“In the late 1990s, senior executives at Microsoft — including then-CEO Bill Gates — were obsessed with what they saw as the biggest threat to the company’s domination of the software industry. That threat was the combination of a Web browser called Netscape with software called Java, developed by Sun Microsystems. Starting with the infamous “Internet tidal wave” memo in 1995, Microsoft spent a great deal of time and energy trying to combat this threat. Why? Because the software giant saw it as having the potential to dethrone its desktop hegemony, by moving what people did with their desktop PCs onto the Internet.
That threat was defused by a combination of market power and savvy marketing from Microsoft, and also — if the truth be told — by some fumbling on the part of Netscape and Sun. Microsoft started giving away its own browser, and began offering “Web-friendly” software. Netscape was acquired by America Online and gradually became irrelevant, and Sun failed to build on the potential of Java for a number of reasons. Among other things, the company was blindsided by competition from open-source server software and the popularity of the Linux operating system.
Now, almost 10 years later, the threat that had Microsoft so concerned has returned in a new form: Search-engine leader Google has become a much bigger competitor than Netscape ever was, first in Internet search and increasingly in other areas such as instant messaging and voice-over-Internet services. On Tuesday, Google and Sun announced a joint venture to promote Java and the OpenOffice suite developed by Sun — a product that competes with Microsoft’s Office, which accounts for about 30 per cent of the software giant’s revenue and 70 per cent of its profits.
The two companies didn’t provide many details about their new relationship, and there was no blockbuster announcement along the lines of what many Google-watchers were expecting — that is, an Office-style suite of applications that would run over the Internet. In fact, the only concrete news was that Sun would offer users who download Java a chance to download the Google toolbar. There was the sense, however, that Google CEO Eric Schmidt and Sun CEO Scott McNealy have other things up their sleeves that they aren’t quite ready to announce yet.
There was a lot of talk, for example, about the power of open-source software and the power of the Internet. Mr. McNealy said he believes Sun’s vision of “the network is the computer” is coming to pass, and that he is often reminded of Mr. Schmidt’s motto: “Don’t bet against bandwidth.” Both men also pointed out that Mr. Schmidt is a former senior executive at Sun, who was instrumental in the development of both Java and the Solaris operating system.
Mr. McNealy, who noted that his company was “the dot in dot-com… back in the old days,” said that the relationship was designed to “drive the key technologies in what we call Web 2.0,” and that forming a partnership with Google was a natural move since the company is “the leader in Web services.” The Sun CEO also sdescribed it as a “very exciting and growing relationship, so stay tuned.”
The two men were coy about where their relationship might lead. When someone asked about the much-talked about “Google operating system,” Mr. Schmidt replied with a smile that “we’re in the end-user search business.” Sun chief operating officer Jonathan Schwartz, however, said the power of the Internet had opened up “another set of opportunities” involving network-enabled, open-source applications such as Firefox and OpenOffice, and that the Google relationship was part of that. Mr. McNealy was the only one to refer specifically to Microsoft, saying his focus on open source was “about choice for the customer,” and that what Sun is providing is “where the puck is going, not where it’s been.” The old “client-server” model used by Microsoft, he said “is so last millennium.”
Although the details of the Sun-Google partnership were less exciting than some of the speculation in advance of the announcement, the reality is that if anyone can make the Internet-based software application business work — and thereby become the threat that Microsoft has worried about for 10 years — it is Google. Where Netscape was a small startup trying to survive financially, Google has a market value approaching $100-billion (U.S.) and yet gives its main product away for free. And in contrast to the 1990s, broadband access to the Internet is now widely available, and users are more comfortable with Web-based applications. How does Microsoft compete?