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Global branch-office wedge-politics – Is this “Freedom to Innovate”?

By Tony Leggett (, July 10, 2001

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Microsoft is a nice company. Say it a few times and you don’t even have to grit your teeth. After all, Apple and Microsoft kissed and made up back in ’97 and we’ve got two spiffy Mac Office updates to prove it. The company chairman often appears nowadays wearing a very non-threatening sweater, raising money for charitable causes. What could possibly be more reassuring and just plain nice?

Microsoft’s niceness was further confirmed when the US appeals court overturned Judge Jackson’s previous ruling to split the company into two. It seemed that while Judge Jackson was a good and proper judge in his findings of fact, he seemed to develop the legal equivalent of compulsive potty-mouth whenever put near a journalist. In short, the appeals court found he “demonstrated partiality” or, as the Register so quaintly put it, he was “a big fat idiot”.

As far as Microsoft is concerned this is all swell and it’s back to business as usual – “Dee-Oh-Who”?

However, if you’re more concerned by the finer nuances of Microsoft’s passport fine print that states your intellectual property, once hosted on a Hotmail server, isn’t – you may want to read on. While trying to appear nice and obsequious throughout the DOJ trial, in the background the boffins have been busy at Redmond. It’s really worth recapping some of the highlights of Microsoft’s exploits this year. It’s worth noting these exploits not just to give Microsoft an old-fashioned bollocking (enjoyable as that may be) but to observe the pattern developing when Microsoft doesn’t get what it wants. They don’t take their bat and ball and go home – they pack up and go overseas.

Divide and Conquer!

For small to medium countries the phrase “branch office”, where your economy is a heap of multinational subsidiaries, is already familiar. By “wedge politics” I simply mean “thin end of the wedge” – hence the article’s title. What I’m laying out below is not just the usual litany of Microsoft abuses. Instead, it’s a collection of evidence that points to a very clever strategy on Microsoft’s part to deal with objectionable policies and technologies.

In brief, when Microsoft has a technology or policy that has given them publicity trouble, or that they think is likely to, they avoid (or drop) that issue in the States, but quietly implement them in markets outside the US and the glare of the US media. This approach, “Global Branch-Office Wedge Politics”, allows Microsoft to gain experience with the particular issue, and entrench it, and, when the time comes to introduce it back in the US, gives them a place to point to and say “But nobody there complained!”

Let’s take a look at the evidence...

Exhibit A: Is it .NET or .TRAP?

Debate has raged over whether people will trust Microsoft with their data for their future strategies such as .NET. Will customers want to rent Microsoft software “services” rather than buy software applications, and why? Microsoft argues it’s for the convenience and security of having your data all in the one place but the key question is still “what will they do to entice customers”? And now we know: wield a big nasty stick.

Most people are already familiar with Microsoft’s classic FUD, such as their “inducements” for enterprise – upgrade now or pay full price later. But this tactic is relatively unsophisticated, and unreliable in terms of revenue generation. A much more insidious strategy is afoot.

Microsoft has been running trials of subscription based software licences with its Enterprise customers. In the past large institutions have sometimes been slugged with licence fees based on the theoretical number of maximum users, but this new scheme’s a kicker. Should your company decide it’s quite happy with the current software as it suits its needs, that’s bad luck – pay up before the expiry date or stare at a blank screen. Yes, this is a nasty policy, essentially blackmail.

What, your company hasn’t had to do this? This is the first you’ve heard of it? Then you probably live in the US. See, these trials aren’t actually running in Microsoft’s home country. The trials are instead happening in Australia and Europe. Why? Why not run this scheme in the States? Why is Microsoft not pushing this policy in the country which houses its world headquarters? While I’m sure there are all sorts of legitimate business reasons that Microsoft could give, the fact is that testing this policy outside the US avoids a lot of media headaches. Who in the American press is going to care about a business practice in some foreign country?

Coincidentally, these business practices are also out of the jurisdiction of the DOJ. Now fancy that?

Exhibit B: Welcome to the Matrix

In the sci-fi film “The Matrix” there was the prophesy of “The One” – someone who could reshape the Matrix as they saw fit. Let’s move to our everyday web-based reality, and it seems “the one” who’ll have the power to reshape the web as he sees fit is none other than Microsoft’s chief software architect, Bill Gates. While you won’t want to know this was really predicted by Larry Ellison (Oracle CEO, get it? get it?), you will want to know exactly how Microsoft wants to achieve this.

In the Matrix there were those creepy agents who flitted about altering stuff – with Microsoft’s brave new Web it will be Smart Tags. Smart Tags were meant to be this wonderful new technology rolled into Windows XP and its new browser Internet Explorer 6. In theory Smart Tags are meant to add extra functionality by adding hyperlinks into documents to suit your needs. Or more accurately, Microsoft’s.

If the Matrix metaphor comes across as a little wacky there are numerous other accounts to shed more light on the big picture. There’s Walt Mossberg’s original coverage, a somewhat tongue-in-cheek example of Smart Tags at work (remember, clever caustic sarcasm is the highest form of wit), and AtAT’s own unique perspective to hopefully give a well-rounded appreciation of the problem. Put simply, these tags have the potential to completely redefine the meaning of any web document (and thus violating the intellectual property rights of the author) by addling the page with a slew of Microsoft-friendly links. The fact that this directs a heap of users toward Microsoft sites and services – at the expense of their competitors – is just an added bonus.

In a word, it’s diabolical. And the IT community said it so loudly that Microsoft chose to beat a hasty retreat on the matter. Pushing an unpopular technology is not prudent when you are trying to appear more friendly to a new trial judge and also appease the various groups upset about it.

So Smart Tags are dead, right?

Wrong. Microsoft has simply withdrawn them from the US version of Windows XP and IE6 – international versions are still going to ship with it as planned. So far this strategy seems to have been effective. Microsoft’s little backflips have appeased some in the US press. So yes, in the US Microsoft has ditched its Smart Tag feature for IE6. And yes, in the US Microsoft has extended their “upgrade or else” enterprise deadline to next February. The US press is right to note, with a small sense of satisfaction, that this decision was forced by public pressure of the media and customers.

But they mustn’t forget that trials of subscription based software are already taking place in countries like Australia. And that while the squiggly purple line is banished from US versions, smart-tags are still going to be trialed (in limited forms) in overseas markets. The keyword is trialed – for an eventual return to the mothership.

This testing of contentious technologies and business tactics away from the glare of the US media seems to be a pattern emerging in Microsoft’s new business tactics. Microsoft has learned to take advantage of the global village when they want to push the boundary with controversial technologies. If there’s something that’s potentially unpalatable, they’ll trial it in an overseas market first. Once the technology is entrenched and the public becomes less vigilant, it can then be pushed through as a fait accompli. It’s a big, borderless global market, and Microsoft has learned to exploit that fact.

Of course, Microsoft doesn’t always leave out central office – just look at the FUD employed around software upgrades already mentioned, or the tracking of “naked” computers sold without an OS, or even Hotmail’s questionable take on your intellectual property. But with the global reach that Microsoft has, and the attention that it receives in the US media, expect more and more of these issues to drop off the radar screen in the States and pop up, quiet and unannounced, in “foreign” markets.

What part of “evil global monopoly” don’t the courts understand?

Let’s just recap a few of the key details here. Evidence suggests Microsoft is tracking (using whatever means possible) the mixture of OS licences bundled with PC sales. They are then using whatever inducements they can to push as many customers as possible onto their new subscription based software services model. Parts of this new software, the most contentious being IE6, had a planned feature (Smart Tags) that would steer customers to Microsoft services at the expense of their competitors and potentially violate the intellectual property of thousands of web authors. And their response to overwhelming negative publicity is to drop it while trying to sneak it in through the international back-door? To me that’s a company screaming “break me up!”

Strategy changes like this affect the purchasing decisions of any company reliant on Microsoft products. None of these moves affect Mac users yet, but we do live in a cross-platform world. These developments will affect how many people run their business and if they unfold as planned will eventually creep into Microsoft’s MBU strategy. Just as with other events like Microsoft’s neverending battle against ruthless software pirates, we’ll endeavor to keep you posted.

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