In the world of business computing, Microsoft is leveraging its strength on the desktop to take on business networking and larger-scale client-server computing - a key step in controlling the networks integrated into the Internet. The main vehicle for this has been the Windows NT operating system which has steadily gained on all competitors in the marketplace. Many worry that Microsoft is using the same kind of tactics used to monopolize the desktop to take over domination of the business community.
In entering the business market, Microsoft is quickly displacing the open standards of the UNIX operating system (sold in a variety of forms by different vendors) with its own proprietary Windows approach. At the lower end of the marketplace, involving the networking of desktops and central "servers," Microsoft is already surpassing UNIX in most markets and is rapidly displacing it in other markets. Windows NT is expected to have a 255% growth from 1996 to 1997 while all forms of UNIX are expected to barely hold even with 8.6% growth. Many analysts are already predicting that it is only a matter of time before Windows NT displaces UNIX in all but the highest levels of computers (and even there Microsoft is making inroads as will be detailed later in this report). In the area of what is called intranet servers (based on the Internet model but connecting internal networks), Microsoft has passed UNIX in sales and is expected to have over 65% of market share by the year 2000.
Part of the reason for Microsoft's success has been the fracturing of the UNIX standard in the early 90s. UNIX had been created at Bell Labs in the late 60s and the federal government had funded improvements in it throughout the 1970s and 80s, including the inclusion of Internet standards. Aggressive purchasing rules by the federal government in the 1980s prohibited purchase of any business-level computer that did not include a unifed set of open UNIX standards as an option. The open standards in the UNIX market, along with high levels of competition in hardware and software, was in marked contrast to the rise of the Intel-Microsoft duopoly in the desktop market. Unfortunately, the government weakened its role in enforcing standards in the 1990s and UNIX standards were allowed to fracture. That opened the way for Microsoft to impose its unified proprietary approach over the open, but sometimes incompatible versions of UNIX. (As a hedge, however, Microsoft had bought a 20% stake in 1989 in the Santa Cruz Operation, one of the main promoters of commercial UNIX software.)
Another reason for Microsoft's success, of course, was its very dominance of the desktop. As businesses increasingly wanted to network personal computers to workstations, servers, and even mainframes, Microsoft's position on the desktop gave it great leverage in designing operating systems to move up the computing scale. With its software and operating system on most desktops across the country, it had a ready base of software to scale into networks with people trained in their use.
But beyond the traditional advantages used by Microsoft, its growing financial and technological strength has given it new advantages to help it leverage control of the business market. Like its control of the desktop operating system, its expanding control of the software tools used by computer programmers has further assisted its expansion in the business sector. Microsoft has had a long, skillful tradition of cultivating developers on the desktop, but the need for customized software in a range of industries has only raised the importance of the actions of software professionals ten-fold.
In a sense, leveraging developer tools for broader forms of control of computing standards dates from the origin of Microsoft. Before its original deal with IBM, Microsoft had been primarily a seller of software languages like BASIC; it was the desire of IBM to include Microsoft BASIC on its machine that allowed Microsoft to negotiate its broader control of the DOS operating system. As customization of software and networking becomes integral to business computing, control of developers tools becomes an extension and reinforcement of its control of the operating system platform. Paul Gross, vice president for developer tools at Microsoft, states bluntly, "Microsoft is very focused on these 2.4 million professional developers because of their impact on multiplying the platform."
No software developer starts from scratch in creating today's ever more complex software; instead, programmers use a base of computer languages, development tools and pre-written software code in order to build the next level of software complexity. With Microsoft supplying an increasing percentage of those software tools, it is able to control the software and computer standards embedded in those development tools. Good development tools make it easier and faster for programmers but they also make such developers more dependent on the operating system and standards embedded in such tools, so whoever controls developers tools end up controlling the standards of the computer marketplace.
As the 1990s progressed, Microsoft systematically expanded control over and investments in the tools developers used within the Windows environment, thereby strengthening its hold within the platform and pushing business software developers towards Windows NT at the expense of networking alternatives. By 1997, over 65% of all software developers worldwide were using Microsoft products. Over half of all developers used one program, Microsoft's Visual Basic, as their primary development tool, with another 25% using C++ as their tool of choice. Moreover, 73% of developers using C++ were using Microsoft's Visual C++.
Microsoft had achieved this level of dominance through its usual bag of tricks from software bundling to strategic acquisitions to raids on competitors' top talent. When its main desktop and server tool competitor, Borland, seemed ready to stage a resurgence, Microsoft began distributing stripped-down free versions of Visual Basic with every copy of its word processing and spreadsheets, including in its Professional Office suites. It acquired a number of smaller software development companies (and this only accelerated with its wide-ranging spending spree on Internet development companies as will be described later). And where it did not buy companies outright, it could launch a full-scale raid on rivals' programming talent as it did in the case of Borland, eventually recruiting scores of programmers including its head of research and development (the Paul Gross quoted above). The stream of talent to Microsoft continued to the point where Borland has filed a lawsuit accusing Microsoft of using such recruits to find out about Borland's development plans and strategically undermine it.
In 1997, Microsoft has taken a leaf from its own success with Microsoft Office in launching a suite of applications tools called Visual Studio, which allows developers to easily switch between Visual Basic, C++ or Microsoft's version of the Java language. This is an especially effective strategy for developers doing corporate computing tasks which often have to deal with networks of programs needing different tools. The key is that the ease of tool integration and sophistication of developer standards will just reinforce the whole range of Microsoft tools and the developers' dependence on Microsoft platforms. One analyst in Informationweek described this "lock 'em in and tie 'em down" strategy this way: "One example is the Microsoft Foundation Classes (MFC). Microsoft locked in millions of C++ developers with its operating-system-specific framework, which made it easier to build Windows programs. The lock: While C++ source code is technically portable across platforms, MFC works only on systems that support Microsoft Windows." Microsoft's buying spree on supporting development tools just helps to make its development framework irresistible.
As Microsoft supplies the operating system increasingly used in large corporate networks and supplies the tools used by programming professionals for customizing software, Microsoft is able to increasingly "enhance" each in ways that obliterate software rivals, from makers of corporate databases like Oracle to IBM's "middleware" network management software. Microsoft has introduced its own network database product, called SQL server, which is increasingly making inroads into database markets currently held by Oracle, IBM, Informix and Sybase. Even in the largest-scale computing areas where its product cannot yet compete with their core database, Microsoft's development tools are increasingly replacing the supplementary database utilities previously sold by those companies. As one executive at Informix stated recently, "The reality is, competing with [Microsoft's] Visual Basic is next to impossible if you are a database vendor." Microsoft is increasing the capacity of Visual Basic to substitute for as many of its rival database tools as possible- absorbing more and more of the functions of their software into its own development tools.
And Microsoft's SQL server itself is coming on fast with a 40% share of the ever expanding NT database market. In order to scale its database applications to large-scale enterprises, one acquisition in its recent buying spree was Panorama Software Systems, which is supplying what is called OnLine Analytical Processing (OLAP) to its SQL Server and Windows NT platform. This new OLAP technology will be integrated with a new NT data exchange standard called Tensor - itself an offshoot of Microsoft's old desktop OLE data linking standard. Between its Visual Basic development tools, its SQL Server software and their integration into new database exchange standards in NT, many analysts are predicting increasing dominance by Microsoft in the database market.
More broadly, Microsoft is creating a whole suite of what it calls BackOffice software in order to dominate management of corporate computing and networks. As with its desktop Office, the strategy with BackOffice is to create such a seamless integrated set of tools that individual products get drowned in the integration of development tools, software and operating system. The greatest limits to Windows NT has been how many different users could be coordinated compared to large-scale UNIX systems, but Microsoft has introduced new software technology called Wolf Pack to radically expand the reach of NT within corporate networks and even mainframes.
As Microsoft expands across networks, it is embroiled in another standards showdown on how to manage exchange of data and software objects between all different kinds of machines - a fight where Microsoft is of course promoting its own standard tied to its proprietary Windows tradition (called DCOM) as opposed to the open standard (called CORBA) promoted by most of its rivals like IBM and Oracle. While DCOM does allow network management between computers with different operating systems, it is designed to work best with only Windows-based machines, meaning that the more Microsoft is able to push DCOM's adoption (through providing development tools and software tied to it), the more incentive companies will have to move towards maximum Windows use on their computer networks. Of course, Microsoft's own widely used developer tools like Visual Studio produce only DCOM software code.
While Microsoft has traditionally pushed forward its dominance through control of software, it is increasingly investing financial resources in professional training, and tilting the workforce towards Microsoft expertise. As Microsoft makes sure there are professionals available trained in its technology where its rivals often cannot, business will feel pressured to adopt Microsoft technology just to be assured of a trained workforce.
Microsoft's existing worldwide training and certification programs trained more than 1.2 million technology professionals in fiscal year 1997 as part of a program Microsoft calls Skills 2000. It reaches these professionals through an intensive combination of partnerships with computer vendors, work with commercial training centers, a free television-based training program, training sessions linked to conferences around the country and a growing network of academic alliances.
Microsoft is the only software vendor (outside fading Novell) which has its own professional certification credential. The company has worked with a variety of vendor partners and commercial training centers to establish its certification program; with 120,000 Microsoft Certified Professionals by 1997, the number had grown 250% in one year. Concentrated in the consultant services and system integrators hired by other firms to set-up their computer systems, such strategic training is magnified as those Microsoft-trained professionals tilt the buying decisions of a whole range of companies. Microsoft is spending hundreds of millions of dollars on training--thousands of dollars per person trained--on other peoples' employees in order to tilt the supply of software professionals towards Microsoft technology.
By subsidizing the training of computer vendors, it also has encouraged those companies to promote Microsoft technology in companies they work with to push support beyond market demand due to the evangelism of trained Microsoft professionals. Microsoft has spent lavishly to tie "system integrators," those companies that sell to and manage computer networks for large-scale corporate enterprises, into its technology. Beyond its traditional subsidies of training, it has begun trading cash and expanded training for equity positions in a number of the largest national integrators, including Vanstar ($2.2 billion in annual revenues), ENTEX ($2.5 billion in revenues) and XLConnect ($150 million) while creating long-term alliances with many others like Ameridata Technologies (owned by GE Capital). Microsoft's goals in these deals has been for each of these vendor partners to create expanded consulting divisions to promote Microsoft products, bluntly calling it the creation of a "Microsoft-biased" division in the Ameridata deal. Such financial equity positions give Microsoft quiet but strong leverage influencing the technology decisions of companies across the country on a day-to-day basis. ENTEX professionals alone manages 2,400 servers and 600,000 desktops for a range of corporations.
Microsoft has spent lavishly to encourage both individuals and such vendors to go through Microsoft's training program, offering tens of thousands of free vouchers and training incentives to radically expand the pool of Microsoft Certified Professionals. It has created a system of what it calls Authorized Technical Education Centers (ATEC) with its own certified curriculum and pool of instructors. Microsoft has tapped into the burgeoning commercial system of technical education centers around the country, from Sylvan to the Michael Milken-owned Knowledge Universe, to push these ATEC partners to hype its products. Many worry that cash incentives by Microsoft are turning what is billed as unbiased technical education into Microsoft marketing. "What they're doing is distracting us from being a high-quality training company that's doing marketing to promote Microsoft training, to one just promoting Microsoft in general and their products," said one ATEC operator. "And that's not what we're here to do."
Microsoft is also tying over 300 academic institutions and 40,000 students a year into its training program through its Authorized Academic Training Program It provides free technical training to teachers and educators and has shaped those academic programs to create Microsoft Certified Professionals, adding the academic stamp of approval to its own programs. Essentially, Microsoft is taking advantage of the weakness of standards in both the private and public technical education fields to mold them into subsidized Microsoft recruitment tools.
Looked at comprehensively, Microsoft is using its training programs to further reinforce the network effects already tilting control of corporate computing under its dominance. Its competitors like Novell, Sun and Oracle are scrambling to create a multi-company training network to contend with this Microsoft-controlled training system, but it is an unfortunate fact that our country's whole system of technical education is being distorted as it becomes one more tool for Microsoft's monopolistic goals.
Next: Microsoft Bids for the Internet
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