Jerry Yang may have a dysfunctional relationship with Carl Icahn, but he can take comfort knowing that Europe's top regulator is making Microsoft equally miserable.
The ever-entertaining Neelie Kroes, who is the European Union's competition commissioner, again poked her finger in Steve Ballmer's eye. Earlier this week, she encouraged EU member countries to break their reliance on a single software supplier. (Guess who she had in mind?)
Neelie Kroes: It'll take a lot more than flowers from Steve Ballmer.
(Credit: European Union)"I know a smart business decision when I see one--choosing open standards is a very smart business decision indeed," said in a speech. "No citizen or company should be forced or encouraged to choose a closed technology over an open one."
As Loren Feldman's sock puppet sendup of Shel Israel is wont to say, "Fascinating!"
Obviously, the decision to go open source or proprietary comes down to customer preference. But when a powerful European regulator starts picking sides--if not taking on the unofficial role of technology cheerleader--Microsoft must be wondering whether it will ever get a break.
The company has already racked up more fines than any other company in the history of European antitrust enforcement. Earlier this year, the EU hit Microsoft with a $1.3 billion penalty for failing to comply with a 2004 antitrust ruling and for charging "unreasonable" prices to rivals seeking documentation for workgroup servers. In recent months, however, Microsoft has pushed a charm offensive. But whatever thaw it had with Kroes has proved short-lived.
"There were couple times Ballmer came out beaming from meetings (with Kroes) thinking they had ironed out remaining issues. But Europe's a different animal," said Michael Cusumano, a professor at the Massachusetts Institute of Technology's Sloan School of Management. "It's the place where the open-source movement originated and they don't really have any dominant infrastructure players. Their history is that Europe's market has been fractured across different countries with different laws."
(Credit:
Dan Farber/CNET News.com)
And no doubt Microsoft is a very different type of company than the sort Europeans have had to deal with. Even though they may have relationships that are cordial on a personal level, Microsoft views its market as global and reserves the right to create linkages among its different products. In the U.S., we understand that a bit more, but rightly or not, Europeans feel they've been victimized.
That's why Microsoft has been saying the right things about open source in public. In March, the company's chief counsel, Brad Smith, told a crowd of open-source developers that Microsoft believes "in a bridge that is scalable, that is workable, that is affordable...that's a hard bridge to build. But I will say this--today more than ever--that is a bridge we very much need to build." A couple of months earlier, Microsoft also pledged not to sue open-source developers for products that connect to Microsoft software and would share communication protocols governing how its software products communicate.
That hasn't made any impression in Brussels. Kroes publicly encouraged both the Dutch Parliament and government to further embrace open standards. Meanwhile, EU regulators are investigating whether Microsoft's guilty of improper competitive practices around Internet Explorer as well as any barriers rivals face making their products interoperate with Office.
Microsoft's Jason Matusow recently had a interesting post explaining why he believed technology mandates didn't make for good public policy.
Technology providers want their current and future technologies considered on the merits of the technology and the value those technologies bring to those who choose to consume it. If a government mandates a specific technology and/or class of technologies, they are unnecessarily restricting their own choices. Inevitably statute moves more slowly than technology, and mandates subsequently lead to sub-optimal choices.
He has a point. Unfortunately for Microsoft, the company's in a permanent bind. It can try to accommodate to open standards but it will not adopt open source as a primary standard. And that means Microsoft is always going to run into an impasse with Kroes or other like-minded overseas regulators.
"I think there is common ground," Cusumano said. "They just haven't found it yet."
Give Brad Smith credit: he didn't wuss out in front of a potentially hostile crowd.
Late Tuesday afternoon, Microsoft's top lawyer got on stage at a open-source conference in San Francisco and tried to find common ground with the audience.
In the end, it was mission accomplished, and he commanded a nice ovation from the crowd. Still, it's clear that a big divide separating Microsoft from open-source advocates remains.
Smith was sent to the conference to offer another olive branch. Open source raises all sorts of intriguing--and thorny--problems for Microsoft, which still struggles to coexist with a movement that's seemingly gaining strength by the day. And Microsoft still has its work cut out in convincing the open-source world that it's ready to bury the hatchet and repair what's been a tempestuous relationship.
Listening to the questions from audience members was instructive. A lot of people in the community still distrust Microsoft's motives--let alone what they dismiss as fig leaf attempts to participate in the community.
Smith repeatedly sought to persuade the audience that Microsoft's good intentions were genuine. Maybe they are, but that's where the company is hard-pressed to convince the diehards.
Brad Smith,
general counsel,
Microsoft
Most of the people I spoke with yesterday want Microsoft to contribute back to the open-source community in a big way. The pledge last month not to sue over open source and foster more interoperability was a good first step, they acknowledged. But they want a lot more than soothing words.
I think Smith got the message, though he and the rest of Redmond's top brass are still trying to figure this one out. He went out of his way to agree that the likely future of software would be marked by "multiple business models" and that the market was big enough for everyone to coexist.
I'm not going to alibi for Microsoft. When it comes to open source, the company's been so dumb and arrogant that you have to wonder whether someone spiked the water supply in Redmond. But some folks don't want to grok that times change, and even idealogues soften their thinking when confronted with reality.
Toward the end of the question-and-answer session, one guy dredged up a list of silly comments made by senior managers and threw it back in Smith's face. Does Microsoft still believe open source is the equivalent of cancer or communism, he asked?
Smith didn't take the bait, and in his lawyerly best manner, he made it clear that Microsoft has turned the page and moved on.
Probably good advice for all concerned.
SAN FRANCISCO--The advance billing had the audience assuming Daniel was about to enter the lions' den. What they got was more along the lines of Mister Rogers talks tech.
Brad Smith, who is Microsoft's top lawyer, went out of his way during an afternoon talk before a gathering of open-source die-hards to portray the software company as ready to turn a page in its relationship with the developer community.
Microsoft's Brad Smith, singing a love song to open source.
(Credit: Charles Cooper)"Two engineers in a room can solve a problem a lot better than 1,000 lawyers," he told a packed ballroom of open-source enthusiasts and executives here, adding that the company wanted "conversation and dialogue."
"We believe in the importance of building a bridge that makes it possible for different parts of the industry to work together," Smith said. "We believe in a bridge that is scalable, that is workable, that is affordable...that's a hard bridge to build. But I will say this--today more than ever that is a bridge we very much need to build."
At another point in his keynote speech at the Open Source Business Conference on Tuesday, Smith said that Microsoft appreciated "the important role that open-source software plays in this industry" and complimented creators of open-source software for their passion. "That's not what you always heard from us and I recognize that."
"We all do software," he continued. "We are all part of the same industry--all part of the same industry that has many diverse parts to it."
But despite his conciliatory tone, Smith is no shrinking violet when it comes to protecting his company's intellectual property. Last year, he told Fortune magazine that free and open-source software violated 235 Microsoft patents. At the time, he told Fortune that the Linux kernel violates 42 Microsoft patents, while its user interface and other design elements infringe on a further 65. OpenOffice.org is accused of infringing 45, along with 83 more in other free and open-source programs, according to the interview in Fortune.
So what's changed in the intervening 10 months? Well, a lot.
Specifically, open-source software is now deeply entrenched in the computing industry and many of Microsoft's customers use open-source software widely. Still, Microsoft came to town intent on sending a message. Earlier in the day, Sam Ramji, who is Microsoft's "Director of Open Source & Linux strategy," was all smiles and full of kumbaya as he participated in a panel with three other open-source executives.
In a later Q&A onstage, Smith allowed that Microsoft was treading on delicate ground--especially on the topic of patents. He acknowledged the differences and sought to undercut any appearance of confrontation.
"We live on both sides of the patent fence every day. We have more patent lawsuits than any company in our industry," he said. "And yet we still believe in the benefits and value of a well-functioning patent system."
In February, Microsoft tried to smooth its relationship with the open-source world. Microsoft now shares communication protocols governing how its software products communicate. Microsoft also pledged not to sue open-source programmers for developing software that uses those interfaces. What's more, the company has developed what it calls an Open Source Interoperability Initiative to improve how open-source software works with its own products.
"It would be a mistake for any one of us to say that the last word has been written on any of this," Smith said.
James Bottomley, the CTO of Steeleye Technology, who was onstage with Smith questioned how Microsoft intended to square its desire to work with the open-source community, given the two sharply different business models.
Smith answered that it would be on a "project-by-project basis."
"I can't give you an answer saying here's a blank check--where do I sign," he said. "We are moving. I recognize that contributing in a variety of ways is part of the equation."
Smith didn't climb to the top of his profession at the world's largest software company by accident, and his formidable skill was on display as he guided through an assortment of audience questions--some teasing, some flip, some downright hostile--and finished the session on a note of mutual recognition.
"Ultimately, people are not caricatures. They get up in the morning. They get smarter. The industry evolves," he said. "And you want that. You don't want people to have to live with the caricatures and stay with those caricatures."
SAN FRANCISCO--On the eve of this country's presidential election, here's a question I'd like to pose to the remaining three candidates: what would you do if other governments begin snubbing U.S. companies because of nationalistic reasons? In particular, one big software vendor comes to mind.
If Microsoft has the equivalent of a foreign policy czar, I'll be shocked if that question isn't front and center. Perhaps more closely associated with U.S. technological prowess than any company in techdom, Microsoft is vulnerable to being viewed as a surrogate for American hegemony abroad. So far, the worst case scenario hasn't materialized, even in the aftermath of the Iraq war. But that's not to say Microsoft inspires warm and fuzzy feelings overseas.
Microsoft has had a famously cantankerous relationship with the European Union. Even though Europe's top regulator, Neelie Kroes, doesn't decide what software local governments buy, her run-ins with Steve Ballmer reflect distrust on both sides. (Here's the audio recording of Kroes' press conference last month when she announced a $1.3 billion penalty for noncompliance with previous regulatory decisions.)
If Microsoft really got singed because of strong anti-U.S. blowback, it would prove an incredible boon for open source. Until now, Microsoft has held its own against open source, but the same trends driving adoption on this side of the Atlantic apply overseas. (Microsoft has been aggressive about making the comparative case against open source, tossing everything but the kitchen sink into the argument; obviously, it hasn't worked.)
So far, local open-source companies don't need to compete by playing the nationalism card. Instead, it's a question of cost and technology--an increasingly persuasive argument in open source's favor during a time of economic turbulence. Daniel Chalef, chief operating officer of a U.S. open-source company with roots in South Africa called KnowledgeTree, told me at an SDForum's Global Open Source Forum symposium here that "for the most part, it's a question of local control over capital" and not a national issues.
At least for the time being, maybe that's so.
***Coop note: In the original text of my post, I misidentified KnowledgeTree. The company, which has roots in South Africa, recently moved its headquarters to the U.S.
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