End of an Era

Charles Babcock AnchorDesk

Published: 03 Aug 2000 15:21 BST

Until the Microsoft verdict, we had come to believe that technology was a constantly expanding horizon. Winners of this technology generation would be overturned in the next iteration as the waves of change and innovation repeatedly washed over us.

The lesson had been internalised.

IBM had actually dammed the tide of change, holding it back with market dominance, bundled hardware and software, staged product introductions... until the storm surge of personal computers and low-cost servers swept its superstructure away. Big Blue's consent decree with the Justice Department temporarily helped competitors, but the reduction of its position was caused mainly by a sea change in technology.

Microsoft proved skilled at riding that flood tide to dominance. But then, brick by brick, Microsoft began building its own dam to hold back the tide of change. The building was skillfully done and the structure rose high. But pent-up forces behind it gathered strength until they circumvented or overflowed the barrier and cut a new channel.

Before the rise of the Internet, Microsoft represented primarily a competitive force, lowering prices for consumers and phasing in operating systems, applications and tools about as fast as the market could absorb them. Competitors in market after market struggled to keep up.

But the investment community could see that what had happened to IBM was beginning to happen to Microsoft, and the wheels of liberal capitalism began spinning faster in anticipation of an opportunity to create a new generation of leaders. Angel investors multiplied, venture capital was pushed at wild-eyed business plans and the stock market could only seem to rise.