IT Management, Microsoft, and "fair dealing"
As has been amply demonstrated in antitrust lawsuits, Microsoft plays hardball. As long as they remain on the legal side of the line, that is their perogative.
Individuals may buy Microsoft products if they wish, no matter what the financial consequences might be.
Corporate directors, officers, and agents, however, are held to a stricter standard. They must demonstrate "fair dealing", and loyalty to their corporations rather than to personal gain. There is growing evidence that at least some officers and agents have made pro-Microsoft decisions which do not meet these standards.
What might a CIO or IT manager gain from illegally favoring Microsoft products? Following the career path of Rick Belluzzo, we see:
In other words, as long as you are willing defer payment until you can "come in from the cold", there may be substantial rewards for making pro-Microsoft decisions. Proving (in court) a pattern of abuse would of course be difficult. For now we are establishing the plausibility of such abuse, so that the courts will take the follow-on arguments seriously.
This is analogous to the problem of "revolving door" employees in positions of responsibility in government. The legal argument here will have to target fair dealing under corporation law instead of under governmental/public service law, but the basic structure of the investigation will be the same.
As with governmental revolving doors, the pot of gold might not be at Microsoft itself, but at a Microsoft-financed ventures elsewhere. For example, Microsoft invested in Anderson Consulting. AC responded by pushing its staff of consultants to MCSE certification and committing to Microsoft products. Shortly thereafter, several CIO-level Boeing IT managers (who had pushed Boeing very hard toward Microsoft) moved to AC.
First, it is essential to Microsoft to lock-in corporations via proprietary formats, and thus lock-out *NIX (UNIX, LINUX) alternatives. Microsoft takes this seriously:
One can therefore expect to see corporate IT deriding (without adequate cost-benefit justification) *NIX solutions to corporate IT needs. We will look for evidence of this. For example, one particular study has been touted by Microsoft in many languages. The study took place at Boeing, headquartered near Microsoft's own headquarters.
Here is the english rendition. A careful reading shows the comparisons were made to antique voice and PROFS communications mechanisms, not contemporary alternatives such as Lotus Notes.
Is there any evidence that Microsoft and Boeing IT management collaborated on such a maneuver? See Microsoft's_Might, from BusinessWeek, 1998.
Example: Boeing. A few months before the Exchange launch, Boeing officials told Microsoft it probably wasn't going to get the business but gave it four days to convince Boeing otherwise. Microsoft Executive Vice-President Steve Ballmer convened an emergency meeting of sales and engineering people and launched a 72-hour, round-the-clock strategizing and software coding binge. The result was a plan and software that convinced Boeing that Microsoft could make Exchange run well on Unix-based computers sold by its competitors, not just Windows machines. The result: Boeing is Microsoft's biggest customer for Exchange, with 100,000 copies installed already and on the way to perhaps 215,000.
That's odd...Exchange still doesn't run on *NIX. Clearly, Boeing was taken for a ride on that one. As they say
Fool me once, shame on you. Fool me twice, shame on me.
In other words, Boeing has lost the legal position to claim that handshake deals with Microsoft can be explained as "business judgment". Decisions favoring Microsoft over alternatives must now be based on an auditable cost-benefit analysis. Anything less must be considered "inexplicable" misuse of public traded stock value.
Now that the question has been raised, just what are the relationships between Boeing IT and Microsoft? Beyond lucrative sales, what does Microsoft get from such efforts?
Microsoft needs a Fortune 100 corporation for alpha/beta testing its forays into enterprise-scale computing. Boeing is conveniently a few miles away. Is Microsoft using Boeing as a testlab? if so, does Boeing get a net positive return from the arrangement?
I have not found a publically visible website explaining any benefits to Boeing from this arrangement. Certainly no reporting line in the annual report for "revenues from services as alpha/beta test site". Rumors from inside the company certainly suggest that the costs of e.g., Melissa and LOVEBUG viruses have been high.
One must thus suspect the plausibility of questionable dealings from Boeing's upper echelon of IT management.
Is there any reason to believe Microsoft is not in fact the best technical and financial solution? In other words, couldn't these decisions be honest business judgments? Please see:
In other words, choosing Microsoft over, say, UNIX is not a simple matter. A fair dealing IT manager must do an appropriate cost-benefit analysis. Given the legal analysis of the NASA situation, we can consider absence of such analyses to be prima facia evidence of unfair dealing.
Let's suppose we determine IT managers have in fact made illegal deals with Microsoft. Do higher level officers and even directors have legal liability? They do if they are informed of the problem or the reasonable potential of the problem, and have failed to take reasonable and prudent corrective action.
First, given the high visibility of the Microsoft antitrust cases, and the explicit testimony of corporate pressure, no U.S.-based director or officer can claim ignorance of the possibility and even plausibility of the problem.
Second, a reasonable and prudent response is to:
Frankly, no one expects directors and officers to expose themselves to these charges, so it will probably be up to external agents (e.g., CALPERS) to force the issue. Government contracts can also be held up pending resolution of such issues.
Teddy Roosevelt on fair dealing, 1925
And in every case the individual corporation officer responsible for such unfair dealing should be punished.
2. Exclusive Dealing. Subsection (b) integrates the various bodies of law that pertain to exclusive dealing relationships in information. Unlike for goods, the typical case here does not necessarily entail production and delivery of copies for resale by the other party. Article 2-306 creates a best efforts rule for goods. That rule, however, is not the law in any other field governed by Article 2B. This Section adopts a good faith effort standard: honesty in fact and adherence to commercial standards of fair dealing. This allows courts to draw appropriate balances in light of the commercial context and the existing traditions of that context in the atypical case where the contract is silent on the issue.
From Prickett Review 20000:
3. Goodwin v. Live Entertainment, Inc., Del. Ch., C.A. No. 15765, Strine, V.C. (Jan. 22, 1999), aff'd, 741 A.2d 16 (table) (Del. 1999) - Class action by stockholder of Live Entertainment challenging the acquisition of Live by Bain Capital. Plaintiff asserted unfair dealing and breaches of care and loyalty and claimed that defendants failed to satisfy entire fairness standards.
The presumptive validity of a business judgment is rebutted in those rare cases where the decision under attack is "so far beyond the bounds of reasonable judgment that it seems essentially inexplicable on any ground other than bad faith.
Which cites: In re J. P. Stevens & Co., Inc., Del.Ch., 542 A.2d 770, 780-81 (1988).
Creator: Harry George