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Judge Thomas Penfield Jackson has a difficult decision. He has already published his findings that Microsoft broke the law. Now he has to come up with a remedy that will keep the software giant from doing so again without causing undue harm to shareholders, customers, and competitors.
Microsoft wants a slap on the wrist. The Justice Dept. wants to split up the company -- and Jackson seems to be leaning in that direction. Too bad. Neither solution addresses the root problem: It's too easy for Microsoft to use the monopoly status it'll retain in operating systems as a club to smash competitors in other areas of software.
While Judge Jackson probably won't take this advice, here's another way -- and the best way -- to rein in Microsoft: Just "open-source" the Windows code. If done right, this simple move would foster competition, reduce prices for consumers, and increase the quality of the software. It might also be the smartest move Microsoft could make to ensure its future survival.
SECRET SAUCE.
What is open-sourcing? The programming that creates most software is proprietary and encrypted. A consumer chooses to use the program based on how good it is, just as a consumer eats at a top restaurant based on the quality of its food. But a company that designs a program won't reveal the source code (the actual lines of programming commands), just like a chef refuses to reveal his recipe and ingredients.
If Microsoft had to open-source its software, the internal code could be seen by anyone, who could then copy, change, or distribute it. The code's proprietary nature disappears. The most successful open-sourced software is Linux, an operating system designed in the early 1990s that now accounts for nearly 30% of the server market (computers that run networks).
The Linux code is published under something called a general public license (GPL), which legally requires anyone who alters the program to publish those changes so that any interested parties have equal access to the information. This is how open-sourcing would have to work for Microsoft's key operating systems products -- Windows 98, Windows CE, Windows 2000, and Windows ME -- for the antimonopoly remedy to be effective. While source code can be opened by other methods, GPL's beauty is that it prevents anyone from turning code into proprietary material.
APPLICATIONS EDGE.
Competitors, consumers. and the government would all benefit from an open-sourced Windows. In one fell swoop, the feds could guarantee a level playing field in this crucial area. Any company could launch its own version of Windows, creating competition where virtually none exists now. And consumers would have choices, which should cause prices to fall.
Open-sourcing Windows doesn't mean Microsoft would have to open-source the code for all its software. It could keep its application products proprietary, which would give the company plenty of ways to make money, though it might have to work a lot harder. Its applications, such as word processor Word and spreadsheet Excel, already account for almost half of Microsoft's revenue. Right now, its applications programmers get an early look at revisions to Windows, which give them a big edge over the competition in creating new products. An open-sourced Windows would negate that advantage, which is at the heart of the antitrust case against Microsoft.
Indeed, an open-sourced Windows would allow Microsoft to concentrate its resources on its applications division. In the long run, these programs will be far more lucrative than selling operating systems because consumers use one operating system to run a PC, while the appetite for applications is infinite.
MORE "CODE SCRUBBERS"?
Microsoft argues that it should not have to give up the edge it now holds in the operating systems market. Company lawyers say that's the reward Microsoft has earned for taking the financial risks early on, investing in the labor and technology necessary to create an operating system that's the standard of the PC world.
But the fact is Microsoft could end up benefiting the most from open-sourcing. Windows 2000, the latest version of the company's operating system, is a horrendously complex program. It took seven years to develop, has more than 80 million lines of code (a likely world record for any consumer program), and was born at the hands of thousands of programmers. Microsoft lore has it that the company employed two programmers to correct mistakes for every Windows 2000 programmer.
Now, imagine the computing needs of the world 10 or 15 years from now. How will Microsoft develop Windows 2015? Hire 1 million programmers and 2 million "code scrubbers?" By open-sourcing Windows, Microsoft would be just one of dozens of companies developing the code to meet the new demands of computing. Thanks to the
GPL, Microsoft could copy innovations created by competitors, drastically reducing its software development costs.
NO FEAR.
It's easy to see why Microsoft might be scared of the impact that such a revolutionary idea could have on the company's future. But fear is no place to start when it comes to managing a great company. Unfortunately, the chances are slight that Judge Jackson will order Microsoft to open source its code. And government attorneys aren't backing it. The reason: It's a relatively new approach to software development and a totally unproven concept in antitrust law. Traditionally, antitrust remedies involve the breaking up of companies, not the taking of private assets. Microsoft might try to argue in court that open-sourcing is akin to a seizure of assets.
Ironically, regardless of what the judge orders, it's quite possible market forces will require Microsoft to open-source Windows later on. By then, though, it might be too late for the Colossus of Redmond to save its powerful brand name. Right now, Judge Jackson has the chance to do the right thing. In the long run, open-sourcing Windows would be the greatest gift he could ever give Microsoft, its competitors, and consumers.
Jaffe writes about the markets for Business Week Online What do you think about an open-sourced Windows? Let us know at our Ask Sam Jaffe Forum EDITED BY BETH BELTON
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