Microsoft, breaking up of
Should Microsoft be broken up into two or more separate companies?
You can also add to the debate by leaving a comment at the end of the page.
Microsoft has a monopoly which it exploits to the disadvantage of computer users. Microsoft’s opera...
Microsoft has a monopoly which it exploits to the disadvantage of computer users. Microsoft’s operating system is ubiquitous in most countries and industries, and in consequence its applications are widely used. This has put it in the position of a monopolist, since it can develop lower-quality products (hence the glitches in Windows XP, for example) and yet has huge pricing power. As with all monopolies, this operates against the interests of both consumers and competitors. It can use this monopoly power ruthlessly in reinforcing its market dominance, as demonstrated for example in the way in which its Internet Explorer overtook the previously dominant Netscape browser. Monopoly in software has an additional disadvantage, which is that of security. Over-reliance on a single supplier multiplies the vulnerability of software users to security holes.
Breaking up Microsoft would simply be punishing it for its success. There is no natural monopoly in Microsoft’s business. In thirty years it has gone from start-up to world-beating company because it is well-run and responsive to the needs of people who want to buy the products it offers. It is misguided to label this success story as a monopoly. There are many firms which try to compete with Microsoft on level ground – and indeed Microsoft only got to where it is today by dislodging some already established firms. Its market position reflects the fact that it is the best company at what it does and if this stops being so it will lose its strong position to a competitor like Linux (or the migration of personal computing to mobile devices), without the need for breaking Microsoft up.
Microsoft intentionally bundles its software with its applications, giving it an unbeatable free rid...
Microsoft intentionally bundles its software with its applications, giving it an unbeatable free ride into most computers. Computer manufacturers and resellers will typically want to offer Windows as it is the standard and familiar operating system for most users. This gives Microsoft the ability to “bundle” its software applications (e.g. Media Player, Internet Explorer) together with this operating system. This means that it is very easy for Microsoft to gain almost universal distribution for its software applications and conversely it is very difficult for its competitors to do this. This further strengthens its unhealthy monopoly position.
Bundling is an appropriate and sensible business strategy. It makes sense that building an operating system gives a company a skill base and understanding of its users that makes it well suited to developing additional software. There are similar processes in many industries outside Information Technology and nobody questions them. For example, it is taken for granted that a building firm which builds the framework for a house would also be well-suited to add to that framework through such things as wiring the house up, fitting the windows, decorating inside and so forth.
A monolithic Microsoft serves too narrow an interest group. Microsoft is clearly a U.S.-oriented co...
A monolithic Microsoft serves too narrow an interest group. Microsoft is clearly a U.S.-oriented company serving its shareholders above other interests. This is too restrictive a view for such an important software supplier. Breaking it up into smaller, less powerful units would encourage it to serve a wider interest set. For example, it might be less U.S.-focussed and it could pay more attention to user rather than shareholder interests.
Microsoft is a rare U.S. success story which foreign critics want to destroy. Much modern discussion of the U.S. economy focuses on the relentless exporting of jobs to lower-wage economies. Microsoft is an example of a relatively new company in a new industry which has been built on a U.S. workforce and is a large contributor to the U.S. economy. People who want to break it up are sometimes motivated by a desire to damage what they perceive as an economic success story for the U.S.
Software is too important to be left to an unbridled free market. The I.T. revolution means that so...
Software is too important to be left to an unbridled free market. The I.T. revolution means that software companies in general and Microsoft in particular have taken on an incredible importance in modern life. In everything from heart surgery to avoiding nuclear meltdown, and in the work of almost every wealth-producing industry, software is essential. It is therefore too critical to the continued success of our civilisations to leave all software development to the ravages of an unregulated market. Instead we should treat operating systems as a utility service, like water or electricity, and regulate it in special ways to protect its supply to the public. Breaking up the company would allow Windows to be regulated in this way, while allowing the other parts of the business to operate separately and more commercially, producing and selling software applications.
Only the market can deliver software innovation. Microsoft has produced amazing applications and software in the market. It has also redefined what is understood as an essential part of an operating system - ten years ago an internet browser was almost unknown, now it is an essential part of a PC's basic software. Equivalent companies in more heavily regulated economies have failed to produce anything similar which has competed successfully against Microsoft. Directing Microsoft how to behave and punishing its success makes it less not more likely that it would improve its products and services.
Microsoft’s control stands in the way of software as common property. Software, like the human geno...
Microsoft’s control stands in the way of software as common property. Software, like the human genome, is simply too important to continued development of our societies to be treated as ownable intellectual property. What Microsoft has developed serves all people in a way which means it should be seen as a form of common property. This cannot be done when a monolithic Microsoft continues to wield monopolistic power over its past output.
Microsoft should be able to benefit from its investments. Microsoft has spent large amounts of time and money in developing its business, employing huge numbers of highly-paid graduates in writing and developing software. If it failed, nobody would be suggesting that it ought to be bailed out or subsidised. It is therefore wrong to say that, just because it has succeeded, it ought not to be able to reap what it has sown. Without Microsoft, the same software development would simply not have happened. It therefore ought to be able to be structured as it thinks fit. Certaintly, any attempt to punish Microsoft for its success will act as a deterrent to future entrepreneurs and innovators.
Microsoft was found in court to have engaged in a number of anti-competitive practices, unfairly exp...
Microsoft was found in court to have engaged in a number of anti-competitive practices, unfairly exploiting its dominant position in the market. Such ruthless behaviour broke the terms of previous undertakings and shows a pattern of contempt for anti-trust law (demonstrated by a series of embarrassing emails revealed in evidence). Only by changing the culture of the company can this kind of behaviour be prevented in the future, and this is best achieved by a structural solution - i.e. breaking up Microsoft into two or more separate companies. This would also provide a necessary deterrent against anti-competitive behaviour by other companies, whether in the IT industry or elsewhere.
Microsoft has admitted bad behaviour in the past and has addressed those failings. It is a different kind of company now from the one taken to court in the late 1990s, and this is the reason that the US Department of Justice dropped its case against the firm. Indeed the I.T. industry is so fast-moving that traditional ideas of regulation cannot be sensibly applied to companies like Microsoft. Rather than trying to impose laws drafted a hundred years ago on new-economy firms, it would be better to trust in the power of innovation and the market to produce disruptive technologies to shake up the IT sector and prevent the long-term dominance of any one player in it.
What do you think?