Next year, IDC estimates 391 million PCs will ship into the market. And on every Windows 8-based computer, SkyDrive, Microsoft’s cloud service, will come preinstalled.
But that’s far from Redmond’s only advantage in the cloud. To log in to a Windows 8 PC, users will need a Microsoft account, which will automatically give them a certain number of gigabytes of free cloud storage on SkyDrive. SkyDrive will also be a default app on Windows 8 smartphones and tablets. And on the latest version of Microsoft Office, the world’s most popular productivity suite, SkyDrive will be the default save location for all new users of the program, who will be given additional free space for using the program.
Such leverage isn’t uncommon for Microsoft, nor Apple and Google, which are using their operating system dominance to push new products, especially in the cloud. Apple will use OS X and iOS to market iCloud, while Google will use Android to encourage migration to Google Drive. For consumers, that could mean limited cross-platform choice. And for cloud startups in the space, such as Dropbox and Box, the significant leverage of their larger competitors is likely to put them in increasingly disadvantaged positions in the cloud. Is this unfair?
“It’s clearly a significant advantage, but the question is whether it’s illegal,” says attorney Stephen Houck, an expert in antitrust litigation. “They have a big built-in advantage, but the question really is whether they are using that advantage somehow unfairly to make it difficult for users to have other choices.”
Houck was the chief lawyer for the 19 states that filed an antitrust suit against Microsoft in the late 1990s, when the court found the corporate giant had used its monopoly to unfairly push its Internet Explorer browser. An analogy could be drawn to the current cloud wars, but the comparison is loose at best. For one, neither Google or Apple maintain monopolies in mobile operating systems, and in the 1990s, Microsoft had used anticompetitive practices against Netscape to maintain its monopoly. “Microsoft was trying, by various means both fair and foul, to kill off Netscape, which posed a significant threat to their operating system,” Houck explains. “Microsoft’s concern then was that the browser would threaten Windows because users would be on the browser all the time, using applications written for the browser, and once that happened, it would be irrelevant what the operating system is.”
In Europe though, the European Union has leveled much more stringent rulings against Microsoft’s bundling practices. Years ago, the European Commission ordered Microsoft to offer a Windows client without Windows Media Player, and in a 2009 settlement, the company agreed to add what’s called a Browser Choice Screen, or ballot box, in Windows to provide users with alternatives to Internet Explorer, such as Chrome and Firefox. As the European Commission stated at the time, “Microsoft’s tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation, and ultimately reduces consumer choice.”
Could a Cloud Choice Screen be next? “It’s a great point, and after this call I’m going to probably go talk to our general counsel because I think you might be onto something,” says Aaron Levie, CEO of enterprise-cloud service Box, only half-jokingly. “Certainly Microsoft has to avoid using its monopoly for unfair business practices.”
However, Levie believes this will be more an issue for consumer-facing services such as Dropbox, rather than for enterprise services. “If we were in the consumer space, I think this would be extremely disruptive, because this stuff will come embedded and seamless in your experience.”
Yet Levie actually lauds Microsoft for “becoming a friendlier partner to work with.” The company, he says, has become more open to third-party ecosystems. For example, with SkyDrive being the default save location in Microsoft Office, Levie says Box “has talked to Microsoft about that, and it turns out that that experience will be open to third-party developers,” meaning there could eventually be save-to-Box functionality in the newest version of Word or Excel.
But it’s not as if Microsoft has completely changed. Only last month the European Commission said it was starting new antitrust proceedings against Microsoft.
[Image: Flickr user Paul Kelly]