Commentary on Microsoft's efforts to capture the 'mid-market' in application software: (A Field Day by Justin Hibbard in Red Herring, Sept 13, 2002)

... Microsoft intends to take a big bite out of the next upgrade pie--a bite from right in the middle. Through its second- and third-largest acquisitions ever, the company is vying for the so-called midmarket in application software, generally comprised of companies with $50 million to $1 billion in annual revenue. Long the domain of niche software vendors, the segment is highly fragmented, underserved by big tech companies, and full of pent-up demand; this makes it potentially lucrative when the U.S. and European economies improve and software spending increases.

None of this has been lost on other software makers. As sales to large corporations have slowed, SAP, Siebel Systems, and other big-business apps suppliers have begun moving down market, while small-business software specialists, like Intuit, have headed up. As these high- and low-end players approach Microsoft in the middle, a train wreck awaits. Fatalities will result, but Microsoft won't be among them. "The revenues from Microsoft's applications suite will be in the league of Siebel, SAP, and PeopleSoft," predicts M.R. Rangaswami, an angel investor and former vice president of worldwide marketing at the business-software maker Baan. The largest of those companies, SAP, last year generated $4.8 billion in sales of software and maintenance, nearly one-fifth Microsoft's total sales.

... Trouble is, many software companies serving the midmarket are Microsoft's partners. That is, they build applications that run on Microsoft's operating system, database, and other infrastructure programs. (In industry parlance, such companies are called independent software vendors, or ISVs.) Naturally, some of them are perturbed. "Microsoft's entry into business-management software is a serious issue for some of the small players," says Evan Goldberg, CEO of NetLedger, a Web-based business-applications provider funded by Oracle CEO Larry Ellison. "Anyone who sells sales-force automation or accounting software to small and medium-size companies is now competing with Microsoft, whom they once thought was a partner."

Implications of Microsoft's Palladium Initiative (to implement "trusted computing architecture" on Windows platform) on privacy, security, Digital Rights Management (DRM) and (of course) antitrust: (Antitrusting Microsoft by Lawrence Lesig in Red Herring, Sept 10, 2002)

... Named after the mythical statue that guarded Troy, Palladium implements a "trusted computing architecture" on the Windows platform. If this crucial bit of the operating system works as designed, a Palladium-enabled machine could give users interacting with it assurance that the machine will do just what it says. If you sent a Palladium-equipped machine an email, but told it not to forward the email, the machine would obey the restriction. If Disney sent a movie, and said, "play this only three times," the machine would obey that restriction, too. A trusted architecture would make it easier for users interacting with trusted machines to control how those machines use their content. And for anyone who's had an email turn up somewhere it shouldn't, this type of control doesn't sound all bad.

... Trusted platforms could change the debate about digital rights management (DRM). For, by increasing trust at the ends of the network, Palladium would weaken an argument that Hollywood now pushes: that Congress regulate every machine on the Internet to protect Hollywood's content. Trusted platforms could enable a different kind of DRM--indeed, I would say, a "better DRM"--one less damaging to innovation and more supportive of content competition.

To see the point, distinguish between DRM systems that control copying (copy-protection systems) and DRM systems that control who can do what with a particular copy ("token" systems that Palladium would enable). Copy-protection systems regulate whether machine X can copy content Y. Token systems regulate whether, and how, machine X is allowed to use content Y.

The difference can be critical to network design: if a technology could control who used what content, there would be little need to control how many copies of that content lived on the Internet. Peer-to-peer systems, for example, depend upon many copies of the same content living in many different places across the Net. Copy-protection systems defeat this design; token systems that respect the network's end-to-end design need not.

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