GAME OF X V.2

“Microsoft has been accused of a bunch of things, and when it came down to something like our work with Microsoft application competitors, we’re clean as a whistle. We never ever did anything remotely unethical to advantage the applications group. Now when it comes to platform vendors. Oh, absolutely. Absolutely, my friend. My job was to put other operating systems out of business, from my perspective. So if we could do that through application support, if we could do that through tying them up technically, if we could do that by having them chase red herrings, absolutely. Did that all day long.”

With the addition of people like James Plamondon and Alex St. John, the DRG became a potent force both internally at Microsoft and externally in the world of developers and competing software. More to the point of this book, they also established attitudes and tactics that would be inherited by the people who originally fought for Xbox. One thing leads to another…

The DRG was a two-headed beast. On the one hand, they fully supported independent software vendors (ISVs)—developers. On the other hand, they engaged in a focused campaign to make sure Microsoft was the winner in every arena in which they competed. The basis of this thought is expressed by Cameron Myhrvold while talking about a meeting they had with a guy from Claris, which was Apple’s business applications spinoff.

How Not to Make Money

Don Eilers represented Claris, Apple’s software spinoff company. Myrhvold describes him as a very nice guy. Ellers came to Seattle to meet with Myhrvold and Steve Ballmer about the possibility of Claris developing applications for Windows. Early in the conversation, Ellers proudly observed that the retail price of the average Macintosh application was half the price of a Windows app.

After the meeting, Myhrvold remembers Ballmer’s reaction. “Steve is hooting and hollering. ‘Can you believe it? Can you believe those idiots? They can’t deliver volume or price point. How are they going to help people make money?’” In other words, selling apps at half the price might appear to be a competitive advantage, but with lower sales volume, Claris was not supporting its developers, and without successful developers, the platform on which they depended—the Macintosh—would not prosper. Ultimately, they would lose as their developers went where the money was.

Myrhvold goes on to explain that, in order to win the software war, there were only two things you needed to do:

1. “You need to make the other guy’s platform priority 2. It doesn’t have to be priority 10; just priority 2. Because in a resource constrained world, priority 1 is going to get the resources and on the margin, priority 2 is going to starve.”

2. “You have to make your platform the best way to make money. And if your platform is the best way to make money, people can hate you, but they’re still going to write for your operating system.”

Myrhvold also points out that Microsoft was continually creating more technology for developers to adopt. “There’s nothing I hated more in life than a release of Windows that didn’t have a major ISV (Independent Software Vendor) agenda. Because I don’t want these guys to have idle cycles. I don’t want them to think about, ‘Oh, what else should we do with our engineering group?’ I want to absorb all the oxygen in the room with them working on Windows related technology.”

If you’re curious about the foundation of DRG’s competitive philosophy, what follows is a complete transcription of what James Plamondon taught at Microsoft in regular seminars to new groups of DRG evangelists. The original document was used in the U.S. Department of Justice Anti-Trust trials against Microsoft, which began in the late ‘90s, and is in the public record. Please read only if you are truly interested in the foundations of Microsoft’s competitive strategy.

Evangelism is War

Our mission is to establish Microsoft’s platforms as the de facto standards throughout the computer industry. Our enemies are the vendors of the platforms that compete with ours: Netscape, Sun, IBM, Oracle, Lotus, etc. The field of battle is the software industry. Success is measured in shipping applications. Every line of code that is written to our standards is a small victory; every line of code that is written to any other standard, is a small defeat. Total victory, for DRG, is the universal adoption of our standards by developers, as this is an important step towards total victory for Microsoft: ‘A computer on every desk and in every home, running Microsoft Software.’

Our weapons are psychological, economic, political—not military. No one is forced to adopt our standards at the barrel of a gun. We can only convince, not compel. Those who adopt our standards do so as a rational decision to serve their own ends, whatever those may be. It is our job to ensure that those choosing an operating system are presented with an overwhelming abundance of evidence and reasoned argument in favor of our standards—so overwhelming that the choice of our standards seems obvious, or (ideally) that the developer is not even aware that a decision was faced, and a choice made.

We do this by understanding the barriers that might otherwise prevent the developer from adopting our standards, and removing them; by understanding the inducements that might facilitate the developer’s adoption of our standards, and providing them; by understanding the arguments of our competition, and countering them.

Our Mission

The Charter of Microsoft’s Developer Relations Group is clear:

Drive the success of Microsoft’s platforms by creating a critical mass of third-party software applications and business solutions.

This mission statement contains both the goal which we are striving to achieve (the success of Microsoft’s platforms) as well as the means by which we are to achieve it (by creating a critical mass of third-party applications and business solutions).

Definition of Evangelism at Microsoft

“Evangelism is the art and science of getting developers to ship products that support Microsoft’s platforms.”

Below are the slides that were used in Plamondon’s presentations:

Effective Evangelism

Evangelism is WAR!

• Mission

○ Establish Microsoft’s platforms as de facto standards

• Enemies

○ Other platform vendors

• Battlefield

○ ISV Mindshare

• Progress

○ Shipping ISV applications

Role of ISVs

• ISVs are just pawns in the struggle

○ But have you ever tried to win a chess game without any pawns?

• We need the support of ISVs to win

• We must earn the support of ISVs by

○ Shipping technologies worthy of support o Helping ISVs implement and market their support for our technologies

• We work hard to help our ISVs succeed!

So, We’re Just Here to Help Developers, Right?

We’re Here to Help Microsoft©!

• Microsoft©Pays our wages

• Microsoft©provides our stock options

• Microsoft©pays our expenses

• We’re Here to Help Microsoft© o By helping those developers

○ …That can best help Microsoft© o …Achieve Microsoft©’s objectives

• Did anyone miss the point here?

Enlightened Self-Interest

• We help ISVs to help ourselves

• But we really do help them

• We fight for our ISV’s

○ APIs, hooks, tool support

○ Design Reviews

○ Strategies, timelines, etc.

○ …because we need their support for our own ends

Too Many to Help

• Can’t help ‘em all

• We help those who can help us.

• If they can’t or won’t help us o Screw ‘em!

○ Help their competitors instead.

Art of War

“To win one hundred battles is not perfection; to subdue the enemy without fighting is perfection.”

Sun-Tzu: The Art of War, written in China by Sun Wu in roughly 400 B.C.

• “Thus, the best military strategy is to attack the enemy’s plans.

• Next best is to disrupt his alliances.

• Next best is to crush his army.

• The worst policy is to attack his fortified cities. Attack cities only when there is no alternative.

Attack the Enemy’s Plans

• Do not attack directly

○ No debates, no white papers, no lawsuits

• Do the unexpected; attack his assumptions Attack the Enemy’s Fortified Cities

• Big ISVs that compete with Microsoft o Lotus, Novell, Oracle, …

• They hate us

○ And there’s nothing we can do about it

• Don’t throw yourself against their walls

• Help their competitors instead

○ Let them attack the cities for us o They’ll be grateful for our help (for a little while…)

All is Not Fair

• We are under close scrutiny

○ Any unethical acts WILL BE uncovered

• Besides—we’re the good guys!

• Simple rule to live by: Never Lie

○ Tell the truth, and nothing but the truth o Be selective in which truths you emphasize o Let the competition fill in the gaps

1. The goal was for Microsoft’s platforms to dominate the market using third-party developers.

2. Nobody is forced to do anything. Persuasion and psychology were the weapons of choice.

3. Supporting ISVs (Independent Software Vendors) is critical to the platform’s success…

5. If someone is too strong to attack directly, or unwilling to help Microsoft, help their competitors.

6. The best strategy is the most subtle: 1. Attack the enemy’s plans. 2. Disrupt the enemy’s alliances. 3. Destroy the enemy’s army. 4. The worst approach is to attack the enemy’s strength (fortified cities).

7. The authorities are watching, so keep it ethical and honest, but selectively honest.

To the point of selective honesty, Plamondon says, “Something I always said when giving this part of the presentation: ‘In a court case, the presecution tells those truths that support the prosecution’s case; and the defense tells the truths that support the defense’s case. Neither side tells “the whole truth,” but between them the whole truth comes out. Similarly, DRG tells those truths that support Microsoft’s case, and which condemn our competition’s case. We cannot be reasonably expected to make our competition’s case for them. That’st their job. And the ISV is on the jury, choosing which platform API to support.’”

Plamondon and others may have seen themselves as the “good guys,” but Microsoft could hardly claim to be an altruistic organization. If they did something good for you, it was to further their own interests. And if you failed to appreciate their largesse, they had ways of making you regret it. ISVs were pawns in their game… very necessary to win the platform war, but, like pawns in chess, they were used strategically and easily sacrificed if necessary.

Plamondon puts this idea in context: “ISVs—independent software vendors—are pawns in the struggle between platform vendors. They are today’s allies… tomorrow, who knows? Tomorrow, you know, it could have been that Netscape was a little applications company that we thought was great and we worked with, and then suddenly they came up with this competing platform. The bastards! You never know which way they’re going to go.”

At Microsoft, Plamondon had become the “anti-Apple” guy, and he found numerous ways to attack his former ally. To many of his Mac friends, he was a heretic, but… “I was such a hell of a nice guy that they’d go, ‘You know, that damned Plamondon, you know, he’s working for the Evil Empire, he’s seducing people to the Dark Side, but, you know, he’s such a hell of a swell guy…. I hate Microsoft, but he’s OK.’”

So Plamondon had no problem promoting Windows right under Apple’s nose. He even had rules that governed his approach to Mac-oriented conferences. If the conference was controlled by the platform developer—what Plamondon calls an enemy conference—”You go to the enemy sessions, see what they’re saying, talk to people, be nice. Just be super nice. You never say anything rude; never, never, never stand up at the microphone at an enemy conference and say, ‘Excuse me, you’re full of shit,” you know.’” In contrast, his strategy with independent developer conferences was to “subvert them.”

Plamondon, friendly and generous to a fault, in separate cases managed to get two ongoing developer groups to end operations simply by getting them to include Windows in their programs. Although it might have been beneficial to their members to learn about Windows, allowing it into previously Mac-only conferences and groups ultimately pissed off the Mac faithful, as well as Apple, which withdrew support. In time, the leaders of both groups found the situation too frustrating and called it quits. In Plamondon’s world these were two fewer channels that Apple could use to reach its developers. In other words, mission accomplished.

Plamondon also held special Windows seminars for Mac developers during Apple’s yearly MacWorld Expo and their WWDC (World Wide Developers Conference). He made sure to get plenty of Mac programmers to present, including a well-known author, Don Bachs (who later joined Microsoft), and another author, Dan Weston.

Although he was successful in getting people to attend the seminars, overcoming their dislike (to put it mildly) of Microsoft was another problem altogether. He credits Don Bachs with the idea of having each attendee stand up, announce their name and company, and then say why they hated one of the following: Microsoft, Windows, or Bill Gates. “It gave everybody an opportunity to not only vent their displeasure, and kind of affirm that ‘we’re all Mac guys here and we all hate Microsoft, Windows and Bill Gates. But you know what? The reality of the marketplace is that we’ve got to support Windows. And now I suddenly realize that I’m not alone.’” They would see other people from notable companies, people whose articles they had read. And suddenly, they realized that there was no shame in developing for Windows as well as Mac. And always, Plamondon was careful not to bash the Mac, but only to emphasize the benefits of programming for Windows.

Before entering the seminar, each attendee was also required to take a short survey with questions like “How long have you been doing Windows programming?” “When do you expect to write your first Windows program?” Basic questions… and there were also questions like, “File management. Which platform has better file management?” “Which platform is more object oriented?” and, “Which platform has more motherhood and apple pie?” and whatever. And they filled out the same survey when they left. As a reward, they received a white t-shirt with black lettering that said, “Windows 95 sucks less,” which was a direct rip-off of an Apple t-shirt that said, “System 7.5 sucks less.” The Apple shirt, however, was white lettering over black, and with better typography and better quality cotton. “I did all that intentionally because it was the anti-shirt. Exactly the opposite of what Apple had done. Because I was making the argument that that was what Windows is. Windows is sort of the anti-Mac operating system in a variety of ways.”*

Cameron Myhrvold remembers the “Windows sucks less” t-shirts well because he had to go to Brad Silverberg, who was running the Windows group at the time, and tell him what they were up to. “It was definitely, like oh my god, do I want to have this conversation?” Fortunately, Silverberg understood the purpose and Ok’d it. (Some years later, Alex St. John would take Plamondon’s “anti-marketing” concept to the extreme and apply it effectively to gain developer support for DirectX, which ties the story directly back to our game narrative.)

Plamondon also got quotes from people who had attended the seminars, which he inserted into various magazines. The message was, “We love the Mac. We just love Windows, too. And so should you.”

Plamondon was not the only one working to strengthen the Windows platform. Myhrvold recounts the efforts of Brian Moran, an evangelist working with UNIX developers. Moran wanted to start what he called a “special program,” and Myhrvold was quick to tell him there was no budget for it. But Moran wasn’t looking for money. His plan was to bundle up all the resources that Microsoft already gave away free to developers and, calling it a “special program,” he would get commitments from the UNIX ISVs in order to enter the program. It cost nothing, but appeared to give value to the developers.

“The guys who competed with Microsoft applications group the most were guys who were kind of recalcitrant in wanting to adopt Windows. It does make sense, but of course that’s what ultimately killed them because guys who didn’t make that transition quickly and well, with good products, lost tremendous share.”

Evangelists were often opportunistic, capitalizing on mistakes, changes of circumstances, or other moments of weakness. For instance, evangelist Todd Needham was going after a company called InterGraph, a company that, in Myhrvold’s words, “famously hated NT.” So Needham found an engineer at the company who was willing to do a skunkworks project in secret. “So Todd supported the hell out of him, and then, when the market was changing and Intergraph’s sales were going down because of issues around UNIX and the growth of the NT workstation, he was able to help this guy unveil this fully formed NT port. So they did what Microsoft did back in those days, and that was you did whatever it took.”

“You can’t ignore that whatever Microsoft says is going to be the standard because they’re so big, so influential, and have so much control of the platform, that if Microsoft says this is the way of the future, you have got to listen.”

“It was just about carrots and sticks, right? You get this, or I’ll hit you with this. And that was how I would see the ‘90s.”

Microsoft’s power ultimately became such that whatever technology they introduced, it was likely to become the standard, and the DRG used that perception to accomplish their goals. They shied away from coercion and worked mostly through inclusion or exclusion. For instance, they might typically invite companies to be part of an early adopter program for a new technology they were introducing. In describing a typical program, Plamondon says, “The early adopter program consists of us giving you a lot of information about the API, all the betas and the developer kits, and all the things you need, inviting you to a number of meetings with our engineers so that you can tell us in person what isn’t working and walk them through the code to show them what isn’t working—so direct developer-to-developer contact.” As part of the program, the developer is asked to deliver a beta of their applications that support the new technology according to Microsoft specifications and to commit to having people demonstrate their product at Microsoft events. In exchange, Microsoft offered co-marketing support.

According to Plamondon, the early adopter program agreement was “just an agreement between two people in two different companies.” Of course, they preferred to get someone at a director level to sign the agreement. However, there were no penalties for failing to live up to the agreement terms. It was entirely non-punitive. All that would happen is that if you didn’t deliver what you promised, you wouldn’t be invited to the next early adopter program, and presumably, your competitors would be invited.

“It’s a carrot so big, it’s a stick,” says Plamondon. “We could take that same carrot and give it to your competitor instead, so that he could beat you over the head with it.”

In cases where a company was dismissive or not interested in what they were selling, the evangelists would be very polite and thank them for their time, and then find their biggest competitor and take the offer directly to them. And when Microsoft backed the competitor, it had an impact big enough that the original company would think twice before turning Microsoft away again.

Plamondon liked to describe this in terms of the famous NFL player Reggie White, who was reputed to hit so hard that players would simply hit the ground when they heard his footsteps coming, rather than endure the pain of being hit by him. However, Microsoft didn’t actually deliver a direct hit. They let a company’s competitors do it for them.

Borland was another competitor that ended up in Microsoft’s sites. Philippe Kahn was not a fan of Microsoft. It is useful to note that Borland was once the third largest software company in the world, behind Microsoft and Ash-ton-Tate, and Kahn was highly competitive. He wanted Borland to be number one. On the other hand, that made him a target.

Cameron Myhrvold remembers how Kahn responded to his evangelists when they would visit. “We’d go down there and talk to them, and then Philippe Khan would call Bill directly and say, ‘I never want these assholes back.’ He would say these completely outrageous things. Bill calls me to his office. ‘I got this call with Philippe and he says, ‘Every time you’re down there, all you tell him is get out of the tools business.’”

The irony of this interaction is that it occurred almost immediately after Myrhvold and evangelist Bob Tanaguchi were down at Borland’s Scotts Valley, CA offices offering to include a Borland compiler as part of a software developers kit (SDK) for a release of Windows NT. They didn’t meet directly with Kahn, but with Brad Silverberg and Paul Gross, so it’s possible that Kahn never knew about the offer. Back at Microsoft, however, the offer to bundle Borland’s compiler, although a minor offense, it did not sit well with Gates. Steve Ballmer sort of condoned their actions while stating that he didn’t condone it. He said, ‘I did not condone it, but I understand the motivation of trying to get these guys off the dime,’ and as he often did, Gates fumed for a few minutes and then calmed down. In any case, Borland never responded to the offer.

Doing or Withholding Favors

Plamondon offers another example of how the Big Carrot worked.

“At the time, Microsoft had tremendous power because people wanted to know what the latest and greatest was from Microsoft. And if your company knew what the latest and greatest was, or even more, what the new stuff would be in six months… if you had a head start on the information, and your competitor didn’t, then you had an advantage that your competitor did not have, and therefore Microsoft had the advantage of being able to share this information with Competitor A—that is, product A—or with Product A’s competitor. And I encouraged our guys to use that power to achieve Microsoft’s objectives.

“So for example, there was a company that created Mac software, and I went way out of my way to help them produce a Windows version. I paid for consultants. I did a bunch of stuff to help them produce their Windows version. And then afterwards, I went to them and said, ‘I would like a quote from you please that says something along the lines of, ‘We produced this Windows version of our product, and now its sales are X compared with our Mac sales, which are Y, and we wouldn’t have had that boost in sales if we hadn’t produced a Windows version.’ Whatever X and Y were, whatever the facts of the matter were, I just wanted them to say that. And they said, ‘I’m sorry. We can’t give you that quote because it might hurt our relationship with Apple.’ And I said, ‘Thank you very much. I appreciate your time.’ And then sent around an email that said, ‘Under no circumstances should anyone from Microsoft help this company do anything until they hear back from me. And they won’t hear back from me for a minimum of six months.’ So these guys are on the shit list. Don’t lift a finger to help them. And if they are in a position to possibly be helped or possibly not, be sure they’re not. Go out of your way to shit on them whenever possible.

“So three, four months pass, and they’ve been calling me, and I’ve heard contacts from other places in the company that they’re trying to get hold of people at Microsoft, and so on. And after three or four months pass, I go ahead and take their call, and they go, ‘Gosh. What happened? Suddenly, we aren’t getting the help we used to be getting, and we became dependent on that help, and it’s actually putting the company at risk, and what the hell happened?’ And I said, ‘Oh. Weren’t you aware that denying me that quote would harm your relationship with Microsoft? Did you think that Apple was the only company with whom you had a relationship?’ ‘Oh. Gosh. We hadn’t thought of it that way.’ I said, ‘Do you think of it that way now?’ They said, ‘Yes. Would you like that quote now?’ ‘Oh, I’d love to get that quote now. Thank you very much. I appreciate your volunteering that.’

There’s this notion of reciprocity. If I do you a favor, I expect you to do a favor in return, and if you don’t, there’s no punishment. There’s just not going to be any more favors. I’m going to remember that investing in you is not profitable to me, and I’ll choose to invest in someone else instead. Because whoever you are, you have a competitor, and that competitor may return my favors.”

-James Plamondon

And Silverberg? Yes, it was that Brad Silverberg, who was poached from Borland several years later to run the Windows division. It was no coincidence, however, as Myrhvold recalls. “It was one of the things that Steve Ballmer would ask me from time to time. Who do you think are the smartest guys that you call on? And Brad was pretty much top of the list.”

Silverberg was not the only Borland employee to be induced to leave Borland, however. In a 1997 lawsuit, Borland claimed that Microsoft had hired away 34 key employees over the previous 30 months, offering huge signing bonuses, generous stock options, and even real estate.

Meanwhile, DRG’s Craig Eisler and Eric Engstrom, began creating Foundation classes that would compete with Borland’s DOS and Windows APIs. They then went to all of Borland’s smaller, less successful competitors—companies like Symantec and Watcom, who were competitors of Microsoft’s as well—and offered their support. Engstrom remembers telling them,”Hey. You don’t have the scale and the infrastructure to compete with Borland for these big APIs. We’ll give you ours for free. We’ll share. You can adopt ours. Go ahead.” They also issued joint press releases and further support in the form of marketing dollars. Fellow evangelist Alex St. John put it colorfully. “They used the smaller competitors to surround and peck them to death.” St. John continues by observing, “And so, evangelism was not only being helpful and amazingly generous and positive to little companies that were struggling, like Symantec and Watcom, it was simultaneously a very effective strategy of bringing down a competitor without getting any blood on your hands.”

“One of the stories I’ve heard about how Indians used to hunt buffalo in the Wild West, was not to go chase one with a spear. It was to surround them and then chase the whole herd off a cliff And Microsoft sort of had that attitude about the market.”

In addition to empowering a rival’s competitors, the DRG employed tactics that were designed to help their major competitors do something stupid. As St. John describes it, “One of the things that James (Plamondon) used to teach us, which was incredibly true, was that to destroy a major competitor requires two things. One, that you have to have amazing execution to take them out and two, they have to fuck up. You can’t take out a kingpin—a leader in a market—without them first making a mistake, so one of the biggest elements of DRG strategy was pressuring competitors to make a mistake. A lot of what Microsoft did and said was, again, whooping… making a lot of scary noises to cause people to panic and run in the direction of the cliff.”

Skipping ahead a few years, Netscape was Microsoft’s prime target in the early browser wars. According to St. John, “Netscape was a fascinating example of a company that owned it. Clearly owned it. Dominated it. There was no good reason that Microsoft should have been successful at running them off the cliff.” And yet, somehow, Netscape did run right over the proverbial cliff. How?

Cameron Myhrvold remembers being invited to a meeting with Netscape that his brother Nathan had set up. He wasn’t able to attend, but reports that at that meeting the Netscape representatives were told that if they didn’t do as Microsoft demanded, they would not get any support from Microsoft. (Cameron) Myrhvold was furious. “That would run entirely contrary to what I would have done, and of course it was my job, so he’s saying that you won’t get the information from Cam’s group that you need to build a great browser, and that’s absolute bullshit. That never would happen. I would not let some guy like Dan Rosen tell me what to do, and if I’m going to give that same level of support to Borland and Lotus and Word Perfect and every other competitor that Microsoft had, I certainly was going to do that for Netscape. And if I’d been at the meeting, I would have said that.” This approach was the opposite of the DRG way of dealing with things.

The DRG strategy started with examining Netscape’s strengths and weaknesses. They had the best browser and the market cornered, but one weakness was their price point. According to Myhrvold, they charged their corporate customers, mostly telcos, $13 a copy while the telcos were providing their service at anywhere from $19.95 to $29.95 a month. With their expenses, it was a low margin affair, and according to Myhrvold, that $13 per copy was “more than their profit per subscriber for the first year.” On the other hand, the early versions of Internet Explorer were inferior, so how could they gain any market share against Netscape and make any money?

At the time, Myhrvold had been put in charge of a sales group focused on interactive TV, a pet project of Craig Mundie, and ultimately an expensive disaster. So in a meeting with Bill Gates and other senior executives, he said, “We should get the hell out of this. It makes no sense. The only partner we have left for interactive TV has no interactive TV license—NTT in Japan. This is a science experiment, and it’s costing the company tens of millions of dollars a year. Meanwhile, there’s this thing called the Internet, and we should be all over supporting ISPs, because every client is a computer.”

Mundie “blew a gasket,” but Gates agreed and refocused Microsoft’s efforts toward going after ISPs. Meanwhile, Myhrvold was thinking about strategies. He could try to sell early versions of Internet Explorer for less than $13 and undercut Netscape. But what was the right price point? He considered selling it for a dollar. “If the other guy can get twelve dollars, thirteen dollars, I can get a buck a copy.’ And then a month later, ‘Well, maybe I can get 50 cents a copy.’ You know, ultimately I couldn’t give the god damned thing away for free.” Even giving away the browser, even reaching out directly to the top 500 ISPs in the world, “we came up empty handed.”

Not until IE 3 (released on August 13, 1997) did they begin to glimpse some success. Under a new product manager—Ben Slivka—they got one great account—Time Warner—”and that was the beginning of the end because people realized, why am I sending all of this money to Netscape every year, and I’ve got this free option?”

Even though Microsoft was beginning to establish IE as a potential competitor, Netscape was still the dominant browser and could likely remain so if it played its cards right. But as the DRG continued to put pressure on and to convert more accounts, the people at Netscape began to feel the pressure. According to Myhrvold, “There’s a whole bunch of mistakes that Netscape made, and in fact, with most of Microsoft’s competitors in the past, what you kind of tend to do is you get up close behind them with your lights on and they drive off the road. People freak out.” In the end, the combination of a free browser of increasing quality and a few mistakes by Netscape, and in time Internet Explorer took over the market, but the road to success was not only about price points and making mistakes.*

Although IE had gained considerable market share by late 1997, Netscape was still dominant. In order to overtake Netscape, Microsoft was forced to bundle IE with Windows 95 and later with Windows 98. In addition, they made some hardline deals with hardware manufacturers that gave IE clear advantages over their competitors. Owning the operating system was their ace in the hole, but their practices ultimately got them into trouble with the U.S. Department of Justice. There were also other anti-Netscape projects in the works, but all that comes later.

The story of Netscape was not the only example of a dominant company being herded off the cliff. Myhrvold also relates the story of Word Perfect, which was the dominant word processor at the time Microsoft was trying to establish Word, and Word Perfect felt the pressure and began committing a series of strategic errors, prompting Gates to say, “Oh my god. It’s stunning. We could not have scripted a better augur into the earth strategy for Word Perfect than what they’ve executed over the last 24 months.”

*Plamondon says, “The developers who created the ‘System 7.5 Sucks Less’ t-shirts were shut down by Apple’s marketing apparatus. “Think different,” my ass. My shirt went on to win a “best T-Shirt of the Year” award (I don’t remember from who).”
*According to Plamondon, “One of the reasons IE3 succeeded in the market was because it had a great Mac version. It had a great Mac version because it was written by the ClarisWorks development team. They had left Claris en masse after Apple refused to let them use OLE 2.0 to integrate their constituent apps, insisting that they use OpenDoc instead. I had worked closely with the ClarisWorks team for over a year, giving them a ton of support, to ensure that their OLE 2.0 version worked flawlessly. Apple was furious at ClarisWorks’ “traitorous” behavior. They told the team: “We own you. YOu will do as we say. “But instead, the team called my up at the end of an offiste meeting, and said that “we have all decided to join Microsoft.” I called the VP of HR, who had a heart attack. This was around the time of Borland’s competitive hiring lawsuit. She said we couldn’t hire the team en masse…but we interviewed them individually, skimmed the cream, and formed the IE3 team from them. Netscape’s Mac version sucked. IE3’s didn’t. That, plus being free, was a compelling advantage.”