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Microsoft holds monopoly, but also vision

By David Kirkpatrick

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(FORTUNE.COM) -- For many people, especially lots of techies, nothing is more offensive than praise for Microsoft. After I wrote in this column two weeks ago that I had liked Bill Gates' speech at Comdex and found in it several impressive Microsoft innovations, I was besieged with e-mail from readers who called me crazy, biased, corrupt, or all three. I was clearly understating the matter when I wrote in the original column that many readers would disagree. At least vitriol can inspire entertaining prose. Here are excerpts from five different e-mails I received:

"Get a clue. Microsoft just sits around on its mountain of cash tinkering with other peoples' ideas which it has stolen and uses its market clout to shove the original and real innovators out the door."

"Once again the rockstar CEO has dazzled a willing press with...trivial products that are presented as major breakthroughs."

"Microsoft is the Ford Escort of the software industry--very popular but with terrible quality."

"The only places where they really lead the competition is in monopoly profits and duping the press into regurgitating their press releases."

"Real innovation does not come from large companies trying to protect their monopolies but rather from small companies trying to break that monopoly."

A somewhat less heated reader wrote, "None of what you have listed is really innovation, but good APPLICATION of existing technology. Innovation is a whole new dimension, a la the Mac way back in '84, the spreadsheet program, the first PDA, desktop publishing, and of course the Internet/WWW." And a like-minded person wrote "Looking for innovation? Look at a number of Mac products (Firewire, Quicktime, iMovie, iTunes, TiBook, etc.)."

Windows is rigid, unwieldy

Those last are good points. I'm a Mac user myself. I've always found Windows impossibly rigid, unwieldy, and unintuitive. There's no question that Apple has been hugely innovative in recent years, however you define the word.

Microsoft's products can use lots of improvement--that's one reason I was excited to see all the new features and capabilities they are building in them now. Politically incorrect as it apparently is, I continue to be impressed with the results that Microsoft is getting for its $5 billion in annual R&D spending.

Can the company itself be called innovative? Perhaps the things that impressed me at Comdex were more incremental than what would properly be called "innovations." They're certainly not in a class with the invention of the World Wide Web. But even the most minor improvements in Microsoft's software have gigantic implications because of the sheer numbers of users of the company's stuff. I'm writing this with Microsoft Word and will send it to my editor using Microsoft Outlook.

One reader, in the course of criticizing my column as "pablum," noted that "The main innovation that Microsoft continuously marketing and licensing."

Hey, that's no small thing. From the beginning Gates had a vision that computing and software could empower ordinary people, and he and his colleagues were able to convey that vision over many years via very forceful and effective marketing campaigns. And in large part because of that we have seen the creation of the world's most powerful industry, mostly built around the personal computer. Many other companies have benefited.

Microsoft champions innovation

Yes, Microsoft is a monopolist. It's been found so by the courts. But to say the company has nothing to do with innovation is absurd.

Which was more innovative, the invention of the graphical user interface at Xerox PARC or finding a way to create an industry that brought this wonderful capability to hundreds of millions of people? The former wouldn't have mattered much without the latter. Bill Gates played a huge role in actually creating the software industry (and by extension the PC industry) by arguing in the early days of Microsoft that PC software ought to be a business whose intellectual property was protected, rather than just a playground for hobbyists. Up until then, people had considered software something that they were free to borrow, copy, or steal. Some may mourn that change, but it was essential to the flourishing of our digital age. And the invention of the web would have had little meaning if PCs hadn't already been widespread.

In technology, standardization is one of the greatest of virtues, and Microsoft has brought it to personal computing. Most people have voted with their dollars not for the Macintosh operating system that I prefer but for Windows. With the standardization the company created in PC software has come the opportunity for huge innovation--yes, innovation--in applications that work on top of Windows--by Microsoft itself and many other companies. Just think of all the things we can now do with PCs. Fostering standardization is not in itself an innovation but the fact of creating an agreed-upon platform makes everybody else's innovation challenge easier. The price we've paid for this standardization is giving one company outsize profits.

Antitrust case yields results

The antitrust action had some very beneficial effects. The company's longstanding tendency to use one product to advantage another is an extension of its fanatical marketing mentality--and a tendency that can easily get out of control. Microsoft clearly went beyond the line in its efforts to limit PC makers and to squash competition in the early Internet days. The hardware companies needed more latitude to use non-Microsoft software, which the settlement now gives them. An example of what's now possible as a result is Sony's impressive VAIO Media software, which probably would never have seen the light of day without the trial and settlement. It's a clear alternative to Microsoft's Windows Media Center software.

Despite its monopoly, Microsoft's products are feeling more competitive heat today than in many years, mostly from open source software like the Linux operating system and the MySQL database. But Microsoft will probably continue to drive the adoption of technology and will maintain its overwhelming market share. I predict it will eventually become some sort of regulated utility--its monopoly accepted as a necessary evil and the price we have to pay for widespread access to inexpensive computing.

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