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... sell NT servers using Intel chips, it is heavily promoting the fact that NT also runs on machines built with its own Alpha microprocessor. (Manes, 2003). Other computer companies are working hard to oppose Microsoft. "All major computer industry participants other than Digital and Compaq view Microsoft as a threat, " wrote Marc Schulman in a recent essay, published by Boston's Patricia Seybold Group, that examined the company's dominance. What follows is a look at the stop-Microsoft strategies of three of the biggest. (Manes, 2003).
Vendors with competing transaction middleware viewed the move of integrating as a way to insert an immature product into the market by making it a ubiquitous service on NT networks. "The one product Microsoft has that competes with us is MTS, and that could definitely be a problem for us if they put it directly into COM+, " says Ed Scott, executive VP at BEA Systems, which markets the Tuxedo transaction-processing middleware. "From our perspective, Justice is focused on the right issues, and we " ll see what the courts say about it. " (Manes, 2003). That fear may have been at least partially behind BEA's acquisition of the Top End transaction monitor from NCR Corp. BEA says it will initially sell Top End alongside Tuxedo but will fuse the two into a single middleware product within 24 months. "Having a more united front is a better attack against Microsoft, " says Karen Boucher, VP of research with the Standish Group. IBM and BEA are the market share leaders in transaction monitors, but Boucher says Microsoft's Transaction Server created a new price standard in the high-end transaction server market. "This technology is now coming in at a high price, and Microsoft is talking about giving it away, " she says. "If everyone goes the Microsoft way, there's no place for these guys. " (DeLong, 2000).
This strategic step was not the first time Microsoft's bundling strategy had directly affected the software marketplace. Over the years, Microsoft has subsumed entire categories of utilities, such as memory management and disk compression, into its operating systems. Microsoft caused a stir in the $ 5. 9 billion online analytical processing market by announcing plans to bundle an OLAP server with the next release of its database management system. OLAP vendors charge up to $ 3, 500 per user for their products, but Microsoft planed to throw in its OLAP server, code-named Plato, as a standard feature at no cost. Competitors say their products will compare favorably but they refused to match Microsoft's giveaway offer. (Miller, 2001). "I can't compete with free and won't compete with free, " says Ray Lane, Oracle's president and chief operating officer. "We " ve got to make sure the market understands there is a bundling alternative. " For Oracle and others, this means convincing IT buyers that alternative OLAP platforms are worth paying for because they offer more functions and better performance than Microsoft's product. Competitors acknowledge it won't be an easy sell. "I don't want to pooh-pooh that as a small challenge, " says Kirk Cruikshank, senior VP of marketing with OLAP vendor Arbor Software. (Miller, 2001).
Other independent software vendors may find themselves in a similar situation. In addition to Plato, Microsoft is bounded other technologies with SQL Server 7. 0 that some companies sell separately, including data-transformation tools for building data warehouses and replication services. Microsoft says the bundling strategy is an attempt to improve on its products' value proposition. Certainly, customers are likely to at least test products and technologies that come free with the base operating system or applications before buying add-ons.
But users acknowledge it's a sword that cuts both ways. "From a technology standpoint, it makes integration easier, but from a business standpoint, it limits our options, " says Kent Castle, manager of end user computing at Case Corp. , a $ 6 billion maker of agricultural and construction equipment in Racine, Wis. "Bundling may hold down prices in the beginning, but once you " re locked into Microsoft components, prices start to accelerate over the years. " (Miller, 2001). Also, there are limits to the value that bundling provides. For example, while many developers use Microsoft's Visual Studio, they frequently turn to products from third parties to fill out their tool palettes. "Applications today are made up of a bunch of different languages, " says J. P. Morgenthal, president of NC. Focus, a distributed systems advisory firm. "Visual Studio goes a long way to addressing the problem, but no tool can fill all the gaps. " (Los Angeles Times, 2003).
Although neither Microsoft nor its partners ever disclosed the terms of their deals, Microsoft has historically enticed vendors to provide such technologies for free by claiming that their inclusion in the operating system is a marketing push for the third-parties' full-function products. Microsoft's Internet strategy, meanwhile, has always involved bundling. Facing stiff competition in the Web server market four years ago, Microsoft bundled its Internet Information Server and the FrontPage Web page design software with Windows NT Server version 4. Likewise, when it was first introduced in September 1994, the BackOffice suite provided just four server applications-database, E-mail, software inventory and distribution, and host connectivity. Later, Microsoft dumped its intranet product, Site Server, as well as other tools, into the bundle. (Dole, 2004).
Microsoft was extending its Exchange messaging server to encompass the emerging product category of instant messaging. Microsoft acquired startup Flash Communications, gaining technology that lets users see who is online and send them text messages that immediately pop up on their screen. Microsoft integrated Flash's technology into versions of Exchange. (Dole, 2004). Microsoft Corp.
today announced revenue of $ 9. 29 billion for the quarter ended June 30, 2004, a 15 % increase over revenue of $ 8. 07 billion for the same period in the prior year. The company also announced revenue of $ 36. 84 billion for the fiscal year ended June 30, 2004, a 14 % increase over the $ 32. 19 billion reported last year. Net income for fiscal year 2004 was $ 8. 17 billion and diluted earnings per share were $ 0. 75, which included after-tax charges for stock-based compensation expense of $ 0. 35, charges of $ 0. 17 related to the Sun Microsystems settlement and a fine imposed by the European Commission, and a tax benefit of $ 0. 02. Information Worker revenue grew 23 % compared to the previous fourth quarter as momentum for the Microsoft Office System of products continued across all customer segments due to strength in volume licensing and OEM sales. Customers acquiring Microsoft Office during the quarter included JDS Uniphase Corporation, The World Bank and Xerox Corporation. There was an increase in operating loss in fiscal 2004.
It happened primarily due to $ 141 million of stock-based compensation expense from the employee stock option transfer program in the second quarter of fiscal 2004 and increased sales of negative margin consoles and costs associated with the next generation console development efforts, partially offset by increased Xbox and Mac Office software sales. As to the future plans, More of Microsoft's $ 6. 8 billion research budget will be directed toward making its software more secure and reliable, chairman and chief software architect Bill Gates said at a European technology conference. "For Microsoft, security will continue to be our top R&D investment for years to come, " the Reuters news service reported Bill Gates as telling industry experts at a Microsoft conference in Prague. Gates also said that only 20 percent of customers use up-to-date software, a figure he would like to see increased to 90 percent. The strategic relationship between Commerce One and Microsoft to market business-to-business electronic commerce software is an example of the Microsoft strategy that all software businesses seem to seeking. The deal is a breakthrough for Commerce One because it guarantees credibility and distribution of its products and gives it an edge over its numerous competitors. The relationship was proposed and managed to successful culmination by Sarah Lave of the Business Marketing Group.
Lave's move is based on exploiting the pervasive Microsoft strategy. She is a full-time student of Microsoft's product needs and developed her expertise by dealing with Microsoft during her tenure as business-development and marketing executive at several Silicon Valley companies. She does not make a move until a Microsoft product manager assures her that a deal is possible. (Gavin, 2004). Since it first became a public business in 1986, Microsoft has fought many a battle and come out on top, but the software giant has its hands full with a number of growing concerns. It needs to find other growth opportunities to replace its operating system and Office businesses, which are reaching their maturity. It can no longer ignore the growing number of customers that are unhappy and frustrated with its inability to provide adequate security for its products and with the stranglehold it has with regard to its licensing models.
It must also recognize the threat of open-source competitors that it once dismissed as too weak. The heady days of annual growth rates of up to 50 percent have been replaced by an average of 11. 5 percent revenue growth. Microsoft is trying to revitalize the market with its upcoming Longhorn release, but that product and its peripheral products will not be coming out for another two years. The company is hoping that its work in XML will provide the next big thing, but whether it is right on the money with its strategy is unclear. (Dole, 2004).
Some users see advantages in integration strategy. An InformationWeek Research survey of 200 technology decision-makers conducted on the eve of the government's lawsuits found that 45 % want the browser merged into the operating system. That number is up; when only 26 % said they wanted that integrated functionality. (Los Angeles Times, 2003). Microsoft's strategy involved integrating whole new categories of technology into its products. In recent months Microsoft Chairman Bill Gates has said repeatedly that the company will add voice recognition into the operating system within the next few years, which remains a major plan for the future. Words: 3, 162.
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Microsoft. web press/ 2004 /apr 04 / 04 - 26 MSJDAPR. asp DeLong, James V. 2000. Washington vs. Microsoft: Don't Repeat IBM Debacle. Wall Street Journal, March 20, A 18.
Dole, Jackson. 2004. Microsoft on Edge. Los Angeles Times, December 24, B 9. Gavin Clarke. 2004. Microsoft. Mission on the market.
Computer gram International, April 16. Los Angeles Times. 2003. Microsoft Empire. Unsigned editorial, December 15, A 18. Manes, John. 2003. Competing Microsoft.
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