IT strategy: Microsoft – Structured to underperform

So, after weeks of testimony which had even the Bill Clinton impeachment trial licked for entertainment value, Microsoft’s historic courtroom battle against the Department of Justice (DoJ) may be coming to a close.

But rather than being decided on its monopolistic share of the operating systems market or the bundling of applications with Windows 98, the future of Microsoft may actually rest on whether it’s getting the right advice from management consultants. It seems the structure of the organisation is responsible not only for late-shipping products, but also the dire performance in court which has led the company to the negotiating table with the DoJ.

The flaky testimony of senior executives – not least Bill “video deposition” Gates himself – and the contradictions that permeated almost all the Microsoft evidence have made them realise that the case is unwinnable.

The DoJ, no doubt fired with renewed confidence as the super-geeks talked themselves deeper and deeper into a hole, appears to want an unconditional surrender: Microsoft must be broken up (a la Ma Bell or Standard Oil) or release the Windows source code to the public domain. This would allow every nerd and his, well, maybe not his wife, but certainly his collection of original Star Wars action figures, to create their own version of the planet’s most popular operating system. Sorry, that last line should have read “most ubiquitous operating system” – Windows, after all, has never really been that “popular”.

Naturally, like some kind of half-baked dictator facing air superiority, Gates and Co are looking for a face-saving solution. They seem to think that the real problem lies with the old browser wars. The government’s case certainly picked on the bundling of Internet Explorer with Windows as a prime example of Microsoft abusing its hegemony in the operating systems market. But the company’s offer to allow OEMs to alter the boot sequence for Windows and remove the Internet Explorer icon from the desktop is just far too far away from the DoJ’s objective – smashing the Windows “monopoly” – to be worth considering.

But why has this happened in the first place? The relatively old hands at Intel, themselves facing government investigation over their own silicon domination, settled, like any good negotiator should, just before the state wheeled out its judicial big guns.

Microsoft, on the other hand, appears to have been so arrogant, so certain that it was just in behaving like a 400lb gorilla, that it thought it could win any fight, out in the market or against the regulators. But this still doesn’t explain the sheer incompetence in the presentation of Microsoft’s case in court.

Some American journalists close to the company are actually reasoning that it’s Microsoft’s company culture which is to blame. Look at the way the company releases software, goes the argument. It’s generally late, usually has bugs in it, and often fails to do things better than its competitors. But it wins, because its customers report the bugs – which are then fixed in post-release service packs or patches – and are already committed to Microsoft technology (so they can’t afford not to wait for the next MS version of an application, nor risk going with another vendor’s package).

But the legal system doesn’t work like that. You can’t make a mistake in court, have the prosecution attorney point out what’s wrong then retract, fix the evidence after consultation and have the original screw-up erased from memory. The judge isn’t like some beleaguered IT manager who wants a new network operating system now, but has to wait because he’s frightened to go with anything other than NT 5.0 when it finally ships. Shock horror: he’s after the truth, not vague promises about what evidence some MS executive might give in a few months time, and only after that evidence has been beta tested in some other, smaller, court.

This problem with culture is so severe that, in fact, the prosecution by the DoJ ought to be the least of Gates’ concerns. If the company can’t get its software right, the DoJ won’t need legal recourse to smash up Microsoft, it’ll do the job on its own. With that in mind, Gates has sanctioned a complete reorganisation of the company into four “customer-related groups” intended to open the minds of teams currently too narrowly focused on specific elements of individual products. This, presumably, is to ensure that disparate programming units will work more efficiently on getting the applications people actually want out on time and (relatively) bug free.

That’s one hell of a BPR job. And it’s quite natural, really. After all, this is a company which, in 25 years, has gone from a couple of geeks in a garage to over 22,000 employees and a turnover of nearly $15bn.

Many thousands of consultants make a very handsome living off the back of Microsoft’s products (and the problems companies have using them).

Perhaps it’s time that Microsoft got a few decent consultants in to look at its own systems, its own business model, and, for the sake of the company and its customers, sort out the unholy mess it has found itself in. Otherwise you can be sure the US government will do it anyway.

Richard Young is deputy editor of Financial Director magazine.

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