Is Microsoft bad for business?

Microsoft is unquestionably the most influential player in the IT industry. Simply uttering the word Microsoft can trigger emotionally charged (and often stock) outbursts from the most sedate people. A PR challenge if ever there was one.

There are those that regard Microsoft as the corporate manifestation of Beelzebub, and those that in some way or other make money from Microsoft’s existence, and so are sympathetic to its cause. In keeping with things digital, people either love or hate Microsoft.

But before we establish the extent to which Microsoft is bad for business, let’s establish whether Microsoft is simply bad.

Microsoft is the biggest boy in the school playground. It is a burden that someone has to carry, whether they like it or not. Thus we cannot blame Microsoft for being number one in the market. But what if this big boy goes around bullying the smaller boys? Many believe the teachers (ie government) should intervene. But even after a vigorous reprimand the bully will most likely resume service when out of the teacher’s eyeshot. Another solution is to let nature take its course. The smaller boys may get to a point where they collectively decide to deal with the bully if he becomes intolerable. This is likely to be a more effective remedy in the longer-term.

There is no question that Microsoft flexes its muscles to full effect. But if we look at the world of sport, which isn’t so different from business, isn’t that just the nature of the game? The interventionalists believe that the law should rein in Microsoft. The free marketers believe that Darwinian principles will dictate what is best for the market. Many will be surprised to hear that IBM was considered Microsoftesque in its practices some decades ago. Perhaps in years to come, people will be surprised to hear that Microsoft was once like Google, or whoever takes over the ‘most-maligned’ mantle. So in a market as volatile as IT, Microsoft’s dominance may only be a passing phase. In this light Microsoft is neither good nor bad. If you don’t agree, then you probably subscribe to the philosophical school that regards man-eating sharks as bad and fluffy little newborn puppies as good.

So is Microsoft bad for business? Well when I started out in IT, the combined key press ‘Control + C’ resulted in different effects depending on the application in use. In one application it would mean ‘copy the highlighted text’. In another it would mean ‘format the hard disk’. This in part made the pre-Microsoft era of IT so exciting. Nonetheless I am grateful to Microsoft for standardising the desktop so that I no longer have to carry application specific function key overlays.

This standardisation of the desktop has also delivered the benefit of user portability. Staff can quickly get up to speed on new Windows applications because they immediately know how to, for example, open files and look up the help text. MS Office is the de facto standard for office document formats. This enables organisations to communicate seamlessly with each other. Microsoft knows this and so prices its offerings just short of the defection tipping point.

Microsoft’s lack of innovation is also good for business. Their skill is in commercialising other people’s innovations. As cruel as this is, it ensures that good market research and robust funding underpin the product. The innovator in a rush to get a return on their invention may not have thought through the commercial and marketing aspects of the product. The consequent impact on their forecast cash flow may result in both the product and the supplier coming to an untimely conclusion, leaving you the buyer ‘high and dry’. ‘Nobody ever got fired for buying IBM’ was a truism several decades ago. The same applies to Microsoft today.

Some aspects of Microsoft’s business practices are to be frowned on; most notably its attempts to bundle everything into the operating system. Once government lawyers get around to understanding what an operating system is supposed to do, they will conclude the associated trials with greater speed. Mind you, on reflection that is not necessarily in their interests either.

Microsoft has gone to great lengths to make its software backwardly compatible. This is to be applauded as it allows old applications to run on newer versions of MS Windows. The downside is that the ‘undocumented security features’ of older versions of Windows and Internet Explorer remain in place. Given Microsoft’s foray into anti-virus software it might appear that it is creating its own business ecosystem.

Open source, in essence free community produced software, is strongly disliked by Microsoft. It undermines the software industry and is used by the ABM club as a weapon to niggle Microsoft. ABM, by the way, is a club, which Anybody But Microsoft, can join. For many techies, open source is a religious cult sweeping the industry. In reality it is amateur-hour software development sponsored by Microsoft’s rivals. Should they lose interest in it, then open source is likely to revert to sub-industry standards. So Microsoft may actually be acting in the interest of business by weeding it out.

As mentioned, Microsoft has worked out how hard to squeeze its customers pricing-wise before they start to squeal. Microsoft has calculated the cost of moving from MS Office to an alternative solution, and has priced its offering just below the squeal-point.

Microsoft might be seen as evil by many organisations, but perhaps uncharitably, one can safely say that it is a necessary evil. MS Office doesn’t really deliver competitive advantage, but its absence will certainly be the source of competitive disadvantage. Having said that, Microsoft is venturing into the enterprise applications marketplace, which is more associated with Sap and Oracle. There is a competitive advantage in using this type of software. However its use across the organisation is akin to outsourcing one’s corporate nervous system. Some may feel that this offers Microsoft too much control over its customers. Microsoft could now potentially squeeze them beyond the squealing point, because by controlling the nervous system, it can effectively control the company’s ability to squeal. I am sure the corporate paralysis market will be attractive to predatory IT vendors. For this reason, I have reservations about Microsoft’s recently announced tie up with Sap. In any case, whether this is good or bad for business, it is the responsibility of the boardroom to ensure that their relationship with their strategic IT vendors is one of buyer-supplier rather than predator-lunch.

 

This article appeared in Ade McCormack’s Boardroom Debate column in the Financial Times in May 06.

 

Ade McCormack is founder of Auridian (www.auridian.com) and author of 'IT Demystified - The IT handbook for business professionals' (available from the Auridian website and good business bookshops). As well as his column in the FT, Ade consults on business-IT matters and is consultant editor of IT Leadership.