MICROSOFT ON INNOVATION IN THE SOFTWARE INDUSTRY.

Microsoft on innovation in the software industry

Abstract

Microsoft Corporation, the largest company in the US software industry, has been under anti-trust scrutiny from the Department of Justice for most of the 1990s. In 1995, its planned acquisition of Intuit, Inc. prompted a Silicon Valley law firm, on behalf of unnamed complainants, to submit a White Paper to the DOJ, on the subject of Microsoft's long-term strategy. The White Paper, relying on the theoretical concepts of network externalities and lockin effects, argues that Microsoft will use Intuit's products to attain monopolistic positions in network operating systems, on-line services, and electronic commerce, and will eventually be in a position to affect the content transmitted over electronic networks. This paper disputes that claim. First, an analysis of Microsoft's growth vs. the US packaged software industry a whole is presented, indicating that Microsoft actually has a fairly small share of total employment and sales. Secondly, a detailed review of the White Paper's argument is followed by a discussion of Microsoft's competitors, whose products also benefit from network externalities and lock-in effects. Ultimately, innovation will be more important than leverage for Microsoft. However, the paper argues that Microsoft's location in Seattle may prove to be a liability when it comes to rapid innovation; the corporation has grown much more rapidly than the Seattle software industry as a whole. Consequently, it cannot rely upon ready access to experienced workers in fields outside its traditional areas of specialization.

Table of Content

CHAPTER ONE5

INTRODUCTION5

The Technological Dynamics of Software8

CHAPTER TWO14

LITERATURE REVIEW14

The Monopoly16

The Government Point of View18

History23

Early Customers23

Successful Strategies24

Competition27

Unsuccessful strategies28

Future Plans29

Microsoft: How Dominant?30

The White Paper Case Against Microsoft35

CHAPTER THREE44

METHODOLOGY44

Research Method44

Literature Selection Criteria44

Search Technique45

Keywords Used45

Theoretical Framework45

CHAPTER FOUR45

CHAPTER FOUR46

DISCUSSION AND ANALYSIS46

A Critical Examination of the White Paper Claims: Timing is Everything...48

And Location is Timing57

CHAPTER FIVE64

CONCLUSION64

Conclusion: Microsoft vs. Silicon Valley?64

REFERENCES67

Chapter One

Introduction

A agreement seems to be appearing in relative to the US programs industry: gradually but certainly, its center is gravitating to Seattle. Microsoft's strategic command of PC functioning schemes, with Windows in the early 90s and now with Windows NT and Windows 95, has positioned it to arrest not only key PC submission markets like phrase processors and spreadsheets, where it has long had a occurrence, but new and appearing markets like enterprise servers, database administration schemes, multimedia devices and names, interactive TV, and electrical devices commerce. Why is Microsoft so dominant? According to Microsoft, it's because they make value software; as asserted by other observers, it's because of anti-competitive practices. The most mighty adherent to the last cited outlook has been the US Justice Department, which has been enquiring Microsoft since 1991, and started gravely impeding its enterprise and acquisition scheme in 1995. The DOJ competently impeded a amalgamation with Intuit, but backed away from prohibiting the bundling of Microsoft Network, an on-line service, with Windows 95. Interestingly, the political force to put Microsoft under the anti-trust microscope has evidently not arrive from little businesses, the common supporters of such activity, but from bigger expertise businesses in Silicon Valley, from ...