Has Microsoft become toothless, or a friendly partner

The Silicon Valley giant has changed over the last ten years

At one time, Microsoft was about as welcome in Silicon Valley as Darth Vader at a Jedi knight convention. Commonly referred to as the Evil Empire, the company was feared and hated in roughly equal measure when it opened its first Silicon Valley office in October 1999.

In that same year, for example, when U.S. District Judge Thomas Penfield Jackson ruled that Microsoft had used its monopoly power to the detriment of consumers and innovation in general, Gary Rivlin, author of The Plot to Get Bill Gates, told the San Francisco Chronicle, "I'm sure there are champagne corks being popped all over the Valley."

He was no doubt right at the time. But recently, Sam Altman, co-founder of Mountain View-based Loopt, which makes a cell phone-based GPS sharing system, told the Chronicle that years ago, "I would have told you, 'Microsoft is really evil.' I would never work with them." Today, though, "they're an incredible partner," he says.

Altman isn't alone. Yahoo was once seen as the anti-Microsoft — a laid-back, innovative, homegrown Silicon Valley firm diametrically opposed to what it saw as the sharklike business practices and buttoned-down culture of Microsoft. But earlier this month, Yahoo and Microsoft finalized a search and advertising deal that calls for Microsoft's Bing to power Yahoo search sites, and for Yahoo to handle premium search advertising services for Microsoft.

And how about open-source technology? There was a time when Microsoft used all of its considerable might to try to squash open source, and open-source proponents would have preferred to be stripped naked, covered with honey and forced to lie on top of a colony of fire ants than deal with Microsoft. But then, several years ago, Microsoft partnered with Novellto work on Linux initiatives. And recently, Microsoft even released as open source a download tool it developed — because it had accidentally used an open-source component in the tool.

So, what happened? Why are we seeing a kinder, gentler Microsoft that many Silicon Valley companies regard as a potential business partner?

Depending on your point of view, it's either because Microsoft finally recognized that it's in its best interest to be a cooperator rather than a predator, or it's because Microsoft is on a long, slow decline, and economic realities are forcing it to act in ways contrary to its founders' DNA.

Those who adhere to the Microsoft-as-cooperator theory trace the change to the antitrust suit. They say that losing that suit led to a period of soul-searching, with Microsoft recognizing that it could no longer thrive by going it alone. That ultimately prompted it to sponsor industry conferences, look for business partners rather than companies to consume, and expand its Silicon Valley presence to 1,300 workers, with another 700 elsewhere in the Bay Area.

Others say that Microsoft's sea change had nothing to do with soul-searching and everything to do with the company's growing irrelevance. The antitrust ruling took away many of the advantages the company had against its competitors, and so Microsoft simply could no longer use its monopoly power to crush competitors. In addition, it fell behind the times and allowed Google to go from start-up to monster in record time. Finally, operating systems are no longer particularly important, and the cloud is the future — and that means Google.

Which story tells the truth? Probably both. Any soul-searching that went on at Microsoft was likely caused not by a fit of conscience, but by a hard dose of economic reality. The truth is, Microsoft simply can't go it alone anymore, even if it wants to. But even though change may have been forced on it, the company truly has altered its outlook and its way of doing business. It has learned that in today's tech world, you've got to go along to get along.

Preston Gralla is a contributing editor for Computerworld.com and the author of more than 35 books, including How the Internet Works (Que, 2006).

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Preston Gralla

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