All empires fail, says the post-Cold War dictum, and that surely applies to dominant companies in technology, or any other market for that matter, as much as to nation empires.

Microsoft’s dominance is likely to be a moment in history, a thought that doesn’t seem possible at times. But the history of IBM, Big Blue, provides an interesting parallel to Microsoft and "Big Bill" Gates. If anyone understands this process, it’s probably Gates himself. Give him credit for being smart enough to run scared and for seeing the directions of likely threats.

If you are of the right age (and Gates is), you remember that in the 1980s, IBM enjoyed the position that Microsoft has now. IBM ruled. Nobody got fired for buying IBM. Computer dealers who bought PCs from IBM were hostages to its power. IBM determined how much profit margin a dealer could earn. It could give and take away. IBM representatives could and did clamp down on those who criticized them publicly.

No one could envision another company challenging IBM’s supremacy in desktop computers and mainframes. IBM didn’t usually have the best technology, but it had good technology, and the best marketing.

What happened? IBM shot itself in the foot, for one thing. It dominated the PC market by establishing an open architecture hardware (software would run on any IBM-compatible) that used Microsoft’s MS-DOS operating system. Then, it decided to try to regain control through the more proprietary OS/2 operating system. That precipitated a split with Gates who was developing the Windows system. (There were other factors in IBM’s fall, but this was a major one.)

Since Windows, Microsoft has been in the driver’s seat. It usually doesn’t have the best technology, and sometimes doesn’t have the best marketing. But it does have the best record for locking people into paying it royalties. Frankly, if the British had had Gates’ way of getting everyone to pay his licensing fees, we’d still be drinking tea and putting stamps on all our documents.

In the old days, everyone loved/hated IBM. In the new days, everyone loves/hates Microsoft. Other than the AICPA, Microsoft is the only organization that I’ve ever had that called up my sources when they said something negative. One time after I relayed a negative comment about the Small Business Server product to a Microsoft marketing vice president, the president of a major accounting software company called to deny the statements made by one of his company’s lower-level executives. At least the anti-trust suit diminished that kind of behavior.

It goes with the territory. Lotus was arrogant when it was on top. So was Digital Equipment, now a forgotten part of Compaq which disappeared into the jaws of Hewlett-Packard.

Digital is a warning for all companies. It fell in love with the myth of its founder Ken Olsen, and forgot customers don’t care about executives. That could happen to Microsoft. There are signs that people fall in love with the myth of Gates (I don’t think Gates does). But who knows?. Will Microsoft lose its dominance because of Java? Linux? Something else? There will be something else and Microsoft will still be a major force even after it peaks. But it will peak. We just don’t know when.

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