December 2000

If you shake hands with the Devil, you're bound to get burned." -- origin unknown

Software developers have always walked a tightrope when it comes to profitability. They seem to live on an exponential curve: if you never "turn the corner," you stay poor and eventually go out of business. If you can ever get a single huge smash-hit product, you can make as much money as you want to. So it is only natural that a for-profit software developer would choose the platform or platforms that offer the greatest likelihood of reaching a mass audience. In the 1990s, that has usually meant Microsoft platforms, particularly the Windows family of products.

Microsoft's management knows only too well how to leverage their monopoly position. They move into new markets in a simple, four-step process:

1. They announce their intentions to promote a certain class of products, generating consumer interest, advertising hype, and investment dollars.

2. They lower the entry costs into the new market segment by encouraging a large number of software developers to write products that incorporate that particular feature or capability.

3. When that niche market is "ripe" for the picking, they declare a "winner," buy them out or coerce them into capitulating to Microsoft, and flood the market with free versions of the product (via download, preload, or bundling arrangement) to force the alternative, competiting products out of business.

4. They close the door to new development by incorporating closed, proprietary "standards" that disallow new developers into the now captive market.

So it is that companies who choose to develop for Microsoft platforms experience boom-and-bust cycles. Netscape, for example, had a huge market share until Microsoft decided to flood the market with a free internet browser they "bought" from NCSA. They "bought" it by promising to pay a percentage royalty on any Windows version they sold.... and then they refused to charge money for the Windows versions. So NCSA got basically nothing for its Mosaic product, and most competing (and future) browser makers were forced out of business as well.

This same pattern has been repeated numerous times with such applications as word processors, spreadsheets, databases, and more. By using proprietary, closed file formats, Microsoft locks-in customers and locks out developers once it controls a sub-market of the software business. The response of competing software vendors has been to either go out of business, or to move to a different niche and develop a different product line.

Well, fine, there are plenty of other markets to go after out there, if you don't mind starting over basically from scratch, having lost your customer base and the concurrent income stream from your flagship product. But a new threat is now on the horizon, a new Microsoft scheme which endangers even the ability to engage in a survival-move to new market niches. What does Microsoft call this new scheme? Security.

Yes, Microsoft, the purveyor of insecure products for uninformed people, has decided to offer a diabolical tradeoff: Let us write software APIs that require any application to be "pre-approved," they say. Let us build new Windows versions that will only run application programs that have Microsoft-approved "signatures." If you don't want viruses, they claim, you will have to give up the ability to run "foreign" (competing) applications from "unknown parties" (new competitors).

What this means is that Microsoft wants to move the entire software-development process, the entire software industry, to Step 4 above.

If Microsoft must pre-approve any software application on any Windows-based PC (namely, 90% of all new computers and pretty darn close to 90% of all computers already in service), any vendor who does not conform to Microsoft's exorbitant demands will be excluded from the software marketplace. Writing the finest applications in the world will be of zero value if Microsoft refuses to grant you a seat at the table. Microsoft will obviously use this security issue and their domineering control of the software APIs to swallow the entire Windows application market down whole. If users fail to recognize the "hook" in the Microsoft security plan, they will lock themselves into buying only Microsoft-approved products from only Microsoft-approved vendors. Innovators and entrepreneurs will be forced to go to Redmond with hat in hand and beg (and pay) for a Microsoft security signature in order to gain access to the software marketplace.

But this is a barrier to entry, which is the "signature" of a monopoly.

The fact that Microsoft is able to raise selective barriers to entry for the software market, Linux notwithstanding, is proof positive of their monopoly status. Since free software is not a commercial market per se, it cannot rightly be used as an exception in an attempt to disprove Microsoft's monopoly condition. The fact that Microsoft now proposes that it itself be the "keeper of the keys" means that it is promoting itself as a de facto monopoly not just in operating systems, but in the market for all Windows applications as well.

The only realistic solution for both providers of software and consumers of software is to abandon the monopoly platforms and move to more open platforms that do not have artificial barriers to entry. This is why OS/2 software vendors who have the business savvy to prosper in a limited market continue to make OS/2 products: they do not have someone raising barriers to eliminate them from their chosen platform. They do not have to give up and start over every few years, so they can make money on their original cash cows as long as they choose.

Let nobody be fooled by Microsoft's smarmy attempts at appearing to be a charitable do-gooder. Microsoft's offer of a security signature regime upon the entire Windows application business is nothing more than a cynical, greedy power-grab designed to outflank the Department of Justice. Software developers who thought it was safe to deal with Microsoft will soon find themselves nothing more than vassals and handmaidens to King William if the marketplace decides to submit to the so-called "security" ploy.

It was only a matter of time. A leopard never changes its spots. And a monopolist's stomach is never full.

Most recent revision: November 30, 2000
Copyright © 2000, Tom Nadeau
All Rights Reserved.