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Is Microsoft changing its stripes?

Is Microsoft changing its stripes?

Now that Microsoft's six-year anti-trust battle is over and the company has hammered out historic partnerships with bitter rivals Sun Microsystems and Oracle, is the vendor on a path to becoming a kinder, gentler industry titan?

"I'm not so sure kinder and gentler is the starting point to describe Microsoft. It's more like being more pragmatic," an analyst with Illuminata, Jonathan Eunice, said. "Pragmatism means companies like Microsoft, Sun and Oracle can somewhat bury the hatchet and work together, but it's certainly not warm feelings all around. It's an enlightened self-interest."

The pragmatism, which has been nurtured in the four years since Steve Ballmer took over as Microsoft's CEO, and the heightened self-interest have been born from changes in the industry and the economy.

"Don't mistake [these partnerships] for altruism. It is forces in the marketplace that the industry has to respond to," says Jonathan Zuck, president of the Association for Competitive Technology, an industry group that backed Microsoft during its anti-trust trial and in May added Oracle to its list of 3,000 members. "It's a maturation of vendors as well as customers. The customers are beyond gee-whiz and now have platforms that need to work together. They are demanding it from the vendors."

Those demands show that end-users have soured on the acrimonious battles between Microsoft and its rivals that have stymied interoperability and raised network costs.

Microsoft, Sun and Oracle hope their partnerships can correct those trends.

Experts say Microsoft has not so much changed its spots as it has adapted to prevailing attitudes and realized that partners, rivals and end-users now share a portion of the driver's seat Microsoft hogged for the past decade.

"The '90s were a great decade for Microsoft in that it set the standard and others followed," an analyst with research firm Directions on Microsoft, Paul DeGroot, said. "But with the rise of the Internet and rising concerns over Microsoft's dominance, people saw the other side of the coin in that if they let Microsoft set the standard, it would be hard to have any choices."

It's the waning of that dominance that has Microsoft in a friendlier mood, experts claim. The company is partnering and bowing to customer demands because of pressure from Java development tools, alternative operating systems such as Linux, and to the emergence of Web services.

"We collectively think all of this partnering is a good thing," program manager and directory services architect for Johnson Controls, Steve Linstead, said. "If these partnerships work out, it will help our interoperability issues substantially. If Microsoft and the others truly make the customers' needs their focus, that would be the Holy Grail for us. But words without action are meaningless."

Most of what exists is words in the Sun-Microsoft partnership, which was signed in April and promised to improve interoperability among their products.

Sun's Scott McNealy said recently that Sun and Microsoft would launch the first phase of their partnership later this year. "We are going to try to solve single sign-on ... so users can log in to the net once without having to remember multiple passwords and they can have their authentication travel across Sun and Microsoft environments," he said.

McNealy was short on detail, but rival IBM recently said its single sign-on software would support both Liberty Alliance specifications, which Sun supports exclusively, and WS-Security, which Microsoft supports exclusively. The Sun-Microsoft tandem could move to neutralize IBM's advantage and in the process solve one of their interoperability issues.

Microsoft said its partnership with Sun, which included settlement of their pending litigation, and a similar legal settlement last year with AOL Time Warner, had cleared hurdles that were blocking future product development, Microsoft spokesman, Jim Desler, said.

"Since the start of the anti-trust trial we are five years older but 10 to 15 years wiser," Desler says. "Interoperability is more important.We are hearing that from customers." And feeling it financially, which some end-users claim is another force acting on Microsoft.

"They are having a harder time making money off their core products so they need to be that gentler giant," manager of information services for Sharp Microelectronics of the Americas, Bruce Elgort, said.

Microsoft is feeling the financial pinch as year-over-year revenue gains shrink, desktop operating system and Office upgrades slow, and price slashing is used to win sales.

Financial analysts forecast a mere 5 per cent increase in revenue for fiscal 2005 (which began July 1) over this year's estimated $US36.5 billion, which is a far cry from the double-digit growth Microsoft has enjoyed.

Microsoft is discounting to spur sales including rebates as high as $US15,000 to small businesses as an incentive to buy Windows XP, according to analysts. It's also offering a 60 per cent discount on software to Paris in an attempt to cool its interest in open source alternatives. Microsoft's efforts and its partnership with Sun highlight a battle Microsoft hasn't experienced for some time.

In fact, Microsoft lost a contract to Sun, which has long struggled with its identity as a software provider, to supply Allied Irish Banks, Ireland's second-largest lender, with operating systems and productivity software for 7500 personal computers.

It all adds up to Microsoft having to redefine itself and its relationships within the industry.


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