MS/DoJ - assessing the fallout of the antitrust case

The dust is starting to settle on the two-year-old Microsoft antitrust court battle, but the fallout will be felt for years to come. The proposed dismantling of the world's most successful software company represents the end of the footloose and fancy-free days of the industry and the beginning of heightened government scrutiny. With the maturation of the IT industry has come vendor consolidation and a growing need to keep dominant players from abusing their power.

US government overview of computers and telecommunications is nothing new. From AT&T and IBM to Cisco Systems and Intel, IT vendors have had to explain their actions.

Microsoft's behaviour during the court hearings has been counterproductive, however. By carrying its hardball tactics into the courtroom - and the public eye - Microsoft has been deemed "untrustworthy" by presiding US District Judge Thomas Penfield Jackson. By contrast, Intel, which has a similarly dominant position in its market, acknowledged its heavy-handed ways and settled during a recent US Federal Trade Commission investigation.

Like many Microsoft executives, Paul Houghton, managing director, Microsoft Australia, refused to accept that Microsoft would be broken up.

"We're not going to speculate as we're really confident about our position in the appellate. We're going to focus on our customers and products - we have tremendous products out this year - SQL Server, Exchange, Win 2000, Office 2000 and we will focus on working with customers and partners. We will still be spending close to $US4 billion on R&D and will be rolling out new products during all of this period," Houghton said.

"Microsoft is built on a high-volume, low-price business model and a heavy reliance on partners. This has allowed many partners to build very successful businesses on our products - and we have been able to do this by using the collective intellectual capacity of all of the units of the company. We cannot see any value in breaking that up."

From an IT vendor's perspective, settling not only gets regulators off its back, but it also avoids dragging in judges or juries to make technical decisions. Consider Jackson's definition of middleware, which he seems to confuse with applications - Office, BackOffice, Web servers, and the like. Microsoft now has to contend with a set of short-term restrictions on its "middleware" products, even as it plans its appeal.

An increase in US government scrutiny has serious implications for IT executives, who have an interest in the case both as consumers and enterprise purchasers but should be more vocal. From a corporate perspective, stable vendors that provide integrated products are preferred - but as consumers, we value choice above all.

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