Penfield-Jackson's revenge? For Silverlight (and Microsoft) to succeed, must Microsoft break itself up?

By now, you can't have missed the news about how Microsoft has officially given the name "Silverlight" to its Windows Presentation Foundation/Everywhere (WPF/E) platform.

By now, you can't have missed the news about how Microsoft has officially given the name "Silverlight" to its Windows Presentation Foundation/Everywhere (WPF/E) platform. If the coverage you read didn't just report the news, it probably drew attention to the theoretical battle that looms between Microsoft and the incumbent Adobe (with Flash, and now, Apollo) when it comes to offering cross-platform runtimes for RIAs ("Rich Internet Applications" if you're Adobe and most everyone else, "Rich Interactive Applications" if you're Microsoft).

Silverlight may indeed be the gauntlet that many are making it out to be, but I'm not here to debate its technical merits. As a supplier of technology and a business partner to its customers, the incumbent Adobe still has one very important thing going for it: the company's customers shouldn't expect Adobe to be competing against them anytime soon.

Should Microsoft consider breaking itself up in such a way that its online division is a completely separate company?

Meanwhile, to the extent that Microsoft plays host to one of the big four Internet destinations and search engines on the Web, and to the extent that its destinations are competing for the same eyeballs that many of Silverlight's potential customers are (Silverlight is especially useful to operators of Web sites), it'd be tough to argue with those potential (or current) customers if their preference wasn't to be acquiring their technology from a competitor.

I can't even remember how long ago it was -- sometime around the days of the Liberty Alliance first taking off -- when Sun's Jonathan Schwartz (who was neither CEO or COO at the time) was preaching that buying your information technology from Microsoft equated to (or would eventually equate to) buying your information technology from your biggest competitor. As Schwartz said it, if Microsoft isn't already competing against you, it eventually will and who wants to do business with an IT supplier like that?

But what are the risks of using technology from a company that could also turn out to be your competitor?

At the time, the Microsoft technology in question -- the one that many where thinking about using -- was a single sign-on technology that Microsoft called Passport. As a single set of electronic credentials for which Microsoft was the safeguard, Internet users with a Microsoft Passport could easily skate past any Passport-compliant site's login screen without having to constantly re-enter those credentials. But like Paul Revere sounding the alarm, Schwartz was like a one-man wrecking ball warning the industry that Microsoft was not to be trusted when it came to Passport. Schwartz would routinely ask if companies wanted a potential competitor to not only be in charge of customer data, but also in charge of their online security. For example, between MoneyCentral and Microsoft Money, the company offers locally hosted and online personal finance solutions that compete with those offered by other financial institutions. Would adoption of Passport have been a risk that those other financial institutions couldn't afford?

Schwartz argued yes. Microsoft argued no.

But before we had a chance to find out, Microsoft succumbed to the industry pressure and pretty much scuttled its ambitions for Passport. Last year however, the hypothetical scenario Schwartz was describing may have surfaced for real when the Redmond-based software company launched its Zune brand. Like the way Apple's iPods work with iTunes, Zune is a portfolio of Microsoft-offered products (portable music and video players) and services bound to each other by a proprietary digital rights management (DRM) solution that cannot be licensed by third party device manufacturers or online merchants of video and audio content. Third parties get to participate in the Zune ecosystem, but more as the supporting cast of characters. Not in the mainline goods and services.

Zune's DRM is different from the DRM solution that Microsoft had previously offered to the marketplace, known to most as PlaysForSure. Like with Windows, The idea behind PlaysForSure was that Microsoft would license the DRM technology to third party content merchants and device manufacturers alike. Say what you will about DRM technology itself, compared to the way Apple runs its business, at least the PlaysForSure ecosystem gave consumers choice. Not only could they could chose from among the many PlaysForSure-compliant sources of content (eg: AOL Music, Yahoo Music, Napster to Go, etc.), they could also choose from a growing list of PlaysForSure compliant devices from companies like Creative and iRiver. 

But when that strategy's protency proved to be too little too late to compete with Apple, Microsoft launched Zune and put itself into direct competition with its own customers: the PlaysForSure licensees. It was bad enough that those licensees had to combat the Apple juggernaut. But with Microsoft CEO Steve Ballmer saying in public that his company is committed to Zune's success and is prepared to go the distance, PlaysForSure licensees had to have felt as though they'd been stabbed in the back by their technology supplier.

The Zune chapter in Microsoft's history is evidence that, in the best interests of its business, the software company is prepared to change gears and make technological decisions that could benefit current (or planned) proprietary offerings at the expense of its customers. I'm not writing this piece to advise potential Silverlake customers to reconsider their decision. It's more that I simply can't imagine a CTO out there that's worth his or her salt that isn't already aware of this and that would turn a blind eye to this history before considering adoption of the Silverlight platform. 

Microsoft must realize the precarious position that it is now in. I hadn't considered it until yesterday, when scanning the work of my fellow ZDNet bloggers, I saw Ryan Stewart's coverage of Comcast and how it selected Adobe's Flex 2 for media content and Dan Farber's coverage of how has added support for Adobe's Flex to its Apex environment. Then, I recalled how eBay is using Adobe's platform to build a rich user experience -- codenamed San Dimas -- for its online auction site. There's at least one commonality to the companies that are selecting Adobe's platform: Microsoft is a competitor. Both Microsoft and Comcast run major online portals through which Internet users can consume entertainment content and do things like send or receive email. Salesforce and Microsoft will be going head to head with each other in the hosted CRM business. eBay and Microsoft are competitors in the online shopping space, not to mention how Skype competes with Microsoft's VoIP services.

I'm sure there are many other examples (feel free to offer your own using the comments below). But the question this raises for Microsoft is whether it is best served by its current organizational structure, or, whether it should consider breaking itself up in such a way that its online division -- the one that many potential Microsoft customers may view as a competitor -- is a completely separate company, fully divorced from the strategies and plans for platforms like Windows and Silverlight.

I doubt very much whether any such restructuring will ever happen and I'm not for a minute suggesting the DOJ should revive Thomas Penfield-Jackson's idea of breaking the company up. But wouldn't it be ironic if one day, the company realizes on its own that breaking itself up might be the best thing to do. 

Update: To address the comments I've been receiving on this post, I've written an update.