Question: “What is Microsoft’s place in Silicon Valley?
How does it affect business and entrepreneurship, for better or for worse?”

Opinion: For better--Microsoft helps spur innovation

Observers of the antitrust case against Microsoft might be forgiven for thinking that the company has nothing but enemies in Silicon Valley and Washington, D.C. But the drama of politics and court proceedings does not change the fact that Microsoft plays an important role in the success of many Silicon Valley companies.

There are an estimated 772 valley companies that work with Microsoft to create value by taking advantage of the company’s platform. These include heavy hitters such as Intel, Macromedia and Autodesk. Given the number and status of Microsoft’s partners, one might have expected Microsoft’s image to fare better than it has in the valley.

So what's the problem?

Microsoft’s challenge is that the company is a lot like the New York Yankees--always on top of its game, and resented and envied by its rivals. Envy and resentment often speak louder than contentment, and it’s no secret that Microsoft's main competitors reside in Silicon Valley.

Unfortunately for Microsoft, its foes have succeeded in obscuring the role Microsoft plays in the success of many valley companies. Although Microsoft has a dominating presence in the operating system and office suite markets, its presence in other areas has kept those markets from becoming true monopolies. Microsoft’s personal finance, database and server offerings have kept those markets competitive. Indeed, many of the upstarts within them would never have got off the ground if incumbent monopolies--in a world without Microsoft--had been strong enough to choke off new investment and competition.

Microsoft’s ballyhooed profitability has not simply amounted to a slush fund for a few Seattle billionaires. To the contrary, Microsoft’s success in its own business has allowed it to acquire and invest in countless companies, projects and technologies that, without Microsoft’s open checkbook, would have lagged for years.

In California, there are more than 18,000 companies that are either Microsoft resale partners or technology partners. These companies depend on Microsoft and its ability to innovate. In March, the Microsoft Technology Center-Silicon Valley opened. When it seemed the valley mystique was gone and there was a virtual vacuum of new investment, Microsoft infused new capital into the area by opening the doors of a state-of-the-art tech center designed to help local businesses.

Companies such as McAfee.com Associates, iPrint, MyWay, Netliant, Returns Online and SongPro all work in partnership with Microsoft in this facility.

Rather than an 800-pound gorilla that squashes competition, as the U.S. Department of Justice and several state attorneys general claim, Microsoft fosters competition in the technology industry, and companies such as McAfee and many others know that firsthand.

There will always be those discontented by the relative strength and prosperity of Microsoft--just as there will always be baseball fans shaking their fists at the Yankees. But that doesn’t mean Microsoft has done anything wrong or deserves the fate it has suffered at the hands of the government.

Microsoft holds a dominant position in the market because it makes products better than anyone else. That’s why the company is so successful and popular with the public.

Microsoft should serve as a model of corporate success, not as an object of contempt from less successful businesses. And more important, just because a successful company is hated doesn’t mean it did anything wrong. Just as is the case with the Yankees, it may just mean they did everything too well.

Perhaps it’s time for Silicon Valley to reconsider Microsoft’s place in its world.

Sonia Arrison is director of the Center for Freedom and Technology at the San Francisco-based Pacific Research Institute. She can be reached via email at sarrison@pacificresearch.org.