Microsoft ruling may spur more software integration

Regardless of what happens to Microsoft Corp. in the wake of last month’s U.S. Court of Appeals ruling, IT executives will likely see major vendors aggressively step up their software integration projects as they scuffle to grab enterprise customers.

The reason is linked to a core issue in the Microsoft case that has been nearly wiped off the legal docket by the Appeals Court: Microsoft’s alleged illegal integration of its products. The Appeals Court has twice now rejected the claim that Microsoft illegally tied products together in violation of Section 1 of the Sherman Antitrust Act, including a 1998 ruling that concluded the union of Windows 95 and Internet Explorer was “a genuine integration.”

“This is a big open gate for Microsoft to do more .Net integration with the desktop and components,” said John Enck, an analyst with Gartner.

Of course, critics say the latest ruling will only make Microsoft more aggressive.

But it’s also an open door for competitors such as Sun Microsystems Inc., Oracle Corp., AOL Time Warner Inc., IBM Corp., Hewlett-Packard Co. and others to more tightly integrate their products into single platforms.

“Aggressive vendors could be a downside in all this,” said Jeff Allred, manager of network services for the Duke University Cancer Center. “But I think some vendors will have to be careful. Microsoft has a base [operating system] and things added to that can be argued to be features of the [operating system]. IBM and others can’t do that because they don’t have the [operating system].”

But the definition of an operating system is changing in the wake of the industry buzz around Web services, chunks of reusable code that can be stitched together into complex applications. The focus is away from desktop applications and shining on delivering Web services software over the Internet.

The major vendors are rushing to develop application servers as the foundation for executing Web services, in essence using those platforms as an operating system to provide services to Web service applications.

“Look at the application server [arena],” said Dwight Davis, an analyst with Summit Strategies Inc. “IBM, BEA Systems Inc., Sun/iPlanet, they all have application server engines and they are all expanding them into e-business platforms. The app server is the foundation and the things being added are such things as wireless support, corporate portals, business intelligence and process management. They are all trying to differentiate themselves because at the server level, they are all the same [Java 2 Enterprise Edition].”

Davis said these vendors are already being aggressive, it’s just that Microsoft gets the bulk of the attention, especially as its antitrust trial has dragged on the past three years.

In last week’s ruling, the court said Microsoft is an illegal monopoly based on contracts it made with OEMs, independent software vendors and others. But the ruling clearly states that where Microsoft was alleged to have tied its products together, the government still needs to prove the benefits are outweighed by the harms.

It’s a clear signal to Microsoft and its competitors, legal experts say, that it will take a pile of damning evidence to prove in court that integration is bad for consumers, including enterprise customers.

“The real impact for corporations is that dominant technology companies have less reason to fear repercussions for their product development decisions,” said Hillard Sterling, senior litigator for Chicago law firm Gordon & Glickson. “It will be much more difficult for plaintiffs to prove tying in software products.”

Tying is defined as a situation in which a buyer must purchase one product in order to get another, which is a violation of Section 1 of the Sherman Act. The government claims Microsoft did that with Windows 95 and Internet Explorer; Microsoft called it innovation.

“The name of the game will be services,” said Kurt Schlegel, an analyst with the Meta Group. “.Net, IBM, Sun and other vendors will all build similar platforms with portals and personal interfaces.” And, he said, the court’s ruling means the government will have less of an impact in regulating all their integration.

“The tendency of vendors is to want to provide everything, to sell the pieces of the platform. Is that tying or is that giving the customer what he wants?” asked Jim Balderston, an analyst with Zona Research. Balderston argues that what IT wants is integration. And with the Appeals Court ruling they may get it in spades.

“I don’t know about [the vendors] being more aggressive,” said an IT consultant at a Toronto bank, who requested anonymity. “It has been business as usual. But I know that we are getting more aggressive and making them work harder to win our business.”

That may be the best thing IT executives can do.

“Vendors are now free to do innovation and let the marketplace decide what it wants,” said Steve DelBianco, vice president of the Association of Competitive Technology, an advocacy group for restricting government intervention into the IT industry.