Industry prepares for post-settlement Microsoft era

Canadian industry experts say the toothlessness of the proposed settlement between the U.S. government and Microsoft Corp. makes its adoption irrelevant.

The consensus is that the agreement reflects a Republican exit strategy in a suit brought by a Democratic administration — and before the U.S. economy cratered. Whatever the reason, the deal seems to be a victory for Microsoft.

“It really seems to be a slap on the wrist,” says Michelle Warren, a PC analyst for Evans Research Corp. in Toronto.

The five-year pact, which was announced on Nov. 2, stipulates among other things that PC makers can install other vendors’ applications without fear of retaliation, that Windows must be sold to all on the same terms and that application programming interfaces (APIs) must be shared with rivals. Microsoft was able to protect its source code and has free reign to embed functions in Windows OS. At press time, about half of the states that were party to the suit are holding out for further concessions.

Theoretically, the agreement could affect Microsoft on two fronts. By having access to Microsoft’s APIs, independent software developers will be able to write more stable and nuanced applications to run on Windows OSes. PC makers also will have more freedom to configure desktops with Microsoft competitors.

The Achilles’ Heel of the agreement is that it doesn’t exploit the court’s finding that Microsoft is an illegal monopoly. This lapse will make it easy for the Redmond-based company to work around the agreement’s stipulations, analysts say. Critics also say the agreement is superfluous because Microsoft had already moderated its behavior when it feared that it would be broken up. The bottom line is that the pact covers things the company is essentially doing on its own.

Having the APIs available would enable outside developers to write better, more stable applications, says Warren Shiau, a software analyst for IDC Canada in Toronto. However, he said that is far cry from opening the actual source code and other steps that would more likely create meaningful competition.

“I don’t think it is actually going to change things,” Shiau said. “There are considerably more things involved in an application being successful than APIs being there and available. People can write instant messenger or media player apps for .XP, but would they actually be successful? I’m saying Microsoft has the power of being the monopolist.”

There are some who feel that the agreement could indeed lead to more competition, at least around the edges of Microsoft’s central franchises. “Those companies that develop niche vertical, OEM-type or custom software applications that are not offered by or not considered core by Microsoft should remain generally unaffected by this settlement,” said a Canadian software development executive who requested anonymity. He echoed the universal opinion that Microsoft is likely to find a way to meet its objectives, regardless of the settlement.

That reasoning is similar on the desktop front. Though companies will in theory be better protected against retaliation if they displace Microsoft icons, the reality is that the company will continue to dominate. “PC manufacturers have the ability say to say to Microsoft, ‘No, we don’t want to have the computer loaded the way it was loaded.’ Will they actually do this? The reality may not actually match what could happen,” Shiau said.

Dell, Hewlett-Packard and IBM refused to comment for this story. Compaq has always had a strong relationship with Microsoft and has long shipped units with other configured with other company’s software, says Ralph Hyatt, the vice-president of the access business group for Compaq Canada. For instance, he said, Compaq ships with AOL on the desktop, which competes with Microsoft’s MSN. “We have certain market power ourselves,” he said.

Trends in the world of computing and the Internet may contribute to a moderation of Microsoft’s traditional behavior. Observers report a general move toward a more collegial attitude by the company. In addition to the desire to stay intact, Microsoft needs to have as many skilled developers as possible write for the emerging .XP and .Net projects.

“Microsoft in the past really tried to actively and aggressively indoctrinate and persuade developers to develop only for Microsoft,” says Alister Sutherland, the director of software for IDC Canada. “Now they probably are being a little less aggressive in that regard, a little more freewheeling. They have got to be seen as modifying their behavior.”

The anti-climatic reaction to the agreement and the last minute wrangling is commanding even less attention in Canada than in the U.S. “It does affect us, but it is not as big an issue [as in the U.S.], says Warren. “It’s more peripheral.”

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Jim Love, Chief Content Officer, IT World Canada

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