Microsoft pledges to loosen limits on secret information

The far-reaching strategic change Microsoft announced Thursday reflects pressure the company faces from European antitrust regulators and major industry changes that are diminishing the importance of its most profitable products.

The company said Thursday that it intends to open access to critical information about Windows, Office and its business-server software to competitors and partners — a move executives said will be good for business.

Microsoft is loosening restrictions on under-the-hood information needed to create products that will complement and compete with its own. In addition, with this highly technical announcement, Microsoft pledged support for competing document formats, industry standards and interoperability with open-source software.

Altogether, the move is the biggest of a series of recent steps in this direction.

The implications extend from the company's efforts to please large corporate customers to its competition with Google for developer mind share — and consumer acceptance — of its Internet services.

Microsoft's move could portend a fundamental change to the broader software landscape as well.

That's what The 451 Group, a New York company that provides industry analysis, wrote in a detailed breakdown of the announcement, which, it noted, involves some "calculated risks" for Microsoft.

Microsoft Chief Executive Steve Ballmer and other executives said the company's products must be more open still.

"I believe Microsoft's long-term success depends on our ability to deliver a software and services platform that is open, flexible and provides customers and developers with choice," Ballmer said in a conference call Thursday.

A group of competitors, in the form of the European Committee for Interoperable Systems, questioned the significance of the news.

"We have heard high-profile commitments from Microsoft a half-dozen times over the past two years, but have yet to see any lasting change in Microsoft's behavior in the marketplace," the committee's legal counsel and spokesman, Thomas Vinje, said.

Anticipating that criticism, Microsoft took several specific actions Thursday to put its strategic shift in motion.

It published more than 30,000 pages of technical documentation describing Windows client and server communications protocols that previously required a trade-secrets license from Microsoft. Communications protocols are the way computers communicate over a network.

"Developers will not need to take a license or pay a royalty or other fee to access any of that information," Ballmer said.

Complying with ruling

Microsoft originally compiled this information to comply with antitrust rulings in the U.S. and Europe.

"This documentation took literally years and millions of dollars of software-engineering work to create," said Microsoft General Counsel Brad Smith.

Courts found that by withholding this documentation, Microsoft illegally blocked competitors' products from working with Microsoft's own. The delays in producing the documentation contributed to a judge's recent decision to extend judicial oversight of the company in the United States.

On Thursday, Microsoft pledged to go beyond what courts have required. It is planning to publish protocols, along with application programming interfaces, or APIs, for its other major products, including Office.

APIs allow other software developers to build on top of Microsoft's products, typically adding new features.

The APIs and communications protocols will be free to developers, but those who make use of this information for commercially distributed products will have to pay Microsoft a royalty fee.

EU investigation

Although Microsoft has not been ordered to publish the additional protocols, the European Commission launched an investigation last month into complaints about Office and other Microsoft products.

"The [European Union] is the center of gravity for all their antitrust concerns at this point," said Greg DeMichillie, an analyst at Directions on Microsoft in Kirkland.

The European regulatory agency expressed skepticism about the announcement.

"In the course of its ongoing interoperability investigation, the commission will therefore verify whether Microsoft is complying with EU antitrust rules, whether the principles announced today would end any infringement were they implemented in practice, and whether or not the principles announced [Thursday] are, in fact, implemented in practice," it stated.

Regulatory pressure

But along with the regulatory pressure, larger structural changes in software development and use are pushing Microsoft in this direction.

The company highlighted business reasons to open wider, noting that business customers with multiple software vendors have demanded it.

Ballmer said the move is "consistent with what we will be doing anyway from a legal perspective, and is pro customer," adding that they "should be a good thing in the long run for our shareholders."

The software industry is evolving from the server-and-desktop-centered model where Microsoft enjoys dominant market share and huge revenues. The new model favors software applications delivered through Internet services, often created by communities of developers surrounding the leading Internet companies.

Ray Ozzie, Microsoft's chief software architect and the leader of its online- services efforts, said interoperability has become more important as end users store and share more information on the Internet.

"This is yet another thing Google has taught the largest software company in the world," wrote The 451 Group.

Consumer focus

Leading Internet companies have developer communities quickly building lightweight, consumer-focused applications and extensions of their core services, said Lee Nicholls, global solutions director with IT services company Getronics.

"Success in the IT market now comes from how well your community works for you," Nicholls said.

Microsoft has an enormous community — some 600,000 partners, software vendors and system integrators — but they tend to focus on business markets.

"There's a lot of pressure for Microsoft on the consumer side and to some extent the small business side as well," Nicholls said.

Opening up access to products such as Windows and Office and lowering legal and cost barriers should help Microsoft grow that community, he said.

Risk from rivals

At the same time, the company risks strengthening the position of its competitors.

"For one, it has validated the [open-source] concept and legitimized any number of competitors, all of which have open-source pedigrees, unlike Microsoft," The 451 Group analysts wrote.

But Directions analyst DeMichillie said Microsoft will be no less of a competitor itself.

"This doesn't at all change Microsoft's message that you want to use Windows desktop and Windows server," he said. "In no way is Microsoft backing off from the notion that Windows works better with Windows."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com