Microsoft and URL

'

Ponderings from Pittsburgh

Microsoft's grip of the High-Tech Industry Pales to the U.R.A. grip upon Pittsburgh's Development Environment

The development environment is more than buildings, mortar and blueprints. The grip on the development environment includes ideas, sharing, open communications, and planning.

The URA's role has escalated into a "super department" in the Murphy Administration.

Clear examples to the barriers facing competitive viewpoints.

Liberal Re-Writting Follows from
http://www.be.com/aboutbe/benewsletter/volume_III/Issue8.html#Gassee

The Be Newsletter Volume III, Issue 8, February 24, 1999 article, Crack in the Wall, by Jean-Louis GassÈe explains some of the key points to the "global" problem in the high-tech industry when confronted with the Microsoft domination.

Microsoft Emotions and Background

The United States DOJ (Department of Justice) spent the end of 1998 and early 1999 in an anti-trust case against the software giant, Microsoft of Redmond, WA. You're the CEO of a PC OEM, delivering some great news to Wall Street: "In an effort to offer greater variety and performance to the customer, our factory now installs three operating systems on the hard disk -- Windows, Linux, and the BeOS. The reaction has been spectacular. Customers love having a choice of OS, and the press -- from John Dvorak in PC Magazine to John Markoff in the New York Times to Walt Mossberg in the Wall Street Journal -- has heralded us for our bold move. This is a great step forward for the consumer and for the industry. Oh, and by the way, we lost $50 million since we no longer qualify for Windows rebates. But it's a sacrifice for the common good."

You're now the ex-CEO of a PC OEM.

---

Just as Microsoft has huge clout in high-tech, so does the URA in Pittsburgh developments.

Microsoft has a choke hold on the computer makers, resellers and developers of software. Standards get set by Microsoft.

Microsoft's Windows pricing practices are closely guarded secrets, so we don't know exactly how rebates are structured. Closely guarded secrets, so too goes the discussions between the URA and developers. In November 1998, the URA and UPMC entered into a "90-day OPEN Discussion Period," (quote from the new conference), but by March 1999, a site plan asked for 100+ days ago that detailed the land desired by UPMC was not forthcoming.

but we can assume that it works something like this: The total cost of a Windows license consists of a base price offset by a rebate. The base price is set; the rebate is flexible, and contingent on the "dedication" of the licensee. That is, the more you "advertise" the product -- through prominent positioning, expanded shelf space, and so on -- the greater your rebate. The Microsoft quid pro quo rebate within the industry looks innocent enough, and can be a useful tool in a competitive market. But when running a monopoly -- and when it comes to out-of-the-box, consumer-grade PC clones, Microsoft *is* a monopoly. "Prominent positioning" and "expanded shelf space" have little meaning. Microsoft has no interest in getting "more" footage on the OS shelf, because they've already got it all. What interests them -- the only useful advantage they can "buy" (to be kind) with their rebate -- is to ensure that no one else will get any.

Pittsburgh's re-developments organized by the URA need a measure of competitive pressures to keep down prices of buildings, roads, infrastructure and such. The TIFs help so as to not bankrupt the city's finances. Things are getting developed at fair market value prices by the URA, but the serious issue of concern is not the price, but the project.

A family that goes to the grocery to discover dog-food on sale at 85% off the regular price is wise to NOT make any dog-food purchase unless it has a dog to feed. The competive price is okay, but the decision process on what to get is flawed.

The citizens of Pittsburgh and the South Side do not want the region's biggest instituional employer to buy the very best property in the eastern time zone!

Furthermore, very few developers, architechs, real-estate agents, small-business owners, employees of Pitt or UPMC, health-care workers, contractors and suppliers of Pitt/UPMC, or the city, want to say otherwise. It took a child's courage to speak-up and say that "The King Has No Clothes."

Pitt and the City are so pervasive at every corner in our village of three rivers that most who would make sensible objections and advance alternative insights are tainted and don't speak up.

Futhermore, Pitt and UPMC are spiteful, grudge-knowing, adversaries to some. What neutral individual would want to pick a fuss against them, and

In the business world, "dedication" is measured by Microsoft in a number of different ways. In Pittsburgh, dedication and loyalty points are not scored by smashing apart $30M develoments in popular sections in town by leading employers.

The BeOS and Linux OS are not installed on *any* PC. If you randomly purchase 1,000 PC clones, how many have any OS other than Windows loaded at the factory? Zero.

But what about all these announcements from companies such as IBM, Dell, and others? A few URLs are supplied here for your convenience:

http://www.dell.com/products/workstat/ISV/linux.htm

http://www.compaq.com/isp/news_events/index.html

http://www.compaq.com/newsroom/pr/1998/wa111298a.html

http://www.hp.com/pressrel/jan99/27jan99.htm

http://www.hp.com/pressrel/jan99/27jan99b.htm

http://www.software.ibm.com/data/db2/linux/

If you parse the statements, Linux is offered and supported on servers, not on PCs. Another IBM story is that installation is to be performed by the reseller on some PCs or laptops, not by IBM at the factory.

As an industry insider gently explained, Microsoft abides by a very simple principle: No cracks in the wall. Otherwise, water will seep in and sooner or later the masonry will crumble.

Guarding against even the smallest crack is important to Microsoft, because it prevents a competitor from taking advantage of a phenomenon that economists call the "network effect." The "network effect" manifests itself as an exponential increase in the value of a product or service when more people use it. Applied to a computer operating system, the effect works like this: As more people install and use an OS, the demand for applications increases. Developers respond to the demand, which attracts the attention of OEMs and resellers, who promote the OS in order to sell the apps, which attracts more customers... The key to all this is distribution and visibility -- in other words, "shelf space."

The URA needs to guard against "wise cracks" and "loose cannons" who might get into the system and then turn up the volume of displeasure on the global operations and project directions. The URA needs to move quickly on development progress so as to not allow time for the citizens to mobilize and oppose any one development. The URA needs to have foot-soldiers in the trenches running planning forums so as to give their local "seal-of-approval" to developments that come down the pike, in any shape or manner.

The shelf space in Pittsburgh is mind-set and momentum and most of all, media visability. The Public Relations feeding frenzy that was evident at the URA and UPMC event made it impossible to conduct a meeting in the Brashear Association Conference Room.

As for the network effect, wanta job next year? Keep quiet.

Bill Gates understands the network effect well. Back in 1983, the market share limitations of DOS was "no problem," Gates said. With the wide distribution we enjoy, we'll get the attention of third parties, and the marketplace will fix these shortcomings."

Shortcoming! Ahh. If the developments in Pittsburgh have shortcomings, then the project get to churn for another run sooner, rather than later. Lasting value isn't a high priority of the developers. Look at the life of Three Rivers Stadium and The Civic Arena. Who would build wonderful public structures that would have timeless beauty and functionality --- when one can rebuild every 20 years?

Those idiots who made monuments and classic buildings in Washington DC had better not step foot into Pittsburgh.

I'm sure that there are some folks sitting in an office building at the URA or Mayor's office trying to figure out ways to justify the demolition of The Cathedral of Learning, slated in the year 2008. Let's build a throw-away football stadium at the site of the old Cathedral of Learning once we wear out the New Three Rivers Stadium and know for sure that the University of UPMC can't co-exist there, due to NCAA rules that the next NCAA Executive Board voted to approve: Samarach, Willard, Fazio, Sherrill, etc.)

If the Univ. of Pittsburgh football team can't co-exist with the Pittsburgh Steelers in the same facility at the same time, then we'll have to have another development next year to fix these shortcomings.

If the 80-yard practice field is proven to be a crutch in the team's preperation, then we'll demand a 120-yard field and the fans will support a new practice home and the associated cost over-runs for the new stadium project.

This puts statements by senior Microsoft executive Paul Maritz in perspective. In reaction to my claim that Be wants to co-exist with Microsoft, Mr. Maritz said (as quoted by Joseph Nocera in Fortune Magazine):

"[Gassee is] articulating his strategy for entry into the operating system marketplace. But on the other hand, I know that Be has built a full-featured operating system, so what I believe he's doing here is outlining his strategy about how he will initially co-exist with Windows and, over time, attract more applications to his platform."

Mr. Nocera interpreted Mr. Maritz's interpretation thus:

"In other words, Gassee's spiel is little more than a trick intended to lull Microsoft. But Microsoft isn't so easily fooled! Microsoft will never ignore a potential threat to its Windows fortress, no matter how slight. The software giant may be in the middle of an antitrust trial, but -- as Andy Grove says -- only the paranoid survive..."

The entire article, part of a court house diary, can be found at http://www.pathfinder.com/fortune/1999/03/01/mic3.html

Industry sages such as T.J. Rodgers, the CEO of Cypress Semiconductors, as well as venture capitalists aligned with Microsoft, criticize the Department of Justice's intervention in the new Pax Romana we're supposed to enjoy under Microsoft's tutelage. Don't compete in court, compete in the marketplace, they say.

I'm a free marketer myself; I left a statist environment for the level playing field created by the rule of law in this, my adopted country. A free market is *exactly* what we want. One where a PC OEM isn't threatened by financial death for daring to offer operating systems that compete with the Windows monopoly.

We started with a thought experiment. We end with a real-life offer for any PC OEM that's willing to challenge the monopoly: Load the BeOS on the hard disk so the user can see it when the computer is first booted, and the license is free. Help us put a crack in the wall.

---

For information on list archives and subscription requests see:
http://www.cptech.org/lists.html