Microsoft Fined $1.35 billion

Microsoft is no stranger to the receiving end of anti-competitive allegations. And, their accusers are often quietly dismissed via some form of: small payments/incentives, clever deal brokering, (pseudo)partnerships, or even more aggressive behavior. Well, not this time.

In 2004 the European Union recognized Microsoft’s practices as anti-competitive and went one step further with an Anti-trust ruling. This 2004 ruling was very serious: 497 million euro fine ($748 million) plus stringent requirements to play fairly with competitors.

As of last Wednesday, the EU recognized Microsoft’s non-compliance with playing fair.  So, the EU decided to take things to the next level: 899 million euro fine ($1.35 billion) plus really play fair. Needless to say this record fine is truly massive. I wonder if Microsoft will continue to do business as usual, or if they would perhaps… changes their ways.

You see, Microsoft is a very large, powerful, and aggressive company. As such the upper executive hierarchy is staffed by a large number of powerful and aggressive executives. And, to remain “competitive”, MSFT has a pretty much constant re-organization within the company and leadership ranks. From my experience: constant re-orgs, role re-definitions, and business plan changes are all fantastic ways to lose track of what you just did, what you’re now doing, and what’s really needed next.

I guess on some level I saw this coming. I mean, all the constant turmoil within upper management (especially within the Live Division) has made it hard (questionably impossible) to properly follow legal stipulations (including Anti-Trust rulings), while riding the razor-sharp-edge of competing like the uncaged-beast that Microsoft is. I’m surely not condoning Microsoft’s behavior, nor am I making excuses for their actions.  I’m just not very surprised.  But, I am curious how they will react with the ball (yet again) fully in their court.

Microsoft Live

When you consider just how large, successful, and dare I say… dominate Microsoft has become in the computer world, I am dazzled by how much trouble they’ve had getting in on the Web 2.0 scene. I’m sure Microsoft doesn’t enjoy playing second fiddle to Google, Yahoo, and bunches of others Johnny-Come-Latelys. I also think Microsoft’s massive executive hierarchy is pretty worked up about addressing their online presence deficit. In truth, I imagine a never-ending barrage of internal emails flying around the MSFT corporate network. Emails saying: the future of our company is at stake!. But, what I think is really interesting is how Microsoft reacts to this fear, and their attempts at growing their online business.

Side note: In 1995 Microsoft really started focusing on the Internet, with Bill Gates’ famous May 26, 1995 Internet Tidal Wave memo, where he directed his executive staff to attack cyberspace and for “…every product plan to try and go overboard on Internet features.”  In this memo he also said: “Now I assign the Internet the highest level of importance”.

Over the past decade, Microsoft has struggled to leverage it desktop market dominance into the online world, and they’ve had less than spectacular results. Microsoft’s massively developed marketing and distribution arms are pretty useless in the online world. They have built so much critical mass in all desktop-software aspects, which is all simply not transferable verbatim into Web 2.0 (Note to self: Since the computer world can’t agree on exactly what Web 2.0 means, I’ll use this term to appear trendy and “in the know”)

The crux of the issue is this: Microsoft was built on the software buy/sell/license mentality. But, it’s really more than a mentality, it’s a firmly ingrained culture completely encompassing a very fixed business model: sell software by unit (100 here, 1000 there), divide software into different segments (Office, Windows, etc) and have these business segments complete for desktop market share. The result: more money allocated to the more successful segments for cool.new.applications. Going on twenty years now, Microsoft has outwardly become an expert (and definitely the dominator) in developing desktop (non-online) software.

It really is a very deliberate decision: Is my company a services-company, or a software-company? Committing to the software-company track: you generate most (and nearly all) of your revenue by selling software by: unit… and after a while, you don’t generate revenue from your existing product until you ship a new version (Windows 2000, XP, Vista, etc). This drives how you do: planning, marketing, distribution (including Best Buy shelf space), development (native C++, VB, .NET, etc), leadership, etc. This really drives your whole company top-to-bottom, from your Steve Ballmer to your Joe Coder.

A software-company can profit by charging for services, but that’s very different from building a software-as-service company, such as Google. If a company wants to be service-based, then the core revenue model becomes: how much service can I sell, lease, or rent on a monthly basis (which is drastically different from: how many copies of this version of my program can I sell). The longer your software-company has been around… the more software-company infrastructure you have. And, all this becomes deadweight when you try to swim in the cool, new, sexy, and profitable online-services swimming pool.

I believe that before Microsoft can establish a significant market presence in the online business world of Web 2.0 (which I like to pretend Ballmer calls the Interweb), the MSFT culture and business-model needs to change. If I were Steve Ballmer, I’d create a Microsoft subsidiary that would operate completely independently from Microsoft (sort of a Skunk Works operation) and be a ground-up online service-company. If Ballmer won’t do that, then mitosis is the next best option: divide Microsoft into two separate companies: software-company Microsoft and services-company iMicrosoft. (I think this mitosis scenario is about as likely as everyone in the U.S. winning the lottery on the same exact day).

Instead of Skunk Works, or mitosis, Microsoft has chosen Plan C: Microsoft Live division. This division is dedicated to the online world, but ends up competing with all the other Microsoft software-centric divisions. And, from the Microsoft news I’ve read, there has been a large amount of executive turnover in this division. I quietly wonder, if one promising executive after another has been consumed (wrung-out) trying to run a service-company within a software-company (I sure wouldn’t want that position).

On several occasions, Microsoft has ventured to buy significant online market share. Just recently, MSFT submitted a $44.6 billion dollar bid to buy Yahoo. While the results are unknown, I could see Yahoo wanting a lot more money. And, if the sale did go through, I’d hope that MSFT keeps the two companies 99% separate (i.e. Skunk Works) – they could share some branding and technology transfer, but I think pushing Yahoo and Microsoft into one company could result in operation square-peg-in-round-hole.

Since buying an online presence hasn’t yet yielded Microsoft a major piece of the internet pie. Building is the next best thing. Case in point: Microsoft Office Live, which is the latest and greatest attempt by Microsoft to build a firm foothold in the online world. Simply put, this is an online version of Microsoft Office. (Did you notice the online version of Microsoft Office tacks “Live” onto the end? This appears to be how they are going to differentiate the desktop and online version of the same product)

I have not had the time, nor the incentive, to check out Microsoft Office Live. So, if you have, please drop me a comment and tell me what you think. Personally, I like using the desktop version of Office. I don’t need, nor want, to do that work online – In fact, I don’t see clear benefits to online-izing (or social-networking-izing) Microsoft Word. There are plenty of sites doing truly new and innovative things in the online world. Maybe one day Word Processing may go predominantly online. Until then, I’d rather use my traditional desktop version of Microsoft Word (I like the idea of Abiword and Open Office, but I never made the transition)

Since this post may be a bit dry (boring), I’ll leave you with this great Microsoft advertisement I just received for Microsoft Office Live. This ad really makes me wonder if Microsoft Office Live is desperately struggling to get people to use Office Live. Maybe I got this impression when the ad called me “chicken” for not trying it. Hey, are we in third grade? Well I double-dog-dare you to make Vista faster and more reliable. OK, I TRIPLE-DOG-DARE YOU!

Vista 4GB

I recently received a comment from a reader who thought Vista didn’t support 4GB of RAM. I was a bit dismayed at first because 32-bit flavors of Window support 4GB, and they always have (nitpickers: I’m taking about 32-bit NT derivatives, not 9X). I had taken it for granted that people just know this. I google’d around a bit to try and better understand this misconception. After a few minutes I realized there sure is some confusion over how much RAM 32bit Vista actually supports. I hope I can clear up some misconceptions, shed a bit of light, and not bore you too terribly along the way.

Techno-babble disclaimer! A 32-bit number can contain a value between 0 and 4,294,967,295 (this number is calculated as: 2^32 -1). Because that’s a very large and unwieldy number, we divide it by 1024 which gives us 4,194,304 thousand. Dividing again by 1024 gives us 4,096 million. Dividing once more by 1024 gives us 4 billion. What I am trying to get at is this: a 32-bit number can be used to count up to 4 billion, which is needed to read/write 4 billion distinct memory cells (aka bytes).

Because 32-bit Windows addresses memory through a 32-bit memory addressing scheme, in theory you can address 4GB of RAM in 32-bit Windows. I say in theory, because there are other factors that move this number up or down. Useless techno-trivia: A 64-bit memory addressing scheme can theoretically access 64-bit of memory address space: which is 2^64 – 1, this comes out to: 18,446,744,073,709,551,615 or roughly 4 billion GB.

In 32-bit Windows, addressable memory is divided into two different areas (or modes): Kernel and User. By default, Kernel-mode gets half of the maximum addressable memory: 2GB, and User-mode gets the other half: 2GB. Windows dedicates Kernal-mode memory to drivers and internal Windows data. And, Windows applications get access to 2GB of User-mode memory. (nitpickers: This is highly simplified).

When it comes to physical hardware, things get a bit more muddy. It’s fairly common for motherboard (aka mainboard) makers to set hardware limitations on how much RAM they actually support. Your computer’s mainboard may limit accessible RAM to: 3GB, 2.5GB 2GB, etc. On server-class machines you can find motherboards that limit accessible RAM to more: 8GB, 16GB, etc. Since a 32-bit number can only address 4GB of RAM, there are various schemes that enable 32-bit Windows to access more than 4GB of RAM. Microsoft, Intel and various server motherboard manufacturers have extended memory addressing schemes.

More techno-trivia: Intel has PAE, Microsoft has AWE These extended memory access schemes in general work by moving around a virtual window through your whole address space. For example: I can read the memory between addresses 10GB and 14GB by setting my memory window to start at 10GB. Note: Since we are moving a memory read/write window around, we pay a slight performance.

So, 32-bit Windows can theoretically take advantage of 4GB of RAM and 32-bit Vista is no different. What is different is how Vista uses the RAM and reports what’s available. In Vista, if you have 4GB of RAM and 512MB graphics card, then your available RAM can show 3.5 GB or less. You are still using all 4GB of RAM, but Vista is really trying to be honest by saying you only have 3.5 available. If you have other drivers that grab RAM, that will decrease the amount of available RAM even more. I’ve read some peoples complaints where they only see 3 GB available and 4GB is installed. If your motherboard (or BIOS) is not limiting it, then you are actually using all 4GB. So, it all depends. It depends on your motherboard, installed hardware, drivers, and etc.

If you want more info, check out Microsoft’s: Memory Limits for Windows Releases.