by Cusumano, Michael A.
PREFACE TO THE PAPERBACK EDITION
It gives us great pleasure to write this special preface to the paperback edition of "Microsoft Secrets, " which we originally published in October 1995. The book has been translated into fourteen foreign languages and has been on best-seller lists around the world, in markets ranging from the United States and Japan to Germany, Brazil, and China. The personal computer software industry moves very quickly, and much has happened to Microsoft in the past three years. The strategies and principles discussed in "Microsoft Secrets" still appear to be guiding the company forward.
"The Internet: " The most important change has been the rise of the Internet and the World Wide Web. When we were writing this book, Microsoft was almost totally focused on finishing Windows 95 (which shipped in August 1995), revising Office and some other applications to go with its new operating system, and launching the proprietary online network, Microsoft Network. Not until December 1995 did Bill Gates and other Microsoft executives become truly serious about the Internet, even though they did ship a basic browser, Internet Explorer 1.0, with Windows 95.
Since that time, Microsoft has changed most of its product plans and products to make sure that they took advantage of the Internet's enormous capabilities. Microsoft now has 40 percent of the browser market (compared to 60 percent for Netscape). Microsoft also has a strong and growing position in server software based on Windows NT Plans for Microsoft Network did not work out as expected, although Microsoft has remade much of this system into a Web-based service.
Microsoft has made maade their operating systems andapplications software. Microsoft Office had about 90 percent of the desktop applications market and had become a standard in corporations. Windows NT and Microsoft BackOffice (which includes servers and database software) were also growing rapidly in market share. These corporate products had higher profit margins than products sold to individuals and guaranteed that Microsoft's profits would probably grow faster than its revenues.
"Antitrust: " Perhaps the biggest concern about Microsoft was antitrust. The federal government, individual state governments, and governments in Japan and Europe were all concerned that Microsoft was too powerful. We saw these same concerns when we published "Microsoft Secrets" in 1995. Government scrutiny of Microsoft seemed more intense in 1998, however. The scrutiny was not so much with regard to acquisitions but with Microsoft potentially using its position in operating systems to extend its dominance to other areas, such as Web-based Internet commerce.
The most recent serious debate has involved features or products that Microsoft is bundling into new versions of Windows. The browser that comes with Windows 98, for example, is much more tightly integrated into the operating system than in Windows 95. Microsoft also continued to include the browser at no extra charge (which forced Netscape to make its browser available for free also, even to companies that previously had paid for it). The problem: Microsoft has allegedly pressured computer manufacturers not to load competitors' products, such as Netscape's Navigator/Communicator browser. The browser is no longer a revenue source in itself, but it is critical as a "port al" to the Web. Both Netscapeand Microsoft, for example, use their browsers to draw customers to their Web sites, from which point customers can purchase various products and services, such as books, news, and travel reservations. Furthermore, in Windows 98, Microsoft is including the Web TV software "for free" and is encouraging computer manufacturers to include hardware to support this technology. Web TV makes it possible to combine TV advertisements and programming with Internet-based sales.
Not all of Microsoft's initiatives will succeed. The company can misjudge markets, as it did with the Microsoft Network. Microsoft also has more competition in Internet markets than in operating systems or desktop software. But the possibilities are limitless for Internet commerce. And Bill Gates has clearly put Microsoft in a superb position strategically and technically to thrive in this new age of the Internet.
"Product Development Process: " To build new Internet and enterprise products, Microsoft has continued to use the same principles and organization for product development that we talked about in "Microsoft Secrets." The company has made some minor changes, however, that we feel are important to note. For example, in Internet groups that want to move especially fast from ideas to final products, Microsoft developers sometimes take the lead in proposing feat
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