At What Cost?
Some companies argue that a breakup would hurt them as much as Microsoft
By Aaron Ricadela
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InternetWeek Microsoft, Others Lash Back As Government Extends Siege (5/8/00)
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he CIO, the chief technology officer, and six other top IT planners for General Motors Corp. recently sat down to dinner in Seattle with Microsoft CFO John Connors. During the course of the meal, someone joked with Connors about which company he'd wind up working for if the government's intent to split Microsoft in two were to come to fruition. Connors laughed it off, recalls Tony Scott, GM's CTO for IS. The next day, the GM contingent asked Microsoft CEO Steve Ballmer more seriously about the threat of a breakup and received a host of reassurances. "They're not conceding at all," Scott says. Yet Microsoft's bravura left Scott unsettled. The meeting planted "some doubt in my mind that the case wasn't going to be a distraction," he says. "I didn't hear a lot of talk about contingency plans."
GM isn't alone. There's growing concern among Microsoft's business customers that a breakup could affect the developer's ability to continue providing a low-cost software environment that lets users plug in pretested components, which helps improve time-to-market, lowers staff requirements, and causes fewer integration headaches. In fact, integration tops nearly all other considerations for business customers choosing Microsoft's computing environment, according to a May InformationWeek Research survey of 200 IT managers responsible for buying Microsoft products. Nine out of 10 respondents cite ease of integration of the vendor's software as a key benefit to their companies, ahead of manageability, low cost, and scalability. And just under a quarter say a breakup would hurt their companies in some tangible way.
"The only thing the Justice Department can achieve through its intervention is to screw up my life," says Michael Saucier, CTO at Sequencia Corp., a Phoenix software supplier to process manufacturers such as Dow Chemical, DuPont, and Procter & Gamble. Saucier says the close relationships among Microsoft's server products is a big reason the multibillion company he founded 11 years ago is successful. "We can think about solving business problems instead of solving computing problems," he says. "I'm not thinking about how I can make my hard disk more reliable or get better access to my tables in SQL Server. That doesn't add any value to our customers, and it's been solved for us by Microsoft."
District Court Judge Thomas Penfield Jackson has put the trial's endgame on a fast track that could yield a breakup order as early as this week. Though Microsoft's appeals could stay any action for a year or more, the Justice Department's proposal that Microsoft be split into two companies-one that sells operating systems, the other applications-could one day separate the development, licensing, and support activities of Microsoft's operating system and applications groups, threatening the value proposition that's made the company and its products so popular and influential.
The government says a breakup would benefit consumers by taking away incentives for Microsoft to lock competitors out of the market, broadening the choice of available software. But for many businesses, the thought of a disintegrated Microsoft is daunting.
"Having the same people write the applications and the operating system is a competitive advantage for Microsoft," says Kennet Westby, CIO and co-founder of Cornerdrugstore.com, a New York startup that has signed up about 4,000 community pharmacies to pool their buying power and sell goods on the Web. "Who gains from that advantage? Well, Microsoft does. But over time it's been proven that customers do as well-especially business users."
Westby, a former contractor for Microsoft's Internet games site who keeps his IT staff near the mother ship in Redmond, Wash., says he couldn't have launched the month-old site on a startup budget with Sun Microsystems or Oracle technology. Because Microsoft pretests Windows, BackOffice, and the COM+ development environment for compatibility before those products even enter Cornerdrugstore's shop, Westby says he can run his apps and infrastructure on fewer servers, configure the software to fail over and restart in tandem, and save money on training to manage it all.
To launch its site, Cornerdrugstore spent less than $2 million, which includes Microsoft's operating system, database, Web-site, and E-commerce software, plus the cost of the hardware, hiring staff, and IT outsourcing. "These things would've cost $15 million or $20 million with Sun and Oracle, and for a startup, that's the difference between doing it and not doing it," Westby says. "Are you married to Microsoft? I'd much rather be married to a company that sells the operating system for a third of the cost and the Web server for free. There's an overhead in IT management that escalates as you introduce more players that don't seamlessly integrate."
There's no question Microsoft business customers get a lot of product integration for their money. Windows 2000 Advanced Server, for example, includes an operating system capable of supporting eight CPUs, Microsoft's Internet Information Server Web-site software, a programming environment for dynamic Active Server Pages, the Active Directory service, Microsoft Transaction Server, Microsoft Message Queue, and other middleware, for about $4,000. The company's client and server operating systems, Visual Studio development tools, and BackOffice products rely on a common programming environment that's intended to reduce the cost, time, and employee hours that IT managers have to commit to their infrastructures.
"The cost of the software isn't where the money goes, it's the cost of integration," says Ronan McGrath, CIO of Rogers Communications Inc., a $2.8 billion cable and wireless company in Toronto. Microsoft last year invested $400 million in Rogers, which uses the vendor's products on its desktops and is developing digital television services that run in a Microsoft environment. "The price of entry in this business is a reliable, robust infrastructure," McGrath says. "I want to offload the integration effort to my suppliers. If there wasn't a Microsoft, we'd go looking for one |
