Microsoft still top of heap, but unlikely to be as powerful

First published in Business in Vancouver The high-tech office column, Issue #612, July 17, 2001

by ALAN ZISMAN (c) 2001

The news was good for Microsoft this week (as I write): a U.S. appeals court had thrown out much of Judge Jackson's antitrust judgment against the company, including his recommendation that the software giant be split up.

While Microsoft has cause to celebrate, I suspect that the company will never have it as good as it did in the last half of the 1990s. And this is regardless of the ultimate outcome of its battle with the U.S. Justice Department and other legal adversaries.

During that period from 1995 to 2000, Microsoft had unprecedented power to define the direction of technology. The Windows 95 operating system and its successors ruled the desktop, relegating Apple's Macintosh to a few modest niche markets, despite its continued elegance and ease of use.

Microsoft's Office owned the market for business productivity software, with once-fabled competitors such as Word Perfect and Lotus 1-2-3 hanging in with single-digit market shares.

Microsoft's power was such that it was perceived to have "saved" Apple by deigning to continue to develop Office for the Macintosh.

Admittedly late to catch on to the appeal of the Internet, Microsoft came from behind, rapidly demolishing Netscape's 80-per-cent share of the Web browser market.

While still facing competition, Microsoft was a major player in markets for network operating systems, enterprise databases, even games. Other technology companies seemed to vacillate between fearing that Microsoft would compete with them and hope that the company would choose to buy them out.

But even after winning in the courts, Microsoft faces tougher challenges in these next five years. While the company remains a giant, it may not be the 800-pound gorilla for much longer.

Part of it is consumer ennui, combined with a soft market. While neither Windows nor Office is perfect, users are less excited about upgrading to new releases. Microsoft will still be able to boast about large numbers of people using new versions of these products, but the bulk of these customers will be getting them pre-installed on new computers, which brings in less revenue. As a result, Microsoft is flailing away in all directions, looking for a new business model. Perhaps software rentals. Perhaps providing services online. Or maybe it's time to crack down harder on software piracy.

(Some evidence: in an effort to push users to upgrade to newer versions, Microsoft has dropped support for Windows 95 and has announced that it will be dropping support for Windows 98. As well, it has said it will be spending US$500 million dollars to promote this October's Windows XP release. Get ready for the hype!)

While the open source Linux operating system has not replaced Windows on many desktop computers, its share of the network server market is growing faster than Microsoft's products. The result is a shrill attack by Microsoft representatives on the General Public License used by many open source developers. Ironically, Microsoft itself has been using open source code in its own software and to run its Web services.

Last year, Microsoft announced that they were "betting the company" on a vision called .Net ("dot Net"), an ambitious-sounding future where Microsoft will be a behind-the-scenes provider of online services to customers ranging from home users to large enterprises.

If I sound vague, it's because I am. It's not clear to me how or when .Net will evolve.

Despite the lack of clarity, there seems to be a widespread suspicion of Microsoft's plans. Perhaps it's the result of too much downtime on Microsoft's Hotmail e-mail service. Or security holes in Outlook.

Regardless, few seem anxious to "bet their companies" on Microsoft's vision.

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Alan Zisman is a Vancouver educator, writer, and computer specialist. He can be reached at E-mail Alan