When the heads of the biggest US tech companies appear at a landmark antitrust hearing in Washington next Monday, there will be a notable absence: Satya Nadella, CEO of Microsoft, will not be among them.
Consumer technologies like iPhones, social networks and search engines will come under the microscope, but the world of business software will get a pass.
That a company worth an astounding $1.6tn has not been swept up in the antitrust worries about Big Tech is partly a matter of optics. Surprisingly, given its wealth, Microsoft has come to be seen as an underdog, lagging Amazon in the all-important cloud computing market.
Unlike Amazon, though, it occupies all parts of what is known as the technology “stack” — the layers of tech that extend from the basic physical infrastructure and operating systems that make up the foundations of IT, up through services like databases, to the applications that run on top. That gives it more scope to tie parts of the technology together, increasing sales.
Microsoft has also done a good job of burying its old image as a convicted monopolist. Brad Smith, the company’s president, made a bid for the moral high ground last month by attacking the 30 per cent fee Apple takes through its App Store. He suggested that even Microsoft at the height of its power 20 years ago was not such an influential gatekeeper — though, with its failed bid to turn a technology called Passport into a broad platform for consumer services on top of Windows, it certainly tried.
It was probably inevitable, however, that Microsoft would eventually be dragged into the fray. It happened this week when Slack, the workplace messaging service, made a formal complaint to the European Commission. By including the rival Teams service free of charge in its widely used Office software, Slack charged Microsoft with acting illegally to squeeze it out of a new market.
Mr Nadella has rejected Slack’s complaints, telling the FT recently that the start-up owes its very existence to being able to distribute freely on Microsoft’s Windows. But what Microsoft gives with one hand, it takes away with the other. From the early days of the PC, when it displaced the pioneering Lotus 1-2-3 spreadsheet with its own rival software, Microsoft has been adept at owning the most important workplace tools that run on its platforms.
Slack is not the only company in the line of fire. Last year, Microsoft folded Skype for Business into Teams, in the process giving up the revenue on a standalone communications service in order to embed video, free of charge, into its new service. During this year’s pandemic that decision has contributed to the huge uptake of Teams — in the process limiting the potential growth of upstart video app Zoom.
But proving that Microsoft’s use of Teams amounts to abuse of a dominant position is likely to be hard. It starts with the fact that the 250m or so paying users of Office 365 service may not give it the reach to qualify as a monopoly. Slack itself has often made the case that Office is used by only a subset of its target market, leaving plenty of room to grow.
But Slack’s lawyers go further, claiming that Microsoft’s entire set of business software — its tech stack — is being brought to bear to defeat the upstart messaging app. Microsoft has certainly made no secret of its intentions. On the very day that Slack filed its complaint, the software company’s executives used their latest earnings call to highlight the progress they were making in persuading customers to sign up for a full set of technology.
The key indicator was not sales of Office 365, they said, but rising sales of Microsoft 365 — the name given to a bundle of products, launched in 2017, that includes the productivity apps, along with a broader set of technologies.
A central ingredient of this is Active Directory, an identity management service that runs on Windows servers. In theory, through Active Directory, someone using Teams could instantly connect with anyone else on Microsoft’s platform, without needing to go through the painstaking process of emailing a request to connect (even if, in practice, it has not reached this level of integration yet).
Tight integration, though, is not in itself proof of Illegal tying. While pushing to sell more bundles of technology, Microsoft also sells its products and services separately. Thirteen years after it ended its last, protracted fight with Microsoft, Brussels may well think twice before opening a new front — not least because it already has a full plate as it tries to take on Big Tech.
Slack, meanwhile, has aligned itself more closely with Amazon, looking for ways to connect its own app to some of that company’s cloud services. After blithely trying to brush off the threat from Microsoft, its complaint to Brussels is a clear sign that it is feeling the heat. As the IT world consolidates around a handful of powerful cloud computing platforms, the prospects for an innovative start-up are not getting any brighter.
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