Skip to comments.How Microsoft Caused the DotCom Bubble and why their Skype ‘Hail Mary’ is irrelevant
Posted on 05/11/2011 7:45:01 PM PDT by aMorePerfectUnion
Since the mid-nineties, I have nurtured a thesis about the dotcom bubble, tech bust, and the role Microsoft played in it. The opportunity to discuss it has never came up.
That is, until Microsofts purchase of Skype yesterday.
I have long argued that while Microsoft might have begun life as a software firm, it long ago morphed into something that was more a very clever IP/marketing firm with a huge tactical legal advantage that gave rise to a monopoly, rather than a true technology company.
Microsoft remains hugely profitable today, but increasingly irrelevant. Their purchase of Skype is an attempt to buy back some relevance. They are the rich, uncool fat kid at school, trying desperately to buy their way into some popularity. On a spectrum of relevance, where would you place MSFT: Are they closer to Google or Apple or Facebook or Twitter, or are they more comparable to the Maytag repairman of the tech world?
Lets back up a bit, and look at Microsofts history, including the impact they had on other technology in the 1990s.
The first PC was given to the world in 1980 by IBM. The mainframe giant looked down upon the idea of a personal computer for home or even business use. The PC was insignificant, never to replace the big iron they made. In 1981, they happily outsourced the operating system to Gates geeks, who themselves outsourced the OS code writing. By 1982, MS-DOS was released.
Embedded within that original IBM deal was the seed of Microsofts vast fortunes. Microsofts true genius was in their license agreements of MS-DOS (and Windows) to computer manufacturers. They offered a variety of different licenses, but the version that charged the least per copy included a clever kicker: Microsoft had to be paid for every machine sold, regardless of whether MS-DOS was the operating system.
Of course, the PC makers gravitated to the cheapest option. Hence, that clever licensing trick led to both a monopoly in Operating Systems and an eventual FTC and Justice department Anti-Trust lawsuit.
Thus, Microsoft had their deal with the devil: Their lightning in a bottle was not some awesome technology or brilliant breakthrough it was a legal clause that led to enormous monopoly power. That was the prime basis of their success. They pre-installed Office in Windows, creating a second near monopoly and billions more in profits. They also had all sorts of dirty tricks, like undisclosed APIs that other software developers did not know of and could not use. They bullied competitors and friends alike. But that is another discussion entirely.
[The entire article is very well written - agree or disagree, MS-fanboy or MS-hater - especially the portions about the Cambrian explosion that occurred when the Internet was born and Microsoft's domination ended]
A million flowers bloomed.
All the rest well worth reading. It is an opinion piece, but well done.
"And what of their Innovation today? Microsoft has missed just about every major trend in computing over the past decade. They missed Search, they missed MP3 players, had to buy webmail, missed user generated content, maps,blogging, online video, cloud computing, location sensitive apps, smart phones, Apps, texting, social networking, tablets, micro-blogging (ie, Twitter). On and on goes the list of latest and greatest technologies, with MSFT nowhere to be seen.
"The list of recent Microsoft innovations is astonishingly short. They were always better copiers than they were innovators; even now, they seem to have forgotten how to steal effectively. They may have bought their way into gaming, dropping several billion dollars to become competitive, develop the X-Box and buying Bungie but all in, it is hardly a winner for them.
Heck they practically missed the internet. Gates himself thought it was a fad. They aren’t an innovator, they just see what other people have come up with, and then either buy it or do another one just like it.
Built my first PC in 1982. Did lots of Ham homebrew before that. But it was my daughter in here 2nd year in college who introduced me to the web. She took me to the library on campus so I could help her with an Architecture project, while we were there she put me in front of the web of that day. At the time I was doing bulletinboard stuff but no internet. I was hopelessly hooked.
Take the TV out of my house, I would not miss it. (wife would) I could live off the grid easily, (wife could not) BUT if you took the web away, I would be in deep withdrawl. And probably would again spend time on my Ham equipment again.
The anti-trust suit had nothing to do with the that licensing scheme. It was about bundling software such as Internet Explorer with the OS. I was working at Compaq at the time and it was a spat between Compaq and M$ over our inclusion of Netscape Navigator on out PC's that sparked the FTC investigation.
Yet to be told is what these bastards did to ergonomic keyboards.
I honestly think that what Microsoft wanted wasn't Skype's software or userbase, what they wanted was the long series of communications agreements that Skype's made with tier one providers around the world, and those agreements were loose enough to be leveraged by Microsoft. Because, let's be honest, Skype's software is just a gizmo, easily reproduced with dozens of packages out there. They don't hold any magic solutions that aren't available elsewhere. But what they did do was smooze and dine what they felt to be the most critical part of real time communication over the internet - the providers themselves.
And they got some pretty nifty sweetheart deals guarantying quality of service, something that'd cost Microsoft tons to try to reproduce themselves.
Why did Office take off and Word Perfect fail? Because Word Perfect kept putting kludges on their software to try to make it better, rather than going for the WYSIWYG interface that business wanted. Why did Alpha IV fail to Access? Because they decided that they could continue with a non-windows interface rather than adapt. Sure, FoxPro and Alpha IV and even DBASE were rocketships compared to Access, but required extensive learning to do the most basic of things, whereas Access excelled at just being easy. Lotus 1-2-3 bet business users wouldn't go for the fancier interface of Windows, and died.
Could someone come along and topple Microsoft? Absolutely. Will anyone? Probably not, but you never know. Firefox and Google Chrome are massive players in the browser market today, something that Netscape could have done, but they truthfully fell behind.
Anthropomorphizing Microsoft to make a person feel better just is foolish, and completely and utterly ignores the very rich history of computers and the massive amount of companies that made the home computer a must have device. And no, Microsoft didn't create the dot com bubble, that was done by all of us who looked at the Internet as being some magical goldmine that'll simply print money in unlimited quantities. Google came out on top because Excite decided to overload their pages to entice more investors, or AltaVista who decided to reduce the number of results, in the hope of making results more relevant, and instead made it outdated. AOL who decided to control how and what people did on the Internet and virtually cut their own throat as people simply went without their interface to the world. Sure, these companies still mostly exist, but are bit players today compared to the giants.
I'll give Yahoo some credit though, every time I think they're finally dead, they somehow manage to come up with some new idea and stay alive a little longer.
"Bad competition"? LOL. I guess when the Microsoft legal, PR and cutthroat monopolistic infrastructure machine successfully undermined and sabotaged those who dared innovate as undefended startups, one could refer to those many, many, MANY victims as "bad competition."
If, that is, one was an acid-drooling THING, rather than a human being.
Or a lawyer.
Almost everyone I know under 55 has an Xbox. Though I don’t do the gaming I used to, I still use it for DVDs, Netflix and now Hulu+. Thinking about the Kinect as well... When will it get a browser??? I am still waiting for it to carry Youtube...
Utter propaganda. Where was the lawsuits against Word Perfect? The largest business word processor during the 1980's. What happened to Lotus 1-2-3, the biggest spreadsheet program for business? DBASE, FOXBASE? Come on, put up the evidence to back up your empty statements... OH, and big oil is holding back the ultra-special carburetor that will guarantee 100 miles per gallon for your F350 pickup..
Word Perfect and Lotus self destructed from greed, changing their licensing schemes and refused to migrate to Windows until it was too late, DBASE died under it's massive corporate overhead, FOXBASE launched a horribly buggy Windows compiler which they refused to fix. What about Borland? The compiler that built so much of the software? Again, it decided to include a paper on how to get to DOS to run the system, and implemented a horrid semi-windowed system that had probably the worst cut and paste ever, and then later decided to recommend that people use notepad to write their code in, and then use shortcuts to run the DOS compiler.
None of these companies were sued out of existence by the mythical legions of Microsoft lawyers. Apple, on the other hand, was quite diligent about suing just about anyone who breathed near their systems. Such as their most recent lawsuits against Amazon for daring to use the phrase 'appstore' for their...application store.
IBM gave the first PC? No, not at all.
what are you smokin jack?
Not only did IBM make the first PC, THEY INVENTED THE NAME “PC”!
now sit down.
Obviously this pathological Microsoft basher doesn't read much into their quarterly earnings reports lately. So quick to judge and overlook how many billions of R&D they have to use to keep their bread and butter products alive and customers happy. Server and Desktop OSs, SQL, Exchange, Office, Xbox and Xbox live.
For christ sakes, overall sales were 16.4 BILLION this past quarter. They must be doing something right. A lot of things right.
Considering how many tech companies come and go with fads or get bought out by competitors, to compare Microsoft were it is today, with startups is pointless. There is plenty of room for everyone these days.
Maybe a goes a little too far, but there’s certainly a ring of truth to it. Microsoft innovates just like Sears did.
They’re not even good copiers. And I don’t care what experts say. From what I can see of their coding practices, it looks like poop.
Sounds like sour grapes to me. Anyway, too bad they bought Skype, I like that program. MS always seems to buy these one-off things, then forgets about them and they vanish.
I'm curious - can you find an earlier reference by IBM than the 1967 ad for the HP 911A personal computer? Or the Sphere 1 computer systems with integrated keyboards and displays in 1975? Interestingly, three months after Sphere started selling their assembled computers (previously available as a kit), IBM sold it's first 'PC', the 5100 PC, which stood for 'portable computer' - though 55 pounds, I think, is hardly considered 'portable.'
The IBM 5150 PC, or Personal Computer, was in 1981, four years after the Apple II, the Commodore PET and the Radio Shack TRS-80, all of which were a far cry cheaper and rather plentiful by the time IBM got into the game.
But thanks for playing!
Home computing is not the only game in town. Microsoft has a HUGE advantage in businesses and organizations.
Microsoft provides the operating systems for millions of ATT UVerse set top boxes, as well as the ATT business and technical support systems. Multiply this kind of market infiltration across many large corporations and you get an idea of Microsoft’s strength.
Most amusing moment of my life, being on a destroyer, in the CIC, and seeing the Aegis system with the blue screen of death. Never figured they'd base the system atop Windows...
No, I think they vanish because Microsoft screws them up with their control freak “we will force people to use our stuff because there will be no alternative” marketing strategy.
Microsofts thinking is not “build a better mousetrap” it's “build the ONLY mouse trap”. The problem is that this no longer works as they now have competition they can't bully out of business.
I'm not a MS basher and I do like the company but there is truth to the Microsoft does not know how to innovate theory. I used to think they lost their way when they tangled with Netscape. Now I'm starting to think they were NEVER a true innovative technology company. Just look at the way they responded to the threat of Netscape competition and you quickly realize they were not interested in making a BETTER browser, they wanted to make the ONLY browser.
I agree. MS is good for the basic stuff like the OS, SQL server, Office, and that’s about it. Those things serve us all well. They try to branch out, but just never seem to be able to.
“I agree. MS is good for the basic stuff like the OS, SQL server, Office, and thats about it. Those things serve us all well. They try to branch out, but just never seem to be able to.”
The good news is MS does have lots of cash and resources to ultimately change their corporate culture and get back on the right track. The sooner the better. Hopefully Apple will bring out the best in Microsoft and vice versa.
because an apple is a PC. GOTCHYA!
I told you to sit down.
Do have to admit, you’re terribly amusing. Of course Apple was a PC (and still is.) So was Commodore’s PETs and CBMs, along with Tandy’s TRS80s (models I to III)
you ever heard the term “PC compatible”???
none of those you mentioned are.
sit boy, sit.
Sure, let's see you run Lotus 1-2-3 on your system. You'll need a 5 1/4" drive, a DOS version of 3.1 or prior (PCDOS, MSDOS, or DRDOS will work), and at least 64kb of ram. Guess what? Nothing's been 'PC Compatible' for a good decade, we do Windows now. Do I get a treat now?
your honor, may I submit one television commercial, written and paid for by apple computers...
“hi, I’m a PC. hi, I’m a mac...”
I rest my case.
do you get a treat??? um, no, you get a rolled up newspaper.
Under 55 and no XBox. FWIW