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Microsoft Turns Competitors’ Innovations into Gold

What all the federal and state prosecutors will never get is Microsoft’s ability to turn a competitor’s strategic innovation into a low-priced, high-volume commodity that Microsoft can then sell with a retail tag that no one else can match. What’s so brilliant about this capability is that it is both very legal and very advantageous […]

Written By

Joshua Greenbaum

Nov 20, 2002

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What all the federal and state prosecutors will never get is Microsoft’s ability to turn a competitor’s strategic innovation into a low-priced, high-volume commodity that Microsoft can then sell with a retail tag that no one else can match.

What’s so brilliant about this capability is that it is both very legal and very advantageous to customers. If you’re old enough to remember Wordperfect, then you can remember when a word processor was a strategic innovation that was sold at a price that, accounting for inflation, is about the price of a PC today. Meanwhile, my last PC came bundled with Microsoft Word, for no extra charge. That’s commoditization a la Gates.

While I’ve maligned .NET as a buzz-word in search of a focus in search of a problem, there’s a lot of evidence that .NET is starting to pull a Microsoft on two parts of the enterprise software market that used to be the domain of specialized innovators: enterprise application integration (EAI) and applications servers. With Gates and company firmly in the picture as providers of EAI and app server technology, it’s looking like the beginning of the end of the specialists in these domains.

All to the benefit of the customer.

The latest evidence that commoditization is the next best thing to monopolization comes from two recent announcements. BEA the app server company announced Liquid Data, its entry into the EAI market. And simultaneously, Webmethods, the EAI company, announced that the open source JBoss apps server was going to be bundled into its EAI offerings. Meanwhile, at the applications level, SAP, Oracle, and Siebel, along with everyone else, are all pursuing apps server/EAI strategies. Seibel most recently announced its support for Microsoft’s .NET.

What’s important about this flurry of announcements is how little users care about the technology issues here. Don’t get me wrong, users want application servers and application integration, and they want their applications to run in these environments. It’s just that they really don’t lose sleep at night worrying about which platform/technology/standard these app servers and EAI solutions should be based on.

What they worry about is solving the problem — supporting connectivity and heterogeneity in an Internet-based architecture — and doing it relatively cheaply and easily. The closer the user is to a real business problem in need of a solution — and hence, to real buying authority — the more that user is assuming these issues will be dealt with in a standard fashion, and the devil take the hindmost.

That’s why .NET is starting to get interesting.

If you dig through the confusion and mixed messages of .NET, what you find is a world in which these underlying technology issues have been reduced to a commodity. (Or at least promised as one). BEA and Webmethods are desperately trying to encroach on each other’s territory because they need a broader solution set to head off the Microsoft threat. They can’t go upstream into applications, so they have to go horizontally into a broader technology offering. And that’s exactly where Microsoft is lurking, waiting to strike.

What’s next?

What’s worrisome for Microsoft’s applications competitors is the idea that once the traditional integration and app server infrastructure have been commoditized, the applications themselves are next. In reality, there’s a lot to be said for commoditization of the applications. Or at least some of them.

If all you want to do is run your account payables and receivables and close the books, what is the strategic advantage of an Oracle Financials versus an SAP Financials? There are already some enterprise application customers who have asked that question and discovered that the applications are more infrastructure than a crucible for innovation.

And that’s a thought that must warm hearts all over Redmond, Wash. And, at the prices Microsoft charges, it could potentially make a lot of customers happy too.