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To the casual observer, Microsoft seems to have
changed its ways. Closer inspection shows that it
remains a heavy-handed monopolist

THREE things have changed for Microsoft, the world’s
biggest software company, since it was declared an
“abusive monopolist” and ordered to be split in two by
Judge Thomas Penfield Jackson last year. After an
appeals-court hearing in February, which went well for
the company, the threat of break-up seems to have
receded. Second, Microsoft has devised a new strategy,
called .NET, under which it will try to recast itself
as a provider of Internet-based software services
rather than PC-based products, and thus grab a large
share of the potentially vast new market for “web
services”. And third, even though its profits and
share price have held up far better than they have at
technology companies that depend on hardware sales or
telecoms-equipment orders, Microsoft has been doing
its best to seem to have abandoned its old
monopolistic behaviour.

It is not that Microsoft admits any wrongdoing in its
antitrust case, you understand. But it has twigged
that good behaviour may undermine Judge Jackson’s
contention that it is predatory and untrustworthy—and
might encourage the appeals court to overturn his
ruling. Playing well with others also fits with
Microsoft’s new software strategy, which, unusually,
depends heavily on open (rather than proprietary)
standards and on co-operation with other software
makers. So has Microsoft really become a kinder,
gentler company?

There is some evidence that it has. Take, for
instance, its long-standing opposition to
“open-source” software, in which the source code
revealing a program’s inner workings is made freely
available. Microsoft has only ever made its own source
code available to a handful of close allies. Last
month, however, the firm announced that it would grant
around 1,000 of its largest corporate customers access
to 95% of the source code of its Windows 2000 and
Windows XP operating systems. Unlike true open-source
software, whose openness means that bugs can be more
easily found and fixed, the Windows source code will
be made available only on condition that it is not
modified. Even so, it will help large firms to ensure
that their own software works smoothly with Windows.

Another area in which Microsoft seems to have taken a
step towards the co-operative, open approach of the
Internet is in the development of new standards for
web services, which have such quirky names as XML,
SOAP, UDDI and WSDL. Microsoft is generally deemed to
have been a well-behaved participant in the
standard-setting process—in marked contrast to the old
Microsoft, which often produced its own incompatible
versions of industry standards. This time around, says
David Winer, an independent software engineer who is
working on the SOAP standard, the company seems to
have realised that the emergence of unified standards
is in its own best interests. That does not
necessarily mean that Microsoft is a willing convert,
however. “I think the world changed, and it’s sucking
them along with it,” says Mr Winer.

In order to convince its rivals that it really does
want their products to work together, Microsoft
recently hired Dan’l Lewin to act as its ambassador to
Silicon Valley, where he has worked for 25 years at
several firms, including Apple and NeXT. Mr Lewin
insists that, when it comes to interoperability with
other firms’ products and embracing open standards,
Microsoft has changed. “This is a fundamental
movement,” he says.

Another sign of change is Microsoft’s new advertising
campaign, in which the company’s usual po-facedness is
replaced by a more humorous approach, including a
hitherto unseen ability to laugh at itself. One ad
pokes fun at Clippy, the annoying paperclip character
that pops up to provide help to users of Office, and
jokes that the XP in Office XP, the latest version of
the software, stands for “ex-paperclip”. For a company
that never normally admits mistakes and championed the
use of the word “issue” in place of “bug”, this is
quite a change.



No laughing matter
Yet despite all this, there are good reasons to be
sceptical about Microsoft’s intentions (or even
ability) to reform itself. Granting limited access to
the Windows source code, for example, may help to
soften Microsoft’s image, but it is a far cry from
embracing the open-source model. Microsoft has falsely
portrayed itself as the champion of open standards in
the past, notably during its “browser war” with
Netscape, only to revert to its old tactics later.
Might the company not simply be waiting for XML, SOAP
and the other new standards to take off, ask its
critics, before hijacking them by creating its own
proprietary versions?

Such fears were heightened last month when Microsoft
announced a batch of services, codenamed HailStorm,
that form part of its .NET strategy. Just as Windows
provides PC programmers with access to basic
functions, such as drawing on the screen or accessing
the network, HailStorm will provide similar “building
block” functions (e-mail, instant messaging and so on)
for programmers to incorporate into the software for
their web-based services.

The idea is that users will sign up with Microsoft for
HailStorm services and pay a monthly fee; this will
enable them to use web services that rely on
HailStorm’s building blocks. Microsoft hopes that this
will make .NET an attractive platform for programmers,
and thus encourage them to adopt .NET rather than the
approach based on Java, a programming language that is
being promoted by Microsoft’s rivals, chief among them
Sun Microsystems. Already, American Express, eBay,
Expedia and Groove Networks have all announced plans
to build .NET web services using HailStorm.

What is worrying, however, is that HailStorm will be
closely integrated with Windows XP, the next version
of Windows, so that once a user has logged into
Windows no further action is required to make use of
HailStorm services. Indeed, the log-on and
registration systems for Windows XP and HailStorm will
be the same. Microsoft will, in other words, be able
to turn millions of Windows users into HailStorm
users, and to offer programmers an enormous potential
audience for .NET web services. Similarly, by
funnelling millions of users into HailStorm from
HotMail and MSN, its Internet properties, Microsoft
may be able to sign up as many as 100m HailStorm users
by the end of 2003. The firm thus has a golden
opportunity to exploit the dominance of Windows to
ensure that .NET takes off. It is, as one analyst puts
it, “vintage Microsoft”.

The company is up to its old tricks in other ways,
too. Windows XP contains several new functions,
including media-playback and remote-troubleshooting
features, that previously required the purchase of
additional software. Makers of such software may now
face the same fate as Netscape—Microsoft can
extinguish them whenever it chooses. 

Windows XP also includes the latest version of
Microsoft’s music and video player, Windows Media
Player 8, which will not work with previous versions
of Windows. As well as encouraging users to switch to
Windows XP, it contains a new music-compression format
called WMA, which is being positioned as an
alternative to the popular MP3 format. Microsoft
argues, with good reason, that WMA has several
technical advantages over MP3, including smaller
file-sizes; but the fact remains that Microsoft is
using the clout of Windows to promote its own playback
software and music format. The parallels with the
Netscape case, in which Microsoft used Windows to
promote its web browser, are ominously clear.

In short, it is hard to avoid the conclusion that, if
Microsoft has changed at all, it has done so only
superficially. Inside the software industry’s
800-pound gorilla, the heart of an incorrigible
monopolist beats still.



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