I lost my job when Microsoft won a little-publicized battle for control of an up-and-coming software technology. This is an old story. Microsoft made promises it did not keep, and gave away an expensive technology at a time when its (small) competitors badly needed cash from product sales in order to survive. What I learned is exactly how Microsoft's competitive practices can do harm. Here's what happened:
Back in 1992 (before Pentium processors and a thing called the Internet), three small software companies in the United Kingdom independently invented an impressive new type of graphics software. Argonaut Software, Criterion Software (back then, called Canon Research, Europe), and Rendermorphics had independently developed real-time 3D rendering software that ran amazingly well on personal computers.
Why did this happen in the U.K.? Perhaps because it was just far enough away from Silicon Valley not to know that its accomplishment had been thought to be impossible. As a result, a nice little battle for market share and control of this new technology standard began shaping up.
Then Microsoft came along.
By the middle of 1994, Microsoft wanted real-time 3D software for its push into the PC consumer entertainment space. Privately, it began courting all three British companies. As head of U.S. operations for Argonaut, I was thrilled when--after a very positive meeting in Redmond, Washington--we were lead to believe that Microsoft had chosen to license and promote our technology over the others. Someone close to the negotiations even told me to "crack open the champagne."
The euphoria that resulted lasted about a week. Through the grapevine, we learned that Microsoft had decided to license the software of our competitor, Rendermorphics, and, worse still, was going to purchase the entire company.
We thought we could still compete. Despite Microsoft's muscle, our software had significant performance advantages. More importantly, it worked on a broad range of platforms, including DOS, Windows 3.1, Windows 95, Windows NT, OS/2, Power Macintosh, Sony PlayStation, and Sega Saturn. Microsoft's Direct3D, by contrast, worked only on PCs running Windows 95. If nothing else, we thought, game developers--who, for obvious reasons, want their games to run on as many different machines as possible--would choose us.
Two days before our official launch in February 1995, Microsoft publicly announced it had acquired Rendermorphics in a press release that said it would promote its newly acquired 3D software as the industry standard. We were not pleased by the timing. Since Microsoft was part of our own product announcement (despite buying Rendermorphics, they were still using our software to create kids titles), company officials knew full well they were beating us to the punch.
Soon after that, Microsoft began giving away 3D technology licenses. That's right: The software was absolutely free to anyone who asked (except us). Free is a very hard price to beat--especially since the software previously had cost $50,000 or more per license.