Rift on Software Arouses Concerns

By John Markoff
The New York Times

September 24, 1990

Like an earthquake that rattles windows and breaks china but leaves the roof intact, the decision last week by the International Business Machines Corporation and the Microsoft Corporation to pursue separate paths in developing software has filled many people in the computer industry with anxiety about the next tremor.

That shock could well determine the future of the personal computer industry - whether technical standards will be set by the company that makes the machines or the company that shapes the programs that run on them - or whether a free-for-all without a single standard will result. It is a matter of tremendous concern not only to those two companies but also to software developers and computer users.

A little more than a decade has passed since I.B.M., the name synonymous with computers to many people, asked a then-obscure Redmond, Wash., software publisher to work with it on a secret personal computer project. Thus, it was Microsoft that provided the operating system for the phenomenally successful I.B.M. PC.

An operating system is a special program that acts like a symphony conductor to run a computer's word processor, store and retrieve data, and manage other programs and functions. Because of the widespread acceptance of the I.B.M. PC with its Microsoft operating system, the alliance formed by the two companies has essentially dictated the design of several generations of desktop computers and won most of the industries' sales.

But now, many in the industry are saying the divergence of the two companies has put the direction of the personal computer industry in doubt, fundamentally redrawing the personal computer landscape more than any other event in the past 10 years.

''I hate to think that the '90's will be more confusing than the '80's, but it's possible,'' said Jim P. Manzi, chairman of the Lotus Development Corporation, a software maker. ''It's the Balkanization of the desktop.''

As a result of the split, many industry executives and software developers say, the world of desktop computers and work stations in the 1990's will be less monolithic and more diverse. This shift may aid innovation, but it almost certainly will also leave many customers confused.

''In the 1980's, you had a monotheistic world where 90 percent of the market was dominated by Microsoft,'' said Philippe Kahn, chairman of Borland International, a Scotts Valley, Calif., software publisher known for its Sidekick, Quattro and Paradox programs. ''In 1995, no single operating system will have more than 40 percent market share.''

In such an environment, software developers would have to decide which operating systems to work with, developing separate versions of their programs for each system, which can be expensive.

If that shift does take place, a number of industry executives said, it will be because I.B.M. has made several moves in recent months to limit Microsoft's influence.

The maneuvers included a licensing arrangement with Metaphor Computer Systems Inc. to create a new class of software intended to reduce the importance of operating system programs, and a second agreement with the Go Corporation licensing a special kind of operating system software for ''notepad'' computers.

The question, the executives say, is whether I.B.M.'s actions have come in time to blunt Microsoft's increasing dominance of the industry.

Microsoft is riding a wave of influence based on the stunning success of its Windows 3.0 software program. The program, which runs under the MS-DOS operating system program used on most I.B.M. and compatible personal computers, has sold more than one million copies since it was introduced earlier this year.

With Windows 3.0, computers that required users to type commands on a keyboard can be made to work with a remote ''mouse'' control used to point at pictures on the screen that command the computer to perform certain functions. This feature, popularized by Apple's Macintosh computer, makes computers more accessible to users, even novices who do not know how to type.

But Windows 3.0 lacks the power of some other operating systems for tasks as diverse as scientific design or linking many computers together in a network. I.B.M. had favored the more powerful OS/2 operating system it had developed with Microsoft, but the success of Windows 3.0, analysts said, drove I.B.M. to seek a new accommodation with Microsoft.

Also wary of Microsoft's surge are the software developers that make application programs, which make a computer perform specific tasks like accounting or word processing. Because Microsoft application programs like Word and Excel run under Windows, they should benefit greatly by the growth of Windows 3.0.

Viable Alternatives

I.B.M. realizes that it must offer software developers a viable alternative to Windows or risk ceding control to the software publisher that earned $170.1 million on revenues of $803.5 million in 1989.

''I.B.M. understands that they can no longer hammer Microsoft,'' said Stewart Alsop, publisher of PC Letter, an industry publication. ''They recognize that the software developers are the key to the industry. I.B.M. wants to develop the state-of-the-art software development system in 1993 and then get the developers to agree to use it.''

Last Monday, while the two partners sought to portray their changed relationship as merely cooperation by other means, ''impending divorce'' became the term most widely used throughout the industry after Microsoft shifted 160 programmers from a joint I.B.M. project to work on Windows software.

A Complex Alliance

But the alliance appears too complex to permit an open break, at least now. In a hasty announcement made after word of a rift was leaked to trade industry publications, James A. Cannavino, I.B.M.'s vice president and general manager for personal systems, and Microsoft's chairman, William Gates, said that the two companies were reaffirming their business relationship by separating development of major operating system software and then cross-licensing the technology.

''I don't call it a rift at all,'' Mr. Cannavino said. ''There were some real tough issues that we've come through, but now we're past all that.''

But differences clearly remain. Mr. Cannavino said that despite widespread industry belief that Microsoft would now move to consolidate its hold over the more than 50 million users of MS-DOS software, the more advanced OS/2 operating system would begin to dominate the market within three to four years. He also said that graphical interfaces that would compete with Windows were inevitable in the future, including the possibility that Nextstep, developed by Steven P. Jobs, a founder of Apple Computer Inc., might be offered for OS/2 by I.B.M.

No 'Replacement Strategy'

But Microsoft has said it believes that Windows and an as-yet unannounced new operating system project will overshadow any move to OS/2. ''We're no longer on a replacement strategy leading to OS/2, the world has changed,'' said a Microsoft executive.

Under the new arrangement between the two companies, each will develop its preferred program - the OS/2 operating system and the Presentation Manager user interface for I.B.M., and MS-DOS and Windows programs for Microsoft.

The difficulty for I.B.M. is that while OS/2 has been a centerpiece of its strategy for connecting desktop computers to its larger mainframes, the program has so far failed to win acceptance in the marketplace. And many analysts say that Microsoft now believes that it has more influence in the desktop computer industry than I.B.M. The success of Windows will make it possible to modernize MS-DOS, giving Microsoft an effective competitor to OS/2, as well as other operating systems like the more powerful Unix system and the one used by Macintosh.

''Microsoft is fundamentally saying to I.B.M., 'You're irrelevant','' said the chairman of one large personal computer software publisher.

Rival Computer Chips

Moreover, Microsoft has retained control over a special group of developers pursuing advanced operating systems that will run on microprocessors other than those made by the Intel Corporation. Intel chips are at the heart of I.B.M.'s and most compatible personal computers. Microsoft has said that it is currently working on moving the program to three different computers, and industry insiders said that the MIPS Computer Company's RISC chip was Microsoft's first target. The increasingly popular Unix operating system now dominates in the RISC market.

Unix was developed as a program for minicomputers, but in recent years its advanced features have made it the leading program for computer work stations. Now work station makers are beginning to see personal computer users as desktop computer users.

''By using Unix we can tailor the operating system to our computers,'' said Scott G. McNealy, president of Sun Microsystems, a maker of computer work stations. ''And we don't have to pay a tax to either Microsoft or I.B.M.''

GRAPHIC: Graphs: The proliferation of operating systems from '87 to '94 (Source: International Data Corporation)