/ 26 October 2001

Uproar as MS wields its power

Microsoft is changing the way it makes money. And consumers and businesses are disturbed by the giant’s moves so far, reports Neil McIntosh

All eyes are on Microsoft this month as it launches its new flagship product, Windows XP, and begins the process of transforming itself from simple software vendor into a network-age seller of Internet services.

But, unlike the hype that accompanied Windows 95 a similarly important software launch for Microsoft the scrutiny the company is coming under this time around will be much tougher. Consumers and business customers are showing signs of rebelling against the Redmond giant, provoked by the dual concern of what Microsoft has become and what it might be soon.

Earlier this year the United States Court of Appeal elected not to split Microsoft in two after it found the company guilty of abusing its monopoly power. In the wake of that decision, Microsoft has pressed on with the multibillion-dollar launch of its latest operating system.

Windows XP, which appeared on shelves on October 25, is a major revision in the Windows’ dynasty of operating systems, which runs on more than 90% of the world’s PCs.

At the same time the company is attempting to transform itself from a software company into an Internet services company, convinced that in the future every software application will not be installed by the user on his computer, but run over the Internet from central servers.

Yet this approach has suddenly placed the company at the centre of a storm of protest from its users.

The European Commission has announced it is extending its investigation of Microsoft’s practices, amid concerns the company is repeating its assault of the mid-1990s on Netscape. The commission fears the US company is using its dominance of the computer operating system market to attack the niche currently dominated by Real, which makes software to allow live or “streamed” audio and video to be played on PCs. Microsoft is tightly incorporating its Windows Media software into Windows, while not offering Real’s software, thus forcing users who want Real’s audio and video players to download and install it themselves. The European Union is already investigating Microsoft’s behaviour in the server software market.

Perhaps worse than further regulatory interest, however, is the reaction of Microsoft’s corporate customers to a new licensing regime that the company has been operating since the start of this month. The new system, which is replacing existing methods of licensing thousands of copies of software across enterprises, forces companies to pay a subscription for system and office software, and all the subsequent upgrades, rather than allowing them to buy the same software and opt not to buy the upgrades.

The system means Microsoft can force upgrades on enterprises: if those businesses refuse, they have to pay more for their Microsoft software later on.

For information technology directors keen to keep a close eye on their systems, losing the ability to determine when upgrades are carried out on their systems is bad enough. But they have also discovered the new system costs much more than the old one, and that has prompted uproar and united action in an industry noted for its fragmented and docile approach towards lobbying.

Members of The Infrastructure Forum (Tif) in the United Kingdom are a blue-chip bunch they include 45 of the companies in the FTSE100. And, after emergency meetings to discuss the licence changes, announced in May and introduced for new licences at the start of this month, the forum has written to the UK Department for Trade and Industry demanding an investigation into Microsoft by the Office of Fair Trading.

Tif says its members, who spend about 2-million a year with Microsoft, face an increase of 94% under the new system.

Some of its members are already said to be exploring alternatives to Microsoft’s omnipresent software.

Creating more resentment is the fact that, according to some corporate information technology watchers, much Microsoft software in businesses has appeared through “creep” through pressure from users, rather than through the information technology departments.

Says CEO of Tif David Roberts: “Given that Microsoft has crept stealthily into organisations and permeated quite a variety of different IT processes and systems almost by creep, the organisations are now very dependent upon Microsoft.

It would take four years, on average, to purge one of Tif’s member organisations of Microsoft products and that would require investment of time and resources. “Nobody is going to enter into that sort of thing, nor can they afford to roll over and just sign the cheque,” says Roberts.

In the US, meanwhile, a coalition of the country’s biggest consumer groups is demanding tough action against the software giant for what they say is its continued abuse of monopoly power, made worse by features new to Windows XP.

They have several areas of concern, outlined in a damning 34-page report entitled Windows XP/.Net: Microsoft’s Expanding Monopoly. Dr Mark Cooper, director of research at the Consumer Federation of America and one of the authors of the report, says Windows XP has brought Microsoft’s anti-competitive behaviour much closer to the consumer.

“In 1995 the browser wars were for geeks. This was esoteric stuff,” says Cooper. “Five years later you have law enforcement all over the place, business customers, home customers, small business customers a variety of people very concerned.”

Cooper is happy to concede that Windows XP is an improvement over previous versions of Windows. “Microsoft has fixed one of the big problems that a monopolist gets away with: their product was unstable and buggy. Clearly, this operating system is much more stable and has a nice appeal.

“The difficulty is that the other 13 or 14 things a monopolist does have become much worse. Our point is that the system will be just as good if we take all these monopolistic practices out.”