SKOPJE, Macedonia, Aug. 8 (UPI) -- Buoyed by optimistic predictions for future growth and increased research investments, Microsoft is wooing European clients, both private and public. The software giant, which has now even penetrated the Balkan interior, has high hopes to profit from European Union-mandated IT investment affecting members and aspiring members alike. But will this potential prize lose its luster, now that the European Commission is threatening Microsoft with up to $3.2 billion in anti-monopoly fines?
Microsoft has looked to Europe to bolster its profit base and provide the company with vital new technology. In June, it found some of the latter in Romania, where it swallowed up the antivirus software of a local company, GeCAD Software. The program, known as "RAV," had been popular with Linux users. The deal not only helped Microsoft expand its Romanian operations, it also helped attack a dangerous rival.
Just how dangerous does Linux's open source coding seem to Microsoft? On 1 August, "IT News Australia" reported that the threat means Microsoft can no longer jealously guard its "crown jewels."
Instead, it is allowing various governments to review the source code for Windows, "...in an effort to determine whether they will use Microsoft's offering or a Linux alternative to fill lucrative public sector contracts." This strategy has helped the software giant win new contracts with several countries -- including Romania. Among the countries reported to be now reviewing are the UK, Austria and Russia. Worldwide government contracts represent a "huge portion of the company's earnings." Microsoft's strategy since January (when it launched its Government Software Program) has reflected this reality.
Microsoft and other tech giants hope to benefit from a surge in European e-government spending. A European Union directive calls for member states to be wired by 2005.
Exactly one month ago today, Europe's suitors -- included giants such as Hewlett Packard, IBM, Cisco Systems and Microsoft -- were lining up to court leaders at the EU's annual e-government conference in Cernobbio, Italy. The EU (which will expand from 15 to 25 countries next year) is seen as a potential cash cow for American companies despairing of a currently "saturated" market.
In this light, Microsoft's strong interest in EU-candidate Romania is easily justifiable. In this tech-savvy and growing country a new dictate from the government makes it a crime not to purchase supplies for state service via the Net -- including such items as pens and paper.
In recent months Microsoft has increased its activities not only in EU-candidate Balkan states (such as Romania and Bulgaria), but also in countries currently in EU limbo, like Serbia and Macedonia. The company has recently set up frontier posts in these countries, partially to sell its e-government ventures, but also to crack down on unlicensed software.
Microsoft's office in Skopje, Macedonia, is so new, in fact, that media requests are now being handled through a local PR agency, Publicis. According to spokesman Sasho Duljanov, Microsoft will try to appease the locals by, "developing programs for support of educational institutions," and through "...transfer of IT know-how to users through local
Microsoft partners." Another pledged benefit- a free phone line for customer support- is a subtle way for the company to get Macedonians to use licensed software. Yet this gimmick probably will have no effect.
While big business and government use licensed software, the economic reality means that most small businesses cannot. A recent report in the "EU Observer" alleges that Eastern Europeans are "...the world's worst software pirates, with an average 71% of software used in companies never being paid for." Software piracy cost manufacturers $13.08 billion in 2002 alone, states the report.
The worst local offenders are Russia and Ukraine, both with piracy rates of 89 percent. In the region, the Czech Republic's 40 percent piracy rate is the lowest, followed by Hungary and Slovakia, both at 45 percent.
Economically if not geographically, Greece is where the Balkans ends. Yet when it comes to software stealing, Greece's piracy rate (63 percent) reflects the regional trend.
That said, it's fairly obvious that cracking down on unlicensed software will be another one of Microsoft's main Balkan aspirations. While official figures regarding software piracy are not definitively know, it's likely that countries such as Macedonia, Serbia, Romania and Bulgaria all have rates like Greece's (but maybe more like Russia's).
Microsoft is allegedly disappointed in the Macedonian government, a limited market of only 2 million inhabitants. One local observer recently joked, "the government was already using licensed software- Microsoft will have to look elsewhere for quick cash."
As recent events have shown, Microsoft is poised to act more aggressively in the areas of investment, acquisition and policing in the Balkans. But will there be a backlash?
In Romania, Linux users disgruntled at the loss of GeCAD are being enticed by a local rival, Romania's other anti-virus firm, Softwin which produces security software called Bitdefender.
According to British tech site theinquirer.net, Softwin has capitalized on the anti-Microsoft mood by offering former Linux users of GeCad's RAV software "...a 60 percent discount if they switch to Bitdefender antivirus. A banner on their home page states: "Bitdefender will never let you down," clearly a punch at RAV's sale to Microsoft."
This goes to show that some Romanians, apparently, could detect the element of absurdity in US Ambassador H.E. Michael Guest's comments of June, when he dubbed Microsoft's hostile takeover as a prime example of US-Romanian "partnership" and "bilateral trade."
Disgruntled European competitors and consumers are an obstacle, but an eminently surmountable one. For Microsoft, the more serious backlash is on the highest levels. On Wednesday, the European Commission threatened potential fines of up to 10 percent of the company's worldwide earnings- $3.2 billion. The EC reiterated longstanding complaints over Microsoft's monopolistic behavior with operating systems, and stated concern that this dominance may be extended, "...into the markets for server systems and media-player software," IDG reported.
The EC is confident it can fine Microsoft. Spokesman Tilman Lüder was quoted Wednesday as saying, "...the case we have is too strong for the company at issue to ignore."
The EC has never hit any company for the maximum 10 percent fine. However, Microsoft's competitors are optimistic. And, according to Mr. Lüder, "...the final decision is months rather than years away now."
Ironically, if the EC gets its way, software code disclosure may become an obligation for Microsoft, instead of a privilege flaunted to show its goodwill.
According to IDG, "...the Commission wants Microsoft to reveal all the software code that competitors would need in order to make their server systems as compatible with Windows as Microsoft's own server software."
Also, the EC hopes that by forcing Microsoft to stop selling Media Player together with Windows, competitiveness will be restored in the market for audio and video playing software.
Microsoft has said that it takes the EC threat "very seriously." The company has until the end of September to respond to the allegations. There has been surprise from some that the EC seems to be getting tough on a case thought to be dead. For its part, Microsoft will no doubt fight back. But what if it loses? Could the European campaign become Microsoft's Waterloo?
No matter what happens in the big picture, however, Microsoft is wasting its time if it thinks it can coax Balkan residents to start buying licensed software.
