In exchange for Netscape's assurance that it would stay away from the Windows browser market, Microsoft would give the company access to something far more valuable: undocumented Windows application programming interfaces (APIs), the gateway to all the Windows operating system's fundamental technologies.
By offering a peek at the company's crown jewels--hidden Windows APIs--Microsoft's hope was to derail Netscape's plan to position Navigator as a platform alternative to Windows, with an entire set of APIs outside Redmond's control.
According to a deposition made public in the ongoing antitrust investigation of Microsoft, Netscape cofounder Marc Andreessen claimed that in a meeting with Microsoft in 1995, company executives hatched the plan and "emphasized that they could not accept Netscape competing as a platform [against Windows] with its own APIs."
Undaunted, Netscape attempted to play Microsoft's game, and ultimately lost. But laid bare through evidence presented in the ongoing Justice Department (DOJ) suit, and the Java copyright infringement case brought by Sun Microsystems is how Microsoft maintains a hammerlock on platform dominance.
That failed Netscape deal and others like it illustrate where Microsoft's real power comes from: it's the closely guarded and controlled Windows API, not Windows itself, that is the jewel in its crown.
"Microsoft has always owned technology by owning the API," said Ted Schadler, an analyst with Forrester Research. "It's a lesson learned from IBM that by changing interfaces they can control the game."
However, with the rapid growth in the number of personal computers being sold, Microsoft now wields enormous power through its control of those underlying APIs.
Microsoft controls Windows--the platform used on more than 90 percent of the world's PCs. The company is pushing its platform domination into all new areas, such as mobile electronics with Windows CE and the upper-reaches of the corporate world with Windows NT, now called Windows 2000.
Each and every copy of Windows includes an underlying API--Win32 in Windows 98 and Windows NT--that defines how Windows applications communicate with hardware, system resources, and peripherals.
Developers write software directly to the Windows API, which then interfaces with the operating system. To write applications tightly linked to Windows--the most popular operating system on the planet--software makers must code to Microsoft-controlled APIs.
Software makers benefit
Competitors, including Netscape, Oracle, Sun Microsystems, and RealNetworks, argue that the process of developing Windows APIs is only partially open, and that Microsoft holds all the cards since it has final veto power over which APIs make it into Windows.
Publicly, Microsoft executives say they have no plan to "hijack" APIs and industry standards.
"We're a big believer in industry standard protocols," said Ed Muth, enterprise marketing group manager at Microsoft. "NT includes these today, in things like TCP/IP.
"But standard protocols don't always provide the functionality customers need to build advanced applications," Muth added. "To meet those needs, vendors layer on top of extended protocols to add advanced functionality."
Oracle went so far as to design its own file system in Oracle 8i, a new version of its database, in part to sidestep Microsoft's control of Windows APIs. Oracle is now positioning 8i's Internet File System as a competitor to Windows NT. "Microsoft has completely unpublished interfaces to their file system," claims Oracle chairman Larry Ellison, one of Microsoft's most vocal competitors.
In the past few months, claims are popping up everywhere that Microsoft is using its API hegemony to defend its platform dominance.
Just last month, in the unfair competition and copyright infringement case brought by Java inventor Sun Microsystems, evidence presented indicated that Microsoft set out to splinter the Java market through manipulation of APIs.
Microsoft's own executives admit that Java offers a serious alternative to Windows. Chairman Bill Gates, in email memos presented during the trial, went so far as to say of Java, "this scares the hell out of me."
The company's original battle plan? Build Java into every facet of Windows. The strategy, described in documents presented during the Sun trial, shows that Microsoft firmly believes Java to be a serious competitor to Windows.
Gates finally vetoed the Windows-Java scheme, and Microsoft set out to "pollute" Java by introducing Microsoft-specific APIs in its Visual J++ development tool and Java Virtual Machine, thereby locking the vast majority of computer users into Microsoft's products, internal Microsoft memos show.
Microsoft has also come under fire from the so-called open source community over leaked memos detailing plans to steer the direction of Linux, an open source operating system that has gained backers as an alternative to Windows NT.
One sentence, included in the so-called Halloween memos and echoed in newsgroup postings, involves a potential plan by Microsoft to "de-commoditize" standard APIs in Linux and elsewhere by adding proprietary extensions and locking consumers in to Microsoft products.
Whether or not the documents were intentionally leaked by Microsoft to show the existence of real competition, the memo's contents enraged developers.
"They [foolishly] want to destroy the process that created their opportunity and take control of the protocols [and thus the industry]," Bob Denny, a Web developer, said in an email message to CNET News.com. "In my 33 years' experience in computing, when this sort of thing happens, innovation and product quality decline and prices rise."
Other companies claim Microsoft also controls "hidden" APIs that it uses to gain an edge on competitors.
Both Apple Computer and RealNetworks claim that Microsoft intentionally "broke" their multimedia software by changing or manipulating underlying Windows APIs.
In written testimony, Avadis Tevanian, Apple's senior vice president of software engineering, claimed that Microsoft intentionally "sabotaged" Apple's QuickTime software so that it worked erratically under Windows.
Tevanian claimed that Microsoft's goal was to protect its Windows platform dominance. "We have a new emerging market here based on content," said Tevanian under cross-examination during the trial last month. "With QuickTime, we have engineered it so that it doesn't matter what the underlying operating system is. The higher-order goal [of Microsoft] is to prevent someone from establishing a new type of platform."
Earlier this year, RealNetworks' chief executive Rob Glaser made a similar claim. Glaser said that Microsoft's Windows Media Player "breaks" his company's RealSystem G2 player. He suggested that Microsoft intentionally disabled his company's software to squash competition.
Microsoft claims that incompatibilities between software from the two companies and Windows is caused by bugs in QuickTime and RealSystem software. However, the company later posted a bug fix to resolve the QuickTime problem.
Microsoft also holds sway over the industry through the introduction of new APIs for linking emerging technologies into Windows, a tactic the company has used since the introduction of DOS, the first widely used PC operating system.
By virtue of its lock on the operating system business, those new interfaces usually become de facto standards. More notable examples include the Mail API (MAPI) for email communication, Open Database Connectivity (ODBC) data access interface, and Wolfpack API for clustering of server systems. The company also has introduced APIs for universal data access (OLE DB), data analysis (OLE DB for OLAP), and access to network directories (Active Directory Services interface).
"Microsoft is more influential as a de facto standard setter than most standards organizations have been," said Dwight Davis, an analyst with Summit Strategies.
A larger fear, voiced by Microsoft competitors and software developers, is that Microsoft may also attempt to sway control of already-established interfaces, such as TCP/IP, XML (eXtensible Markup Language), and dynamic HTML, by folding them into Internet Explorer and Windows.
"Microsoft realized that on the Internet, it wasn't just Windows everywhere, so they had to change their API strategy," Schadler said.
Microsoft dodged a bullet with the Internet-scrambling at the last minute to add capabilities to an already delayed Windows 95 back in 1995, just as the Internet came to the fore.
"Microsoft had to work overtime to integrate HTTP and HTML into its products, making up for the fact that Microsoft was so fixated upon dominating the desktop that it did not see the Internet phenomenon coming," said Martin Marshall, an analyst with Zona Research.
That was the beginning of a new era at Microsoft, in which outside standards forced the company to the bargaining table. "Microsoft now understands that it will ultimately have to adopt what comes out of standards bodies," said Davis. "But they are not averse to leaning on standards bodies to see the Microsoft way."
Microsoft does still wield substantial clout in decisions about which standards will be supported throughout the industry. The company is currently driving discussions over the fate of standards for Web-based content, such as XML, Dynamic HTML, and data analysis specifications, such as OLE DB for OLAP, for example. But the company is now more often using its influence within standards organizations, such as the W3C, to push--some say dominate--discussion about the adoption of new technology.
And high-profile disasters, such as Microsoft's ill-fated scheme to drive adoption of its ActiveX technology for Web-based component development through a pseudo-standards body, have led the company to rethink its old ways of doing business.
Even on the desktop, where Microsoft has ruled for years, the company has had to revise its proprietary lock-in strategy. When Office 97 was introduced in the fall of 1996, many corporate customers complained that files created with the new desktop application suite were not compatible with the older version, Office 95. Microsoft was forced to make available a series of converters.
The lesson must have sunk in; the next version of the suite, Office 2000, will use XML, a budding Internet standard, as a preferred file format.
"How Microsoft influences standards clearly has changed," said Mike Gilpin, an analyst with Giga Information Group. "A few years ago, pre-Internet, Windows was the center of the universe. Microsoft said, 'This is a standard,' and it was so. It's not like that anymore in many areas."
For example, unlike Windows, Microsoft cannot control the underlying APIs behind Linux and Java.
Linux is based on standard Internet protocols, like HTTP, TCP/IP, and other technologies defined and maintained by bodies outside Microsoft's control.
Java potentially offers both developers and corporate IS organizations a cross-platform technology not wedded to a single company's operating system. Developers don't need to write new applications to Win32 to guarantee market acceptance, since Java applications run just fine on Unix and the Macintosh.
The specter of a computing infrastructure outside its control caused panic at the upper levels of Microsoft, as numerous court documents suggest.
If--and it's a big if--Linux and Java begin to truly permeate the computing world, the world's largest software company may have a difficult time extending its desktop dominance and establishing a lock on the Internet and the upper reaches of corporate computing, both lucrative markets that represent no less than the giant's financial future.
Microsoft is far from endangered--it expects to record revenues again this quarter, members of the Java camp continue to jockey for dominance, and Linux is just now gaining the support of major software makers. But Redmond's continuing legal difficulties, strong new competitive technologies, and a potential backlash from developers and consumers as more details of the company's business practices come to light could undermine Microsoft's platform control.
Whether or not Microsoft can establish Windows NT as the industry standard setter remains to be seen. Observers agree that the company pulled a rabbit out of its hat with its well-publicized Internet turnaround several years ago. But new challenges--the Java alliance, the popularity of Linux--have arisen.
In the meantime, analysts said a potential lessening of Microsoft's API clout is an indication of a healthy market.
"Both Microsoft and IBM have settled upon HTML as a delivery medium. We finally have an agreement on a Document Object Model that resolves differences between Microsoft's and Netscape's Web page reading methodologies, and XML will play a huge role in Web-based application integration," said Zona's Marshall.
"If anything, we are in an era where more true standardization has happened than in any other era that I can remember," he said.