(This is a modified version of an article that originally appeared on Jan 03, 2001 on CFO.com at this location. )