Ten years after losing its antitrust browser battle against the U.S. Department of Justice, Microsoft continues to dominate some markets, swings and misses in others, and serves as an example of what not to do for competitor Google.
Ten years after losing a bitterly contested antitrust browser battle to the U.S. Department of Justice, debate continues as to whether Microsoft was tamed by the legal rebuke or freed to treat it like a speed bump.
In April 2000, U.S. District Court Judge Thomas Penfield Jackson ruled that Microsoft violated federal and state antitrust laws and ordered the company to decouple its operating system and browser technology, pay hefty fines and undergo years of scrutiny to prevent future market monopolizing. Now with the key stakeholder in the trial, Netscape, gone and Internet Explorer competing with open newcomers such as Firefox and Google Chrome, the ramifications of the years-long trial continue in the European Union for Microsoft ... and now Google.
Microsoft today remains intact -- reporting in January record revenues of nearly $20 billion for its second fiscal quarter -- but the 2000 ruling has meant more choices in the browser arena and enabled an industry to innovate around technologies that many felt Microsoft attempted to control in a closed environment, according to industry watchers. For others, not much changed and Microsoft continues to capitalize on its market strengths, pummeling competition where it can.
"The potential was there to shatter Microsoft. I envisioned a whole new world as seen through my IT goggles," says Greg Topf, director of IT at NewBay Media in New York City. "I knew Microsoft was always the 800-pound gorilla. I really figured major changes would be coming, the implications from the ruling really held the potential to cause Microsoft to totally re-architect itself. Honestly, the whole change was a lot smaller than I envisioned."
Microsoft, which declined to comment for this story, has lost some market share to competitive browsers, yet the company seems to be making strides with its plans around IE 9 and standardizing HTML5.
"Microsoft has shown they really want to lead the way with HTML 5 and not follow others with innovation. Their leadership here will help Microsoft deliver IE9 as a truly modern browser and demonstrates how seriously they are taking this effort," says Forrester Research analyst Sheri McLeish. "From the browser perspective, people can have multiple browsers and it is important Microsoft innovate in this technology to stay as close to customers as possible."
And Microsoft continues to dominate with its Windows operating system, holding 91% market share, according to Net Market Share, and seeing eager anticipation and accelerating adoption of the latest revision, Windows 7. According to a 2009 report by McLeish, 80% of enterprise customers use some version of Microsoft Office for productivity and collaboration, with 8% choosing alternatives. And many are anticipating adopting Microsoft Office 2010 to meet emerging needs, according to Forrester.
"Microsoft continues to leave its computing fingerprints on most desktops," McLeish says. "But the scrutiny ensured Microsoft couldn't monopolize the market so now companies like Google can also make a concerted effort to own the desktop experience from browser to application to operating system."
One positive shift that might not be apparent in market share numbers is Microsoft's commitment to interoperability with third-party and open source systems.
"Microsoft has become more sensitive to the broad software engineering community in the past 10 years and realizes that the monopoly it was trying to hold in the '90s isn't healthy for the company or the industry as a whole, from political, financial, technical, legal and ethical perspectives," says Ian Rousom, who works in infrastructure design engineering for Lockheed Martin Enterprise Business Services in Denver.
Rob Enderle, principal analyst at the Enderle Group, points out the company's internal R&D efforts as well as an internal Linux group devoted to Microsoft's "massive effort with interoperability." In the 1990s, Microsoft pushed its closed environment, requiring hardware makers to meet its specifications, but this century Enderle says the company realized the potential to innovate faster by working with others, even competitors.
"The DoJ and the EU served as a slap in the face to Microsoft to lift its head up and see what was happening in the world of technology outside of its R&D," Enderle says. "Microsoft in the 1990s seemed invincible, but the case allowed other products to come to market to address challenges, faster than if one company worked on them, and now Microsoft seems a bit less arrogant because if you hit someone in the pocket hard enough you will force them to change."
One thing the lawsuit didn't change was Microsoft's ambition to create a significant presence in many markets.
"Windows Mobile represents one of the tougher failures, because they just completely didn't do it right. The Zune was positioned against Apple, in an attempt to be relevant, but didn't take off as hoped," says Jonathan Edwards, research analyst covering enterprise communications infrastructure at IDC. "Some of the company's attempts against competitors have not really worked because they are trying to be in every market or they saw the writing on the wall too late."
For IT professionals, worse than misfired product efforts is the fact that little has changed with the software giant. The company, while committing in part to standards efforts, hasn't done enough for some customers. And licensing complexity still dogs Microsoft as simpler options, such as software-as-a-service, for IT organizations continue to emerge.
"Microsoft still needs to learn to be less proprietary. If every software company in the world opened themselves up to standards, it would be a lot easier place to live in," says Craig Bush, network administrator at Exactech, a maker of orthopedic implant devices and related surgical instrumentation, in Gainesville, Fla. "[Microsoft] also needs to improve their ridiculously complicated licensing structures. Some of the software applications I administer are so hamstrung by the licensing that it's extremely time-consuming to work with them."
Others think that Microsoft made some headway in its browser technology, but hasn't achieved what competitors have when it comes to the user experience on the desktop. For instance, the company may offer the choice of other browsers, but Microsoft still requires IT pros tap IE to get there.
"I find it ironic to start up IE to download a new browser, kind of like saying, 'Thanks for the ride to Chrome, I'm done with you now!'" says John Turner, director of networks and systems at Brandeis University in Waltham, Mass. "Microsoft will always be suspect in that way. Every time I install a fresh copy of Windows and start IE so I can download Firefox or Chrome, I cringe at the ads and pop-ups Microsoft puts in to try to get me to stick to IE."
Naveed Husain, CIO at Queens College, a City University of New York public educational institution, says despite efforts Microsoft isn't innovating as well as competitors. Husain says the trial didn't change Microsoft.
"I think Microsoft has slowed down, and it is now becoming the IBM of yesteryear," he says. "SharePoint and Windows 7 are now the leading products for Microsoft. There seems to be less movement on the side of innovation."
One thing Microsoft's struggles with U.S. and European governments does well is serve as a warning to current industry darlings such as Google.
"For Microsoft, the company was so big, so successful that it became a target. Now with scrutiny from the courts, the company has adjusted internally and knows how to walk the fine line between being aggressively competitive and monopolizing a market, so the ordeal probably made it a stronger company," Forrester's McLeish says. "With Google's success as a search presence in people's lives, it was certain to make the company hunger to extend its business and develop an online platform for communications and collaboration, enabling Google to step up and become as gigantic a presence now as Microsoft was in previous decades."
The difference between the companies remains that in its heyday Microsoft pushed a closed environment, and Google from inception sold itself on open environment, seeking input for shared collaboration. But recently the company has experienced its own antitrust probes in Europe. Industry watchers say that if others don't notice Google's attempts to own the desktop, Microsoft would be more than willing to point such details out to authorities.
"Once you get on the EU radar, I'm not sure there is an easy way to get back out of it, but if you look underneath the FTC investigation of Google [Buzz and consumer privacy] and the ongoing issues with the EU, Microsoft has been part and parcel to making that happen," Enderle says. "Microsoft has gotten much more aggressive in terms of lobbying the government, and in an effort to create a better defense, the company has gone on the offense."
While industry watchers say Microsoft and Google will continue to deal blows at each other in any way possible, they point out that the fact that Google is equipped to truly compete with Microsoft proves the lawsuit made a significant difference to the high-tech industry.
"Google might not have gotten as much funding as it did or taken off with consumers if Microsoft wasn't revealed to be vulnerable. Google's focus on Microsoft wouldn't have occurred if it hadn't been for the antitrust lawsuit," Enderle says. "Microsoft thought it was above the law, but the lawsuit proved it was vulnerable, opening the opportunity for Google to bring something new to the market."
Do you Tweet? Follow Denise Dubie on Twitter here.