One of the many ironies of the Microsoft antitrust trial is that its duration seems destined to coincide precisely with the realisation that monopoly power in the IT industry is on its way out. Although this likelihood can't be used to defend against anything that Microsoft may have done in the past, the increasingly competitive nature of the IT industry can't help but affect the mind of Judge Thomas Penfield Jackson.
The history of monopoly power in the computer industry is actually remarkably straightforward. It all began with Tom Watson Sr, who learned the fine art of crushing competitors while selling for the then-notorious National Cash Register Corp. By all accounts, the ruthlessness of IBM in the 1920s and 1930s makes Bill Gates and company look like Santa Claus. In a lax antitrust environment, Watson quickly wiped out nearly all of IBM's once numerous electromechanical equipment rivals.
To its great credit, IBM and Tom Watson Jr managed to maintain this near-monopoly position through the long transition to fully electronic computing, creating the mainframe colossus of the 1960s and 1970s. Since then, monopoly power has been steadily and inevitably dissipating. First came minicomputers, where IBM could never get more than a third of the business. Then, of course, came the PC and IBM's fateful decision to essentially pass its power on to Microsoft and Intel and, much less directly, to Cisco.
As great as the power of these three companies is today, it's still restricted to a few relatively narrow industry segments that account for only a tiny share of total industry revenue. Moreover, even the combined global power of the three giants is nowhere near what IBM alone enjoyed in its heyday. Clearly, the computer business has become more competitive over time. But now the internet has emerged to finish off the job.
Already, the emergence of non-PC devices and the always-pesky plug-compatible chip competition have helped confine Intel. Now, the accelerating shift from packaged software to Web services promises to rein in Microsoft's once unbounded ambitions. Lastly, the shift from in-house corporate networks to public carrier services will inevitably loosen Cisco's still-iron grip on the data-communications-equipment industry. All three companies should continue to thrive mightily, but their power has already begun to ebb.
People often ask who the next Microsoft or Intel will be. The simple answer is no one. Although there will certainly be many huge new internet companies, there probably won't be any major new monopolists. No company will be able to control internet transmission, content, commerce or access devices, although Microsoft and Intel still have a slim chance to eventually gain control of the Web server business.
The reality is that one of the main reasons IBM, Intel, Microsoft and Cisco have grown so rich is that their customers have been so locked in. Software compatibility has always been at the heart of sustainable IT monopolies. But on the Web, software is subordinate to services, and services are much more difficult to control. Judge Jackson's dilemma is how to deal with today's still-powerful Microsoft monopoly at the very moment it becomes clear that it should eventually fade away.