In-Depth

Poring Over Microsoft's Interoperability Initiative

Microsoft is putting tens of thousands of pages of interoperability documents online. Its partners may need to find new ways to make peace with open source software.

• By Scott Bekker
• April 01, 2008

"Today, Microsoft is describing a set of fairly broad changes to our technology and business practices, designed to further increase the openness of our products, and to drive greater interoperability and choice for developers, for partners and for competitors," Microsoft CEO Steve Ballmer said in a Feb. 21 teleconference to announce what the company describes as "Microsoft's strategic changes in technology and business practices to expand interoperability." Among the four main principles in Microsoft's new approach is one specifically addressing open source.

"We're committing to fostering a more open engagement with [the] industry, as well as the open source software community," Ballmer said.

Ballmer himself and some analysts called the announcements an important shift in strategy for Microsoft. Not everyone is buying the assessment. In a statement the same day, the European Commission (EC), which has been pursuing antitrust remedies against Microsoft since a landmark decision in 2004, gave Microsoft's four principles a cool reception.

"The Commission would welcome any move toward genuine interoperability," the Commission's statement read. "Nonetheless, the Commission notes that today's announcement follows at least four similar statements by Microsoft in the past on the importance of interoperability."

Then, six days later, the EC's verdict shifted from cool to hostile when the governing body imposed a penalty of 899 million euros (about $1.3 billion) on Microsoft for non-compliance with the EC's March 2004 decision, especially the part about sharing interoperability documentation with competitors for reasonable prices.

For partners, all of this led to a big question: Is it time to drag all those anti-open source white papers, battlecards and PowerPoint slides downloaded from the Microsoft Partner Portal into the desktop wastebasket?

Four Principles
The core of the February announcement is that Microsoft opened more than 30,000 pages of documentation about interoperability and APIs to the public for viewing over the Web. Microsoft had previously required companies to pay just to look at the information and pay again to use it. In addition to making the information public, Microsoft laid out four principles, which apply to Microsoft's high-volume enterprise products. Covered are Windows Vista, the .NET Framework, Windows Server 2008, SQL Server 2008, Office 2007, Exchange Server 2007, Office SharePoint Server 2007 and future versions of those products.

Microsoft's four new principles are:

Ensuring Open Connections to Microsoft Products: This principle consists of providing protocols that allow competitors' and partners' software to communicate most directly with Microsoft software. While the EC decisions required that information for Windows clients-given the EC's determination that Microsoft enjoyed an unfair desktop monopoly-and Windows servers, Microsoft is extending the sharing of communication protocols to Office, SQL Server, Exchange and Office SharePoint Server.

As noted, this formerly for-sale information is now freely available. While viewing the protocols is a no-hazard activity, some of the protocols are covered by patents, meaning that actually using those patented protocols is another story. Microsoft hasn't yet specified which protocols are covered by patents, but the company promises to do so soon. The company is also working up reasonable and non-discriminatory (RAND) terms for royalties in cases where a Microsoft patent is involved. In the four principles announcement conference call, Microsoft Chief Software Architect Ray Ozzie assured participants that "we'll make licenses available at low royalty rates."

Promoting Data Portability: Microsoft now says as a matter of principle that it will "design high-volume products and provide documentation to enable customers to access their stored data and use their data in other software products." That's a big deal if it happens, but Microsoft has frequently given lip service to similar sentiments in the past while acting differently. The first test of this principle will be an Office add-in that Ozzie highlighted.

"We'll also be designing and implementing new add-in APIs for Microsoft Office that will enable other developers to develop support for their own additional document formats, and customers will now have the ability to select any of those formats as their default document format," Ozzie said.

Enhancing Support for Industry Standards: "Microsoft will support relevant standards in its high-volume products and do so in new ways that promote even greater levels of interoperability than before," a company spokesperson said in an e-mail statement. "This will allow other developers implementing standards to understand how a standard is used in a Microsoft product and foster improved interoperability for customers."

Fostering More Open Engagement: "Microsoft will increase its communications with the customer, IT and open source communities to drive a collaborative approach to addressing interoperability challenges," the spokesperson's e-mail statement said.

'A Dark Chapter'
As the subsequent EC fine indicates, Microsoft's four principles didn't emerge out of a void. The reason Microsoft has 30,000 pages of protocol details ready to post to its MSDN Web site is because the EC ordered the company to provide the information all the way back in 2004.

The EC case started in 1998 when Sun Microsystems Inc. complained that Microsoft refused to supply the protocol information needed for Sun's workgroup server OS to interoperate with Microsoft's dominant Windows clients. In March 2004, the EC delivered its decision, ordering Microsoft to disclose interface information that would allow competitive workgroup server OSes to compete fairly in light of Microsoft's client PC dominance. Microsoft had 120 days to provide the information to competitors on terms the EC judged reasonable.

What followed was a series of appeals and bitter disagreements between the EC and Microsoft over what constituted "reasonable terms" to charge competitors. Over the last year, facing daily fines of 2 million to 3 million euros, Microsoft's terms have become steadily more conciliatory.

According to the EC's statement, Microsoft's initial demands for interoperability information from workgroup server competitors were 3.87 percent of a licensee's product revenues for a patent license and 2.98 percent for a license giving access to the secret interoperability license. In May 2007, under pressure, Microsoft reduced the royalty rates to 0.7 percent for the patent license and 0.5 percent for an information license. Those terms were for sales in the European Economic Area. Worldwide, the rates stayed at the higher levels. After losing its overall appeal in Europe's Court of First Instance in September, Microsoft cut fees for access to the interoperability information to a flat fee of 10,000 euros, while an optional worldwide patent license royalty was 0.4 percent of a licensee's product revenues.

"Microsoft was the first company in 50 years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision," EC Competition Commissioner Neelie Kroes said in a Feb. 27 statement announcing the fine. "I hope that today's decision closes a dark chapter in Microsoft's record of non-compliance with the Commission's March 2004 decision."

Even before the EC delivered its fine, someone at Microsoft's Feb. 21 press conference asked whether its new interoperability policies were designed to insulate the company against more sanctions.

"These steps are being taken on our own," Ballmer said, then repeated it for good measure. "They're being taken on our own. There certainly were things we did, absolutely, to get in compliance with the European Commission decision, and with the consent decree here in the United States, but these principles are being taken on our own accord, and do reflect both kind of the reality of our unique legal situation, and our view of what will be required, but also, quite frankly, what we see as new kinds of opportunities and risks in the more connected world."

The Industry Reacts
Opinions on Microsoft's motives and the seriousness of its principles are mixed in the tech industry.

Microsoft Watch blogger Joe Wilcox is suspicious of Ballmer's claim that Microsoft's four principles were not primarily motivated by the EC case. "I'm not a conspiracy theorist, just to be clear," Wilcox blogged on March 3. "But my guess: Microsoft's interoperability principles announcement was a pre-emptive, defensive strike. This kind of thing has happened before, on both sides."

Wilcox also believes Microsoft has left itself room in the principles to use standards and patent threats in combination to control the industry. "Microsoft will refocus on controlling standards the way it used to," Wilcox wrote in another post. "The [principles] aren't so much guidelines that Microsoft will follow as rules the company will impose on third parties, whether they be competitors, customers or partners."

Whatever the motivation, analysts with Gartner Inc. agree with Microsoft that the new changes are significant. In a Gartner analysis written by George Weiss, Matthew Cain and Nikos Drakos, the analysts said, "Gartner believes this is an important change in Microsoft's willingness to encourage interoperability. We do not expect this new attitude will pervade the whole company, but we do think that attitudes are changing as new executives replace the old guard."

Michael Cunningham, executive vice president and general counsel for Linux distributor Red Hat Inc., responded to Microsoft's interoperability principles by calling for Microsoft to drop offers of patent licenses that Microsoft "knows are incompatible" with the open source software (OSS) General Public License, or GPL.

In his statement, Cunningham called for Microsoft to instead extend its existing Open Specification Promise, which applies to some of its low-revenue products.

"If Microsoft were truly committed to fostering openness and preventing customer lock-in, it would extend this promise to the protocol and interface information it intends to disclose [on Feb. 21]. There's no explanation for refusing to extend the Open Specification Promise to 'high-volume' products, other than a continued intention on Microsoft's part to lock customers into its monopoly products, and lock out competitors through patent threats," Cunningham said.

"Microsoft's announcement today appears carefully crafted to foreclose competition from the open source community. How else can you explain a 'promise not to sue open source developers' as long as they develop and distribute only 'non-commercial' implementations of interoperable products?" Cunningham asked in reference to statements made by his Microsoft counterpart Brad Smith. "This is simply disingenuous."

Red Hat followed up in early March by publicly announcing the hiring of two high-profile patent attorneys to its staff.

What's a Partner to Do?
How solutions providers eking out day-to-day sales respond to the four principles will depend on what types of customers and engagements they focus on.

Partners targeting SMBs, or those in head-to-head competitions with open source-based solutions, have two main options. They can share the cynicism of the EC and many in the open source community about Microsoft's intentions and continue using the old Microsoft-produced partisan collateral. A few new rebuttal lines to the basic sales pitch, emphasizing Red Hat's lawyers and Microsoft's promise to continue to take a hard line on patents, and it's business as usual. The other approach here is to become one of those partners that wins deals by emphasizing 100 percent the positives of Microsoft solutions, focusing on business priorities, return on investment and other winning arguments.

In enterprise and other environments where interoperability is important, the four principles actually may strengthen Microsoft partners' business case. After all, the main non-government group hammering Microsoft on interoperability for years has been enterprise customers who need Microsoft software to work better with other solutions. The four principles are another data point in the slide deck about how Microsoft is starting to "get it" on interoperability, and that things are getting better. It dovetails nicely with a list of all the Linux distributors and open source companies that have worked out deals with Microsoft lately (Novell Inc., Xandros Inc., Linspire Inc. and XenSource, to name a few).

Over the next few years, Microsoft's interoperability principles could play out in several ways for partners, according to industry observers. In the best-case scenario, the open source outreach aspects of the principles could spur a new class of OSS apps running on Windows. "Microsoft surely will entice many OSS developers to port applications to Windows in addition to Linux. This will help Microsoft expand the Windows platform as an organic and thriving ecosystem," the Gartner analysts argue.

Should Microsoft's RAND terms prove incompatible with the GPL and the ambiguity of Microsoft's patent claims continue to be threatening to OSS developers, a middle case could develop, which would be a continuation of the same general trend of the last few years: Microsoft fighting every inch of the way as European regulators try to drag the company into extending access to its desktop monopoly. The industry would become a more interoperable place, inch by painful inch.

In the most underhanded scenario, Microsoft would manage to use the interoperability principles to steer standards in its favor, cementing Windows, Office and the other high-volume enterprise products into the center of the IT world. That's not so bad for Microsoft-centric solutions providers, either.