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Barbarians at the Gates

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On the occasion of Bill Gates’ retirement, it seems everyone has written a retrospective.

Not wanting to be left out …

Bill Gates’ original significance to the software industry was his recognition that it was still a software industry. It’s the complaint of those who disparaged him back then, boiled down to its pure, concentrated form.

In 1980, we who lived in the world of small systems had a script: Personal computer companies … primarily Apple and a host of garage start-ups that ran CP/M … would free us from more than just the clutches of the IBM monolith. They would democratize information technology. Being a community of people who all liked and trusted each other, they would work together and with us to build a brave, new, more congenial world of small systems.

It was going to be a different kind of industry that broke the old rules of dog-eat-dog competition.

Then, along came Bill Gates, who targeted competitors and, in spite of it being considered gauche, went after them. Gates’ original significance was that he was the one who changed the world of small systems from a hobby to an industry. Many of us were, at the time, outraged. Some never did forgive him for it.

But really, we had nothing to complain about. The nature of capitalism is that companies win and lose in the marketplace. Microsoft under Gates won.

Gates is also often credited (or reviled, depending on the source) for adopting or co-opting whatever ideas he could find that seemed to make sense for Microsoft to pursue, instead of innovating the way Apple did.

This was always a silly complaint. Apple got its ideas about a graphical user interface from Xerox PARC Labs — an organization that was brilliant at creating ideas that made a lot of money for a lot of companies, none of them Xerox.

Apple learned about GUIs from Xerox. Microsoft drew its ideas from Apple, IBM, Digital, and just about everywhere else there was a good idea to be had. That Microsoft established its family of features through adoption instead of originality is something to admire, not despise, as those in the open source community must, if they’re honest, attest to.

Early on, Gates also recognized a cardinal rule of the software industry: Those who control architecture dominate. Those who don’t occupy fragile niches. Gates was the only player of his time who played this game well.

Gates leveraged MS-DOS to get to Windows, Windows to get to the office suite, and his office suite to control the architecture that truly mattered: Data formats. Once Microsoft Office came to dominate the desktop, no other company could intrude on it.

So as TCP/IP’s open networking supplanted IBM’s closed SNA, Microsoft became the only company able to truly control an architecture.

As Bill Gates phases out and Steve Ballmer takes full control of strategy, everyone knows the big threat to Microsoft is Google. But I wonder whether Google really is the strategic threat to Microsoft that so many in the industry imagine.

At its core, Google is a media company. Its search engine and applications are bait, used to attract the Web users it sells to its advertiser customers. That’s where it makes its money — from advertising revenue.

Microsoft makes its money licensing software.

CIOs and CTOs are more likely to entrust their enterprises to products from a company that depends on the revenue they generate than from a company that would be just as happy selling electronic tulips should they prove to be of more interest to Web users.

The real threat to Ballmer’s Microsoft is XML, and Microsoft Office’s switch to it as its go-forward document format. With the switch, Microsoft’s strategy of architectural control is becoming more a matter of historical interest than future utility.

The desktop is about to rediscover its roots. Just as Borland released Quattro Pro — a better Lotus than Lotus — and gave corporate IT an economical and architecturally neutral spreadsheet alternative, now anyone who wants to get into the desktop applications game can do so.

All they have to do is to read and write either Open XML or ODF … both open formats; soon to be interoperable … and they can sell a risk-free alternative to Microsoft Office.

Unable to compete on architectural lockdown, and with exciting new features increasingly hard to think of, what’s left are three radical alternatives.

Microsoft under Steve Ballmer will have to compete on some combination of: Efficient code, price, and service.

It will be an interesting game to watch.