Saturday, October 20, 2012

How Netscape changed the world

Netscape Time: The Making of the Billion-Dollar Start-Up That Took on MicrosoftNetscape Time: The Making of the Billion-Dollar Start-Up That Took on Microsoft by Jim Clark

The stock market flotation of Netscape in the summer of 1995 made all the front pages and network news shows, alerting anyone who hadn’t been paying attention, to the dot com boom. As a promising startup, Netscape Communications had it all: based in Silicon Valley, a few months old, its assets the work of a bunch of geeks straight from college, expanding fast, not making a profit and giving away its product to ordinary consumers. And its product was a browser – whatever that was.

In 1995, if you thought all that didn’t add up to a good investment prospect, it just showed you didn’t ‘get it’: those in the know would explain that the internet worked under different rules and if you were too concerned about a company’s balance sheet, you were going to lose out. On its first day on the stock market, Netscape shares doubled in price, valuing the company at $2.2 billion.

Microsoft was distracted by the launch of its new operating system, Windows 95, and had to play catch up in the browser market. But Bill Gates was soon ready to take on Netscape with Microsoft’s own Internet Explorer browser. The tactics used to do so led to a protracted case against the company brought by the Department of Justice – the one in which Bill Gates’ sulky videotaped deposition cast him and Microsoft in a new and less glamorous light. Along with Gates' brilliance and unimaginable wealth, there was anger and stubbornness too.

Jim Clark invented Netscape Communications. He had already founded the successful Silicon Graphics company (SGI). He had fallen out with its CEO and been left, bitterly, on the sidelines, disagreeing about the direction the business should take.

Netscape was his revenge on fate: this time he would fund the company himself so nobody could second guess him. He would hitch his wagon to the emerging internet and would sign up Marc Andreessen and a bunch of his student friends, and have them reproduce the Mosiac browser they had just written at the University of Illinois.

Netscape Time is Clark’s own account of all this. If you have read Michael Lewis’ The New, New Thing, about his encounter with Clark a few years later, you may be disappointed. The narrator of Netscape Time isn’t quite the colourful, extravagant character painted by Lewis. Here, Clark appears reasonable to the point of dullness. And he is disappointingly discreet about those around him. Andreesen, in Clark’s account, is a techy genius and full of good sense. Some of his fellow programmers have eccentric haircuts and a love of pizza and remote controlled cars, but somehow they don’t exactly come to life, except in an utterly stereotypical way.

And there isn’t much detail about what Netscape Communications was trying to do, or why, ultimately, it failed – except to say that Microsoft’s sharp practices made fair competition almost impossible.

I read the book after enjoying Charles Ferguson’s account of dealing with Netscape for his software business Vermeer Technologies (in his High Stakes, No Prisoners, which I wrote about here.)

Ferguson gives a convincing account of why he believes Netscape blew its early advantage over Microsoft through a series of technical mistakes and failures in software architecture. He had the impression that Andreesen and his fellow programmers weren’t properly managed by the more experienced people Clark had brought from Silicon Graphics. And he thought that Netscape’s CEO, Jim Barksdale, had no real interest in the details of technology, only in business.

But Clark’s book doesn’t throw much light on any of this. The only technical detail Clark shares with his readers - repeatedly - is that the browser Andreessen made for Netscape was “ten times faster” than the original Mosaic browser. As to how it would integrate with other software or how Netscape was making money from it, we’re left to guess (although he does describe the financial side of his negotiations with some big telecoms companies). It’s hard to say whether Clark or his publisher decided that anything vaguely technical would put readers off, or whether that really wasn’t Clark’s interest either.

The most vivid episode, because it’s described with enough detail to draw you into the story, is Clark’s battle with the University of Illinois and Spyglass, the company to which the university had licenced Mosaic. Through some fancy legal footwork, involving the closure of offices at different times in different time zones, Clark orchestrated his way out of being sued by Spyglass for unauthorised use of the intellectual property behind Mosaic (even though he had carefully made Andreessen and his colleagues rewrite the code from scratch at Netscape).

The battle with Microsoft, ultimately more important for the fate of Netscape, is less well covered, partly because the Department of Justice case was still being heard at the time of writing. As in Ferguson’s book, the figure of Gates is a huge force, slightly off stage in both accounts, but still influencing events, even if only because others were wondering what he’d do next. As Clark puts it, “Microsoft’s huge advantage changes the shape of the industry itself, in the way the gravitational pull of some huge celestial bodies actually warp space and time.”

Clark makes a good intellectual case for the breakup of Microsoft, which was being seriously discussed as part of the DoJ case. It never happened, but what did – just as the book was being finished, I’d guess – was the sale of Netscape to America Online in November 1998. Clark optimistically describes Netscape as now being a “portal company”, through its Netcenter. But unfortunately, no other software from Netscape ever matched the firework, both financially and technically, that its browser had been.

In the New York Times report of Netscape’s IPO, one can see just how much we now take for granted was still new: in August 1995, the Times still feels it necessary to refer to “the global computing web known as the Internet.” There was much important stuff that Clark was prescient about: he put the internet and business together to form a vision of a “revolutionary communication medium to grease the skids of consumerism and commerce”. He saw potential that others hadn’t yet recognised and acted upon it, with his own money.

Both Clark and Ferguson’s stories end on a downbeat note: they are both richer – much richer in the case of Clark – but their creations, software companies both, have failed to grow up as independent businesses (Ferguson’s was sold to Microsoft). But although we now know that Microsoft wasn’t broken up, the pessimism Clark and Ferguson feel about its inescapable dominance doesn’t hold any more. Apple, pretty much written off in both books, is resurgent, with a larger market cap than Microsoft (try telling that to anyone in 1998). And other internet businesses, notably Google, have shown that Microsoft can no longer exert the kind of “gravitational pull” that Clark describes.

Netscape did something big, pointing the way to our future, thanks to Clark. It was a firework worth building - however quickly it burnt - and worth remembering.

Here is a good, independent Netscape timeline.

Sunday, October 7, 2012

The undermining of IBM

Computer Wars: The Fall of IBM and the Future of Global TechnologyComputer Wars: The Fall of IBM and the Future of Global Technology by Charles Ferguson

With hindsight, tech change looks like a story of serial revolutions. But at any one time, things seem pretty stable and it’s surprisingly hard to spot those revolutions until they’re part of history.

Today, for instance, Apple is pre-eminent, Google appears untouchable, Facebook is looking for a way to turn massive popularity into massive earning power, and Microsoft is still raking it in but needs rather badly to have its Windows Mobile deal with Nokia come good.

Meanwhile, smartphones and tablets are tilting usage away from desktops and laptops. And, as ever, computing power and speed keep on improving. On the face of it, it’s hardly a world in chaos.

But rewind to 1993, less than 20 years ago, and you can see how far we’ve come: the landscape would be all but unrecognisable to someone who was only familiar with today’s players.

There was one massive company around which the whole industry revolved: IBM. By 1993, it was in crisis, making huge losses, but it was still almost impossible to imagine a computer business not dominated by IBM. Its strength had come from its mainframe and minicomputer divisions, although it had launched its phenomenally successful PC more than a decade earlier.

One of Bill Gates more profound observations is that "we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten." Charles Ferguson and Charles Morris’ Computer Wars (1993) is a test of that – as they look forwards from their point in time. The book’s subheading is “The Fall of IBM and the Future of Global Technology" - and indeed the book is both history and futurology.

Its most entertaining sections are undoubtedly those that look back, dealing with IBM’s problems. The authors are forensic and merciless in their analysis of how Big Blue fell off its perch, or rather, how Bill Gates helped tip it off. Gates’ reputation, still two years ahead of the triumphant launch of Windows 95, was already well established. The authors describe him as “the most respected and feared man in the computer industry – and the most hated.” But they give his ideas a good write-up, which stands the test of time:

“Software is the democratizing trumpet that is blowing down the walls of mainframe computer centres. It is the nexus between people and machines; humanize the software, Gates argues to anyone who will listen, and the industry’s potential is limitless – and who controls the software controls the industry.”

That was the strategy that was building Microsoft. IBM was Gates’ most important customer, but he was ruthless in pursuing his contractual advantages to allow him to sell his software to the so-called clone PC manufacturers. That meant that as Microsoft kept improving its software, the PC industry increasingly revolved around it rather than IBM. But IBM was so riven by internal feuds and management failures that it didn’t even realize what Gates was doing to it.

Microsoft sat between the chip manufacturers, principally Intel, and the computer makers. Over the years, its irreplaceability to the parties on either side allowed it to grow its profits while the rest of the industry was forced to compete to the death and operate on wafer thin percentages.

The authors’ look into the future is no less interesting than their account of recent history, albeit, understandably, less accurate. The flotation of Netscape was only two years ahead, and the Worldwide Web had been invented two years earlier. But there is no mention of the internet in the book. Instead, there’s talk of “interactive, multimedia computers” and “home multimedia stations”, which would receive content over the air, through fibre optic cables or tapes and CDs. The assumption was that this would be driven by the entertainment industry. But there’s also a vision of a more familiar world: “home catalog shopping and price comparisons would become the norm.”

And there’s a rather remarkable prediction of tablet computing: “most people cannot envision replacing their morning paper, or a good book, with a session at a video terminal. But once a home display station was the size and weight of a magazine, with magazine-picture sharpness and complete, cordless portability, the objections should disappear.”

While the book’s industry analysis correctly predicts the future dominance of what it calls ‘the Silicon Valley model’ (in which it includes Microsoft and Intel), as opposed to the big industrial businesses like IBM and the Japanese computer manufacturers, there is no hint of businesses such as Yahoo! or eBay – companies offering services online, rather than selling products through retail channels or subscription. But hardly anyone else saw that coming either.

After completing the book, Charles Ferguson showed he understood the business far better than most consultants and commentators – by starting a business to develop software (Frontpage), and selling his business to Microsoft. It’s the tale he tells entertainingly in his High Stakes, No Prisoners - so entertainingly that I went to find this earlier work, which is written with the just same intelligence and pace.

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