Microsoft

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Current Microsoft logo.

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Microsoft logo as of 1984.

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Microsoft Corporation is the world's largest and best known software manufacturer. Its headquarters are in Redmond, Washington, a suburb of Seattle. The company was founded in Albuquerque, New Mexico in 1975 by Bill Gates and Paul Allen to develop and sell BASIC interpreters under the company name Micro-soft.

Microsoft products

Software

Microsoft produces a wide range of software products.

• Microsoft's flagship product is the Windows operating system, produced in many versions, including Windows XP and Windows Server 2003. Almost all IBM compatible personal computers are sold with Windows pre-installed. (See History of Microsoft Windows.)

• The product which generated Microsoft's enormous wealth, however, was the MS-DOS operating system. All versions of Windows prior to Windows NT for business systems and Windows XP for home systems were based on an MS-DOS foundation.

• Microsoft Office is the company's line of office software. It includes Word (a word processor), Excel (a spreadsheet), Outlook (a Windows-only email and schedule program), and PowerPoint (presentation software). Microsoft also produces Microsoft Office for Apple Macintosh computers. The Mac version of Office includes the Mac-only Entourage instead of Outlook. Like Windows, Office has grown to near-monopoly status in many markets.

• Microsoft Visual Studio is the company's set of programming tools and compilers. It is GUI oriented and links easily with the Windows APIs, but must be specially configured for non-Microsoft libraries. The current implementation is Visual Studio .NET 2003.

• Microsoft FrontPage is a WYSIWYG HTML editor.

• Microsoft produces computer games that run on Windows PCs, such as the Age of Empires and Microsoft Flight Simulator series.

• Microsoft develops and publishes video games for its XBox video game console. In addition, all "third party" XBox video game publishers, such as Electronic Arts and Activision, pay Microsoft a royalty for each game manufactured.

• Microsoft also produces a line of reference works, such as encyclopedias and atlases, under the name Encarta.

• Microsoft also produces software for Apple Macintosh, through the Macintosh Business Unit. Microsoft PowerPoint, Microsoft Excel and Microsoft Word were first produced for Macintosh.

Network Services

In the mid-1990s, Microsoft began to expand its product line into the networked computer world. It launched its online service MSN (Microsoft Network) on August 24, 1995, which was a direct competitor to AOL. MSN became an umbrella service for all of Microsoft's online services.

In 1996, Microsoft and NBC, an American broadcasting network, created MSNBC, a combined 24-hour news television channel and online news service.

At the end of 1997, Microsoft acquired Hotmail, the original and most popular webmail service. It was rebranded MSN Hotmail and was used as a platform to boost Passport, a universal login service.

MSN Messenger, an instant messaging client, was introduced in 1999 to compete with the popular AOL Instant Messenger (AIM).

Training

Microsoft has created a number of training initiatives, with the intention of creating a pool of low-cost employees with skills relating exclusively to Microsoft products. The best known of these is the MCSE qualification, which stands for "Microsoft Certified Systems Engineer". While the MCSE certifies familiarity with Microsoft products, it is not an engineering qualification.

Hardware

Microsoft also produces a number of computing related hardware products.

• A line of computer input devices, including mouse, keyboard, joystick, gamepads.

• The company bought WebTV, a television internet appliance.

• When Microsoft released the XBox in late 2001, the company entered the multi-billion dollar game console market dominated by Sony and Nintendo.

History of Microsoft

Formed in 1975, Microsoft started by selling a BASIC interpreter which quickly established a reputation for excellence. As the popularity of Microsoft BASIC grew, other manufacturers adopted Microsoft BASIC's syntax to maintain compatibility with existing Microsoft BASIC implementations. Because of this feedback loop, Microsoft BASIC became a de facto standard, and the company cornered the market. Later, it tried (unsuccessfully) to extend their grip on the home computer market by designing the MSX home computer standard.

The name "Micro-soft" (for microcomputer software) was used by Bill Gates in a letter to Paul Allen for the first time on November 29, 1975. "Microsoft" became a registered trademark on November 26, 1976.

In late 1980, International Business Machines needed an operating system for its new home computer, the IBM PC. Microsoft licensed Quick and Dirty Operating System, from Seattle Computer Products in order to sell it to IBM as the standard operating system the IBM PC. Microsoft subsequently purchased all rights to QDOS, and renamed it MS-DOS (for Microsoft Disk Operating System). It was released as IBM PC-DOS 1.0 with the introduction of the PC in 1981. In contracting with IBM, however, Microsoft had retained the rights to license the software to other computer vendors as MS-DOS. The early 1980s saw a flood of IBM PC clones, and Microsoft were quick to leverage their position to dominate the operating system market. (In the 1990s, Microsoft adopted exclusionary per-processor licensing, later determined to be illegal, under which the PC manufacturers were required to pay for an MS-DOS licence even when the system shipped with an alternative operating system.)

Software running on PC hardware was not necessarily technically better than the mainframe software that it replaced, but it had two advantages that mainframe software could not beat: it offered more freedom to the end-user, at much lower cost. Microsoft's success rode on the PC boom.

The now highly profitable and cash rich Microsoft diversified into a wide variety of software products including:

• compilers and interpreters for programming languages
• word processors, spreadsheets and other office software

Some of these products were successful, and some were not. In most cases, early versions of Microsoft software were buggy, feature-poor, and inferior to competitors, but later versions usually improved rapidly as the software grew in popularity. By the turn of the millennium, many of Microsoft's software products dominated the market in their respective categories.

Microsoft has devoted huge amounts of effort to marketing in developing their products, as well as to the integration of their software products with one another in an attempt to create a seamless and consistent computing environment for the user.

Microsoft has attempted to leverage the powerful Windows brand into many other markets, with products such as Windows CE for PDAs and their "Windows powered" Smartphone products.

Business culture

The software developer

Microsoft has often been described has having a developer centric business culture. A great deal of time and money is spent each year on recruiting young university trained software developers meeting very exacting criteria. Resources are continuously invested in measures devised to keep them in the company, year after year.

For instance, while many software companies often place an entry level software developer in a cubicle desk within a large office space filled with other cubicles, Microsoft assigns a private closed office with a window to every developer. In addition, key decision makers at every level are either developers or former developers.

In a sense, the software developers at Microsoft are considered the "stars" of the company in the same way that sales staff at IBM are considered the "stars" of their company.

Canine nourishment

Within Microsoft the expression "eating your own dog food" is used to describe the policy of using Microsoft products as internal tools, above everything else. It seems to be very difficult for management and support staff to get the permission to use software from Microsoft competitors. It seems to be difficult even for the software developers, who are the "stars" of the company, to use software tools made by the competition. This policy is justified by the need to make employees aware of the products.

Many have noted that one of the effects of this policy is to constantly push the development of products which software developers find useful for their immediate needs (regardless of the perceived needs of the market stated by others) given the great influence the developers as a whole (but not necessarily individually) have on corporate orientations.

Long term wariness

Microsoft fosters a general attitude of long term strategic wariness in its managers. Everybody must be ready for anything the competition or the market can throw on the road in any number of years. In this frame of mind being the largest software company in the world is not seen as a form of safety or a guarantee of future success. For instance: Future competitors could rise from related industries which are not now in the software business in a very concentrated way. Giant companies who tower over Microsoft could turn their attention to it in a few years from now and try to crush it. Consumers of vast segments of Microsoft software could decide they do not wish to upgrade anymore, or at least for a few more years than usual. Because of these imponderables Microsoft managers must maintain an unending vigilance and do everything to sustain a dynamic expansion in new markets.

Public perceptions

For a long time, Microsoft was widely seen as the "good guy" in the computer software market, providing an inexpensive alternative to the expensive systems provided by the major mainframe and UNIX vendors, and it was admired for the large amounts of money it made in doing so.

By the 1990s, the perception that Microsoft had become the "bad guy" had increased substantially. It was frequently accused of leveraging its market dominance in desktop computing in order to try to exploit its customers unfairly.

In recent years, Microsoft has been accused of anti-competitive business practices by the US government, the European Union, and Microsoft's competitors; this has generated huge negative perceptions.

The monopoly question

Microsoft's Windows product has an effective monopoly in the desktop operating systems market. Those who make this claim point out that, among other things, almost every PC sold has a copy of Microsoft Windows pre-installed. In a 2003 publication, Dan Geer argued the prevalance of Microsoft products has resulted in a monoculture.

Some observers claim that the characterization of Microsoft as a monopoly leaves its competitors in a conflict:

• On the one hand, competitors reject this characterisation as negating their own position. In a monopolized market, there exists only one provider of a product or service. Therefore, to competitors, calling Microsoft a monopoly is a defeatist strategy: it denies either their own existence, or their capacity to survive and to compete.
• On the other hand, competitors favor the characterization of Microsoft as a monopoly because such a characterization benefits them. First, it raises the potential for regulatory intervention. Second, the public relations benefits of being seen as an "underdog" may increase sales.

Monopoly or not, there is no doubt that:

• In most mass-market desktop software application markets, Microsoft is a dominant player.
• This dominance attracts widespread resentment.
• This resentment is not restricted to its competitors.

Critics of Microsoft have accused it of using its dominance in desktop operating system to try to leverage market share in other sectors of the computer market, such as web browsers (Internet Explorer), server operating systems (Windows NT), office software suites (Microsoft Office), and streaming media (Windows Media).

After its bundling of the Internet Explorer web browser into its Windows operating system, Microsoft acquired an extremely large market share in the browser market. Partly as a result of this dominance, Microsoft was convicted by a USA federal court for abusing its monopoly in the desktop operating systems market (see Microsoft antitrust case for more details).

Microsoft has in all of these cases depicted its actions as its response to customer demand.

Critics also decry Microsoft's "embrace and extend" strategy of adding proprietary features to open, de facto standards, thereby using its market dominance to gain de facto ownership of standards "extended" in this way.

Security

By 2002, several of Microsoft's networking- and Internet-related products had become the subject of intense criticism following several high-profile security lapses. Malicious programmers increasingly exploited weaknesses in Microsoft software by creating and distributing worms, viruses, and Trojan horses designed to spread across the Internet and waste computing resources or destroy data. These exploits frequently targeted Microsoft's Outlook and Outlook Express e-mail programs, Internet Information Server (IIS) Web server, and SQL database server software. Microsoft contends that its dominant position in several Internet-related software categories naturally subjects the company's products to more attacks, because the products themselves are so widespread. Critics counter that these attacks also target Microsoft products that do not hold commanding market shares, and suggest that this is because Microsoft products in general are fundamentally less secure than those of the company's competitors.

In several cases, Microsoft's practice of designing and configuring software to make it easier to use and less intimidating to novices has facilitated the spread of these viruses and worms. For example, Windows operating systems released since 1995 hide file extensions by default, which can help malicious programmers trick unwitting e-mail recipients into opening dangerous file attachments that masquerade as harmless files with innocuous extensions. (Recent versions of Outlook and Outlook Express disable dangerous file types upon receipt, so that users cannot open them.) Critics charge that this focus on usability and automation has come at the expense of important security considerations.

In January 2002, Gates announced the Trustworthy Computing initiative, which he described as a long-term, companywide initiative to find and fix security and privacy vulnerabilities in all of Microsoft's products. The initiative prompted the company to reevaluate and redesign several of its practices and processes, and has significantly delayed the release of Windows Server 2003, the successor to the Windows 2000 Server family of operating systems. Reaction to the Trustworthy Computing initiative has been mixed, with observers lauding Microsoft's increased focus on security but charging that the company still has a lot of work to do.

In Feburary 2004, the partial source code of Windows NT/2000 was leaked and widely distributed among the BitTorrent peer-to-peer network and Internet Relay Chat (IRC) chatrooms. The archive contains source code for network protocols, parts of Internet Explorer, certificate handling and kernel code. The potential for hacks and exploits as a result of the leak is an obvious sign that Microsoft's security protocols to protect its intellectual property from abuse has failed.

Advantages of Microsoft software

The best general features of Microsoft software that helped it gain the market share it now enjoys:

• Common user interface -- all Microsoft applications used the same menu commands, short-cuts, and procedures for similar tasks.

• Interconnectedness -- this applies especially to Microsoft Office, but, in general, the data of one Microsoft application has been more 'usable' by other Microsoft applications.

• Backward compatibility -- Microsoft generally has done a better job at allowing older code and data to work on newer systems.

These three qualities were important in Microsoft applications becoming seen as better options that their competitors.

Microsoft also generally provided third-party programmers with hooks into their software, and the quality of the solutions built by the third-party programmers also led to more Microsoft sales.

Now the ubiquity of Microsoft software allows the user to benefit from so-called network effects. For example, the large installed base of Microsoft Office makes MS Office files the de-facto standard word-processor format, making a copy of MS Office essential for most business users. In addition, more potential employees having training in MS Office than competing products. Hence using MS Office can result in reduced training requirements, especially in the case of temporary employment.

Microsoft software is also designed to be easy to configure, allowing companies to hire lower-paid non-expert systems administrators. Microsoft supporters argue that this results in a decreased "total cost of ownership".

Microsoft software also represents a "safe" option for IT managers purchasing software systems, in that the ubiquity of Microsoft software allows them to claim that they are following accepted best practices. This is a particularly attractive option for IT managers with limited technical knowledge.

Microsoft software makes heavy use of software re-use. This is one of the main reasons the resources of most Microsoft software can be used from most other Microsoft software. This advantage can be misued, however, see below.

Disadvantages of Microsoft software

Earlier versions of Microsoft products had a security stance of "permitted unless forbidden", which is hard to change, as much Microsoft software relies on this policy. This stance can be taken advantage of to cause security problems. For example, macros embedded in documents or HTML in email can run programs allowing an attacker to take over the user's computer.

This is demonstrated in the proliferation of worm and virus programs that attack Microsoft software. This problem is compounded by the very ubiquity of Microsoft software, cited as an advantage above. Once a working virus is released, it is almost certain to spread very widely because almost every computer it comes across is able to replicate and spread the virus. This effect has recently been dubbed the "Microsoft monoculture," by analogy to the problems associated with lack of biodiversity in an ecosystem. As an acknowledgement of the problem, the National Science Foundation on November 25, 2003 announced it had granted US$750,000 (Lemos, 2003) to computer scientists at Carnegie Mellon University and the University of New Mexico to further understand the causes and the (presumably) negative effects of the homogenization of the world's computing platforms (National Science Foundation, 2003).

A result of the dominance of Microsoft software is that the advantage mentioned above of being able to hire less highly trained, and therefore cheaper, systems administrators is offset by two factors:

• Greater unreliability means you will have to hire more of them.
• Microsoft shops are more liable to security breaches, because reducing computer insecurity requires highly trained systems administrators, regardless of the operating system in use.

Detractors argue that users do not own Microsoft software and that therefore Total Cost of Ownership comparisons with open source software do not compare like with like.

The future

The open source movement is traditionally at odds with Microsoft for

• Microsoft's closed standards (e.g. NTFS) that reduce interoperability with open source software
• what is perceived as the selling of inferior (especially with regards to security and stability) products at high prices by means of monopolistic practices.
• Microsoft's supposed spreading of fear, uncertainty, and doubt about open source and other competing software.

Recently, Microsoft has been accused of being a puppeteer behind the SCO v. IBM, a court case perceived by open source advocates as a highly unreasonable suit intended to scare people about the legal status of open source software.

As of 2003, Linux is a popular OS in the server market with almost 25% market share. However, as Linux can be freely copied and downloaded, its true market penetration is hard to measure. Most estimates place Linux as the most popular operating system for servers. According to Netcraft's measurements, the open source Apache server software is used on 67% of servers, while Microsoft's IIS software is used on 21%.

Although seen as an operating system for technical-inclined people only, Linux's supporters are attempting to make inroads into desktop computing. Linux-based products are beginning to be bundled with PCs sold in the consumer market. Notable is Lindows, sold by Walmart in 2003.

Microsoft CEO Steve Ballmer has stated that Linux is a "tough competitive force... It's non-traditional, it's free and it's cheap. We have to educate people why what they pay for [our offerings] is more than offset by the value we deliver. We used to be the cheap guys. We were cheaper than Novell, cheaper than Oracle. We can't do that with this one." (Reported in CRN.com, June 17, 2002).

With $50 billion in cash reserves, it is unlikely that Microsoft will lose its position as a major player in the computer market anytime soon.

November, 2002: Microsoft's quarterly 10-Q filing to the Securities and Exchange Commission revealed that most of its businesses were losing money, while two had enormous profit margins: almost 86% for its "client" division that sells Windows. Microsoft is likely to focus on these sectors of the market. (See theSEC filing and the news.com article)

Microsoft is working to leverage its current success in desktop operating systems into new markets such as media players, server software, handheld devices, web services and video games, with varying degrees of success.

It is also looking to move towards a "subscription model" for licensing. Microsoft's current revenue scheme depends on users buying upgrades on a periodical basis, but this is becoming increasingly difficult, as many users fail to see the benefits of upgrades and continue to use older packages, such as Windows 98, Windows ME and Windows 2000 instead of the latest Windows XP and Windows Server 2003. Microsoft would like to switch to a subscription basis, whereby users pay an annual fee for software. The success of this strategy partly depends on the proliferation of broadband Internet access, as Microsoft will need build online licence verifying mechanisms into its programs.

At the same time, Microsoft is engaging in a major public relations and branding exercise to try to combat the negative PR associated with the recent accusations regarding its business practices.

Microsoft is now positioning PCs running Windows XP Media Center Edition as a home entertainment hub.

Based on recent Microsoft management comments, it appears that Microsoft is attempting to move up-market, positioning its products and services as high-value, rather than low-cost. Steve Ballmer was quoted as saying in 2002 "We are actually having to learn how to say, 'We may have a high price on this one, but look at the additional value and how that value actually leads to a lower cost of ownership despite the fact that our price may be higher,'" (Reported in VARbusiness, July 15 2002).

Microsoft .NET initiative

The .NET initiative is a major company-wide effort by Microsoft. It has several aspects including:

• Easing the development of applications that use the Internet
• Alleviating problems related to managing and installing multiple versions of complex software packages on the same system (see DLL-hell).
• Providing a more consistent development platform for all Windows applications (see Common Language Infrastructure [CLI]).

It will achieve this by using a proprietary extension of XML to link several different devices together to be controlled quickly and easily by other computers. Critics view .NET as yet another Microsoft attempt to leverage its operating system monopoly into a similar monopoly on Internet applications.

Furthermore, in regard to the name of the initiative and its components, critics also point out that not only are the terms ".net" and "CLI" in use to mean other things (Microsoft used CLI to stand for Common Language Infrastructure), but that Microsoft regularly overloads generic terms (e.g. "Windows", "Word", "DNS") to refer to its proprietary technology, and then attempts to control them using trademark law and patent law.

Microsoft Next-Generation Secure Computing Base initiative

Microsoft has now launched the Next-Generation Secure Computing Base, recently renamed from Palladium operating system initiative. This effort is also called Trusted Computing. Microsoft presents this as their solution to computer insecurity. Opponents have characterised it as another exercise in entrenching and extending their monopoly, effectively allowing Microsoft to control all uses of PC technology. In particular, they have accused Microsoft of using it as a way to combat the emergence of free software.

The Future of Windows

Microsoft has a number of new initiatives: .NET, Palladium and the "Longhorn" operating system (Longhorn is the next home Windows release).

Microsoft intends that Longhorn will have many new features such as speech recognition and an enhanced user interface but it is likely that the operating system itself will be an extension of and improvement on Windows XP and Windows Server 2003.

References

• Charles, John. "Indecent proposal? Doing Business With Microsoft". IEEE Software. January/February 1998. pp. 113-117.
• Clark, Jim with Owen Edwards. Netscape Time: The Making of the Billion Dollar Start-up That Took on Microsoft. New York, Saint martin's Press, 1999
• Cusumano, Michael A.; Selby, Richard W. Microsoft Secrets: How the World's Most Powerful Software Company Creates Technology, Shapes Markets and Manages People. New York: Free Press, 1995.
• Edstrom, Jennifer; Eller, Marlin. Barbarians Led by Bill Gates: Microsoft from inside: How the World's Richest Corporation Yields its Power. N.Y. Holt, 1998.
• Lemos, Robert. (2003). U.S. funds study of tech monocultures. Retrieved December 20, 2003, from http://news.com.com/2100-7355-5111905.html?tag=nefd_hed
• Moody, Fred. I Sing the Body Electronic: A Year With Microsoft on the Multimedia Frontier. New York: Viking, 1995.
• National Science Foundation. (2003). Taking Cues from Mother Nature to Foil Cyber Attacks. Retrieved December 20, 2003, from http://www.nsf.gov/od/lpa/news/03/pr03130.htm

See also

• History of Microsoft Windows
• Halloween documents
• Microsoft antitrust case
• Microsoft Developer's Network

External links

Microsoft sites

• Microsoft web site: http://www.microsoft.com/
• Microsoft Network (MSN): http://www.msn.com/
• Microsoft Xbox: http://www.xbox.com/
• Microsoft Encarta encyclopedia: http://encarta.msn.com/

Other sites

• Open Source Intiative website.
• Free Software Foundation.
• FAQ on the Microsoft Antitrust case by The Center for the advancement of Capitalism (a pro-Microsoft site.)
• Just Say No to Microsoft - A site offering alternatives to Microsoft products
• MicroSith - A parody of Microsoft and Star Wars