Microsoft: Difference between revisions

Microsoft Corporation is the largest computer software producer in the world, headquartered in the Seattle, Washington suburb of Redmond. The company was founded in 1975 by Bill Gates and Paul Allen to develop and sell BASIC interpreters.

Desktop operating system monopoly

Microsoft's Windows product has a monopoly position in the desktop operating systems market, and since its bundling of the Internet Explorer web browser into its Windows operating system, a virtual monopoly in the Web browser market. Almost every PC sold has a copy of Microsoft Windows pre-installed. Microsoft has been convicted by a USA court for abusing its monopoly in the desktop operating systems market in the same country (see Microsoft antitrust case for more details).

How Microsoft dominated the desktop software market

In 1983, Microsoft was able to leverage a contract with IBM to produce a BASIC for the IBM PC into a contract to provide an OS for the IBM PC. Microsoft then bought the rights to use Tim Patterson's Seattle DOS on the PC and released it via IBM as Microsoft DOS (MSDOS). MSDOS was very successful.

Microsoft then developed a wide variety of software products including operating systems; language compilers and interpreters; word processors; spreadsheets; etc. Some were successful, some were not. Most have become the dominant software in their category.

Even in these early days, Microsoft was accused of following the maxim "DOS isn't done until Lotus won't run" -- a reference to claimed deliberate incompatibilities between MSDOS and Lotus' competing Lotus 1-2-3 spreadsheet.

The best known products are Microsoft Windows, Microsoft Office and a series of server Operating Systems and Products generally referred to as NT although the product changed to Windows 2000, and then to the most recent release, Windows XP.

Microsoft also produces Microsoft Office for Apple Macintosh computers, and is arguably the most important set of programs on the Mac. Microsoft also owns a small portion of Apple, having invested $400 million in the company in 1997. Since then, every new Macintosh ships with Internet Explorer as the default web browser.

Political and moral criticisms of Microsoft's anticompetitive behavior

Some critics of Microsoft have compared its business philosophy to communism, because of Microsoft's assertions that it is acting in the best interests of consumers by protecting them from the consequences of free choice in a free market.

Security

Some of Microsoft's products, particularly Outlook (a mail reader) and Internet Information Server (an HTTP server or webserver), and its operating systems, have received much criticism from computer security experts because they have been victims of so many worms, viruses and other exploits. The company has defended its products by arguing that as the largest software company, their products are subject to more attacks, which is true in some cases but certainly not in the case of IIS, since it holds only a minority share. Security experts believe the problem is due to fundamental design decisions that were made in favor of usability rather than security. Some usability experts dispute this, saying Microsoft software is weak on that front too. For a contrarian view that illustrates Microsoft's usability advantages consult www.objectwatch.com and the book "Com+ and the Battle for the Middle Tier".

Recently the corporation seems to be taking security issues more seriously, but it remains to be seen how successful they will be at securing their software.

Advantages of Microsoft software

Most of the advantages of Microsoft software arise from its ubiquity, allowing the user to benefit from so-called network externalities. For example, the large installed base of Microsoft Office makes MS Office files the de-facto standard word-processor format, making a copy of MS Office essential for most business users.

Microsoft software is also designed to be easy to configure, allowing companies to hire lower-paid non-expert systems administrators.

Microsoft software also represents a "safe" option for IT managers purchasing software systems, in that the ubiquity of Microsoft software allows them to claim that they are following accepted best practices. This is a particularly attractive option for IT managers whose technical knowledge is minimal.

Disadvantages of Microsoft software

Microsoft software makes heavy use of software re-use. Whilst this is very efficient for rapid software development, it leads to complex interdependencies between software packages. This can mean, for example, that crashing the Microsoft web browser can also crash the operating system GUI.

The same interdependencies mean that the resources of most Microsoft software can be used from most other Microsoft software. This means that most programs can run other programs, even where this should not be possible. For example, macros embedded in documents or HTML in E-mail can run programs, allowing an attacker to take over the user's computer. Microsoft has a security stance of "permitted unless forbidden", which is hard to change, as much Microsoft software relies on this policy.

This is demonstrated in the proliferation of worm and virus programs that attack Microsoft software.

The advantage mentioned above of being able to hire less highly trained, and therfore cheaper, systems administrators is offset by two factors:

• greater unreliability means you will have to hire more of them
• Microsoft shops are more liable to security breaches, because reducing computer insecurity requires highly trained systems administrators, regardless of the operating system in use.

Hardware

Microsoft also has been involved in designing and selling hardware products where they deem it will expand their software business. An early example is the Microsoft Mouse which enabled a simple Xerox-Star, Apple-Macintosh input interface to the Windows operating system. Later models sport scrolling wheels, extra buttons, LED motion detectors and other features.

In late 2001, envying the multi-billion dollar game console market dominated by Sony and Nintendo, Microsoft released its own proprietary game console called XBox.

A relevant, critical novel is by Douglas Coupland, called Microserfs.

Microsoft .NET initiative

The .NET initiative is a major effort by Microsoft to ease the development of applications which use the internet as well as to facilitate installation problems often called DLL-hell (version conflicts of different components). See Common Language Infrastructure. Critics point out that not only are the terms ".net" and "CLI" in use to mean other things, but that Microsoft regularly overloads generic terms (e.g. "Windows", "Word", "DNS") to refer to its proprietary technology, and then attempts to control them using trademark law and patent law. They tend to view .NET as yet another Microsoft attempt to leverage its operating system monopoly into a similar monopoly on Internet applications.

Microsoft Palladium initiative

Microsoft has now launched the Palladium operating system initiative. Microsoft presents this as their solution to computer insecurity. Opponents have characterised it as another exercise in entrenching and extending their monopoly, effectively allowing Microsoft to control all uses of PC technology. In particular, they have accused Microsoft of using it as a way to combat the emergence of free software.

Microsoft earnings inflation

Factors entirely apart from technology standards could ultimately undo Microsoft's monopoly. Accounting standards, in question for some years in the United States, do not require American publicly traded corporations to declare the expected costs of stock options on their earnings bottom line. Microsoft has taken unique advantage of this, to build a solid record of earnings increases even as its stock option payouts have ballooned: The Economist reported that 1998 earnings of US$5B had been dwarfed by stock option payouts of US$23B, and that the company had actually lost US$18B - none of which appeared on its formal books or earnings reports.

Accounting standards changes in the wake of the collapse of Enron stock and of Arthur Andersen may therefore have a serious impact on Microsoft's standing.

Microsoft vs. Free Software

Microsoft acknowledges that one major potential competitor is free software, as exemplified by Linux. Microsoft has targeted free software and open source software with its Embrace, extend and extinguish strategy as revealed in the Halloween documents.

Microsoft CEO Steve Ballmer has stated that Linux is a "tough competitive force. . . . It's non-traditional, it's free and it's cheap. We have to educate people why what they pay for [our offerings] is more than offset by the value we deliver. We used to be the cheap guys. We were cheaper than Novell, cheaper than Oracle. We can't do that with this one." (Reported in CRN.com, June 17, 2002).

Ballmer addressed Fusion 2002, a Microsoft partner conference, saying: "We have prided ourselves on always being the cheapest guy on the block--we were going to be higher volume and lower priced than anybody else out there, whether it was Novell, Lotus or anybody else. One issue we have now, a unique competitor, is Linux. We haven't figured out how to be lower priced than Linux. For us as a company, we're going through a whole new world of thinking." (Reported in VARbusiness, July 15 2002).

The future

With a $40 BN cash pile, it is unlikely that Microsoft will lose its position as a major player in the computer market, no matter what the outcome of the antitrust suit.

Microsoft is working to leverage its current monopoly in desktop operating systems into new markets such as media players, server software, handheld devices, web services and video games, with varying degrees of success.

In particular, it has succeeded in displacing the Netscape web browser, and is working on displacing media player competitors such as Real Networks and Quicktime and instant messaging competitors such as AOL by bundling its own products with Windows.

Microsoft is now positioning PCs running Windows XP as a home entertainment hub.

Linux and open source software represents the greatest threat to Microsoft's domination of the computer software market. However, Microsoft's bundling, licensing and marketing policies, combined with its policy of closed software and proprietary standards, currently prevent any other system from threatening its position.

Based on recent Microsoft management comments, it appears that Microsoft is attempting to move up-market, positioning its products and services as high-value, rather than low-cost. Steve Ballmer was quoted as saying in 2002 "We are actually having to learn how to say, 'We may have a high price on this one, but look at the additional value and how that value actually leads to a lower cost of ownership despite the fact that our price may be higher,'" (Reported in VARbusiness, July 15 2002).

This retreat from the high-volume low-cost market represents a strategic change for Microsoft.

See also:

• Embrace, extend and extinguish
• Fear, uncertainty and doubt
• Halloween documents
• Microsoft antitrust case

Outside Links: Microsoft's own sites

• Microsoft web site: http://www.microsoft.com
• Microsoft Security Advisor: http://www.microsoft.com/security
• Microsoft Network (MSN): http://www.msn.com

Other sites

• Google search for "Microsoft security problems" and variations thereof
• Allegations of Microsoft financial impropriety
• Criticism of Microsoft business practices by Novell
• Interview with Steve Ballmer