Is Microsoft successful? The answer is a resounding yes. Best known for its Windows Operating System—utilized on more than 90% of personal computers globally—Microsoft is the world’s largest software developer (“United States v. Microsoft,” 2005). In the early 80s, Microsoft offered a glimpse into the future—with a computer on every desk of every home—a revolutionary new vision that would change the way people lived. In 1985, founders Bill Gates and Paul Allen introduced their first operating system—Windows. Remembering commands and typing them into prompts was a thing of the past. Windows allowed users to simply click an on-screen icon to execute a desired command—opening the door to millions of previously intimidated consumers. In addition to selling millions of copies of its Windows software around the world, Microsoft also profits from its online service—MSN, a cable news channel—MSNBC, and its successful XBOX video game system.
But has Microsoft’s success come at the expense of others—namely its competition? In 1998, the U.S. Justice Department accused Microsoft of operating under a monopoly, stating it “maintained its monopoly power by anticompetitive means” (“United States v. Microsoft,” 2005). Microsoft bundles several features into its Windown operating system—including Internet Explorer and Windows Media Player—making it almost impossible for others to compete. Since then, other companies have followed—such as Sun Microsystems, Novell and AOL Time Warner—filing antitrust suits against Microsoft that would be settled out of court.
Today, Microsoft is under pressure once again, but this time it comes from abroad. In March of 2004, the European Union (EU) fined Microsoft $613 million for antitrust violations, stemming from its Windows Media Player application (“United States v. Microsoft,” 2005). Additionally, Microsoft was ordered to release a new version of its poular Windows XP interface—this time without its Windows Media Player. The verdict of the U.S. and European Courts might depict an unfair advantage, but on the contrary, Microsoft gained its market share by simply out-performing everyone else—and will continue to do so far into the future. Through the years, Microsoft has been commited to providing its customers with cutting-edge technology that would help them realize their full potential. Its strategy of bundling sofware is geared directly towards the consumer—providing everything in a single package. The competition is threatened by Microsoft’s success—and always will be—so it must continue to develop new and innovative products that will keep it ahead of the game.
John Sculley—former CEO of Apple Computers—had no idea what he was giving away. Not realizing its full potential, Sculley sold the Windows technology—which was originally developed by Apple Computers—to Microsoft in exchange for the development of certain applications. Despite a lackluster performance with its first release, Microsoft continued to push forward. After removing the bugs which plagued its first version, Microsoft was ready to introduce its newest operating system—Windows Version 3.11—which marked the beginning of the Windows legacy. The release devasted competition—none more than Apple Computers—and no other company has been able to compete with Microsoft since.
Any company can work to get ahead however, only a select few are able to stay ahead—Microsoft being amongst them. Through the development of cutting-edge technology, Microsoft aims to help its customers “realize their full potential” (Microsoft, 2003). In its effort to stay ahead, Microsoft is facing accusations—both current and past—of violating competition laws. Commonly referred to as antitrust laws, they legislate against trade practices considered unfair and/or those that undermine competition. Penalized for its success, Microsoft has been in and out of courts for more than a decade, and yet its position atop the industry remains unchanged. Beginning in 1991, when it was intitially investigated by the Federal Trade Commission, and continuing to more recent antitrust suits by the European Union, Microsoft is constantly scrutinized for simply being the best.
Previously, the U.S. Department of Justice also filed suit for antitrust violations. It accused Microsoft of thwarting competition by bundling its Internet Explorer browser into Windows, and consequently, not giving competitors such as Netscape a chance to compete. This brings a question to mind. Who is Microsoft ultimately responsible for? Is it to the consumers? What about its employees and shareholders? Does Microsoft have an obligation to its competition?
First and foremost, Microsoft’s main responsibility is to the consumers—as they purchase its products. Microsoft should also take care of its employees—since they develop the products for the consumers. And finally, Microsoft has a responsibility to the shareholders—to increase the value of the company. In attempting to fulfill its obligation to the consumer—by equiping them with all the required essentials—Microsoft is consistently repremanded and ordered to make accomodations for its competitors. Advocates argue that Microsoft is violating its responsibilty to the consumers—by not allowing them to choose between alternatives (“European Union says…,” 2005).
However, if ordered to unbundle its operating system, Microsoft would essentially be delivering an inferior and/or incomplete product to consumers. Consequently, this results in higher costs for consumers—since they would have to purchase additional software a la carte—and meanwhile, putting more money into the pockets of the competition. Microsoft knows what consumers want and that has been fundamental to its success. But to remain successful, it must work continuously to develop innovative products.
Growing to dominate the industry, Microsoft has no direct competition whatsoever. But that does not mean it can relax. On the contrary, Microsoft must work even harder to maintain its position, as it seems governments and companies alike—want nothing more than to see it topple. Hence, the future of Microsoft rests solely on its ability to continuously develop innovative products.
Why is innovation so crucial for Microsoft? In a recent antitrust suit, the European Courts ordered Microsoft to release a new version of its Windows XP platform—called Windows XP Home Edition N—that did not include its Windows Media Player (Pruitt, 2005). In addition to providing consumers with a variety of choices, the decision will also make it easier for multimedia developers—such as Quicktime and Real Networks—to compete with Microsoft.
This is where innovation becomes crucial. Since Microsoft can no longer bundle the Media Player into its operating system, it must provide consumers with something its competition does not. Microsoft has the luxury of a brand name—one that is recognized worldwide—so it must incorporate innovative features into its Media Player to get consumers to buy it. If it is successful, then Microsoft will see an increase in profits—since the Windows Media Player will sell separately. But if Microsoft is not successful—and its competition does it better—consumers will ultimately lose confidence in Microsoft, and will seek other alternatives in the future.
Being the best is expensive—especially in the case of Microsoft. In the last decade alone, Microsoft paid over $1 billion in legal fees and settlements for violating antitrust laws (“United States v. Microsoft,” 2005). Accused of operating its business in a manner that curtails competition, Microsoft has been in and out of courts with numerous entities—both public and private—paying a price for its success. Microsoft is successful at what it does—developing innovative products and outperforming the competition—despite its portrayal as having an unfair advantage. In this period of increasing government regulations, Microsoft can adapt and remain successful—but in the end—it is the average consumer that pays the price.
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Microsoft. (2003). Mission and Values. Retrieved June 26, 2005, from http://www.microsoft.com/mscorp/mission/
Pruitt, S. (2005, March 29). Microsoft agrees to European Union antitrust changes to Windows. Infoworld.com. Retrieved June 28, 2005, from http://www.infoworld.com/article/ 05/03/29/HNwindowsn_1.html?OPERATING+SYSTEMS
United States v. Microsoft (2005). Wikipedia Online Encyclopedia. Retrieved June 24, 2005, from http://en.wikipedia.org/wiki/Microsoft_antitrust_case#Settlement
Webb, C.L. (2004, October 1). Microsoft to Europe: Don’t be cruel. Washingtonpost.com. Retrieved June 26, 2005, from http://www.washingtonpost.com/wp-dyn/articles/A64766-2004Oct1.html