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DIRECT TESTIMONY OF JOHN SOYRING
I. BACKGROUND
1. I joined IBM
in 1976 and have, since then, held a variety of positions. I am
currently Director of Network Computing Software Services, which offers professional
consulting, design, application development and product-specific services to large enterprises
for
the purpose of developing and deploying mission-critical business applications using IBM's
e-business technologies.
2. Over the past
ten years I have held, among other positions, the position of Director
of IBM's Programming Center in Austin, Texas, in charge of the development of IBM's
OS/2
family of products as well as IBM Data Base Management Systems, local and wide area
communications products and distributed systems management products. I have also been
the
Director of OEM Sales for PC software products, including OS/2, and I have been in charge
of
strategic relations for IBM's Personal Software Products Division, which included
relationships
with independent software vendors for OS/2 and product development.
3. I hold a
Bachelor's Degree in Electrical Engineering from Michigan Technical
University, and I have completed graduate studies at the University of Minnesota and the
State
University of New York in Electrical Engineering, Computer Science and Business
Administration.
II. THE IMPORTANCE OF
APPLICATIONS
4. IBM
introduced its personal computer, dubbed the "IBM PC," in 1981, and over
time the industry adopted the term PC to refer to IBM and IBM-compatible personal
computers
that operate on Intel or Intel compatible microprocessors (hereafter referred to as "PCs").
In
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1987, IBM introduced its OS/2 operating system for PCs. Since its inception, IBM has
enhanced
OS/2 with expanded functions and capabilities on an ongoing basis, and it continues to do
so
today. Between 1987 and today, IBM has invested hundreds of millions of dollars on OS/2
research, development, distribution and marketing.
5. Despite this
enormous effort, OS/2 has not enjoyed broad commercial success,
particularly with regard to consumer or home PC users. According to IDC, in 1996, OS/2
accounted for approximately six percent of the PC operating systems sold worldwide. By
contrast, the same report concludes that, in 1996, Microsoft Operating Systems including
Windows (Windows 3.1, Windows 95, Windows 98 or Windows NT client operating
systems,
referred to below collectively as Windows) and Microsoft DOS accounted for
approximately
ninety-two percent of PC operating systems sold worldwide.
6. Customers
purchase PCs in order to run application programs, which are particular
software products that allow users to do the things they want to do such as write letters or
handle
their personal finances. Many important applications designed to run on Windows have not
been
made available in versions designed to run on OS/2 or have only been made available with
limited
function or significantly later than the Windows version of the same application. Examples
include popular games, leading desktop publishing applications, and office productivity products.
This unavailability of applications has been an important reason for OS/2's relatively limited
acceptance. For an application to operate properly on an operating system, it must be designed
to
work with the main interface (Applications Programming Interface, or "API") between the
particular operating system and applications. For example, "Win 32" is the main API for
Windows 95, Windows 98 and Windows NT.
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7. Many
companies, referred to in the industry as Independent Software Vendors or
"ISVs," develop and offer many different types of applications. Because the API is not
standardized, but varies significantly from operating system to operating system, usually
applications are developed for a particular operating system. ISVs usually develop
applications
that will run on the most widely used operating system. This gives them the greatest
opportunity
to make sales, recover their costs and make the most efficient use of their limited
development
resources. Once an application has been developed for a particular operating system,
significant
modifications must usually be made for that application to operate on any other operating
system
-- and
those modifications must then be thoroughly tested. This process is known as "porting,"
and can be both costly and time consuming. In addition, there are other substantial costs
involved
in offering a product on another operating system which may be even greater than the
porting
costs, such as marketing, distribution, sales, support and maintenance. Software companies
will
decide to incur such costs only if they anticipate enough users of the other operating system,
and
therefore, enough potential purchasers of their application, to justify this investment. This,
in
part, explains why there are not more applications for OS/2.
8. In addition to
these costs, certain terms in Microsoft agreements make it more
difficult to port applications developed for Windows to OS/2. Specifically, many of the
agreements under which Microsoft licenses tools (software products ISVs use to develop
applications) to ISVs restrict use of the tools to developing for Windows. Thus, ISVs, who
develop applications first for Windows because of its huge install base, may not be able to use
the
same tools to develop applications for OS/2. In addition, in order to simplify and reduce the
time
and resources required by an ISV to develop an application for Windows, Microsoft has
included
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with its tools certain software (referred to as "redistributable code") that can be included in
ISVs'
applications. This code cannot be used in OS/2 applications because of restrictions imposed
by
Microsoft. This Microsoft redistributable code can be so integrated into an ISV's
application
that, in order to port the application from Windows to OS/2, the ISV has to recreate much of
the
application from scratch. This makes it less likely that an ISV could justify the cost of
offering
the application on OS/2.
9. These
circumstances have resulted in OS/2 being caught in a vicious cycle. First,
the limited number and type of OS/2 applications has resulted in a limited demand for OS/2.
That, in turn, has meant that relatively few PCs are shipped with OS/2, and that the installed
base
of PCs with OS/2 is relatively small. This relatively small base of OS/2 installations has
further
reduced the incentive for application developers to spend the resources necessary to port
their
existing applications to OS/2 and to then offer and support them on OS/2. At the same time,
the
restrictions Microsoft has placed in certain of its tools agreements, as I have described
above,
have helped ensure that porting applications from Windows to OS/2 continues to be a costly
and
time-consuming task. All this has resulted in fewer and fewer new applications being offered
on
OS/2. This self-perpetuating cycle has reduced the demand for OS/2.
10. Microsoft, on the other hand, has benefited from
a converse cycle that also tends
to be self-perpetuating in the absence of some industry advance that undermines it. The
large
installed base of Windows has encouraged ISVs to develop a large number of applications
for
Windows, which has led to increased demand for Windows. This, in turn, has further
increased
the incentive for ISVs to develop applications for Windows. In fact, users, ISVs, and PC
suppliers - recognizing the opportunity offered by Windows' large installed base - know that
the
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most popular applications will be written for Windows. In fact, given the relative size of the
Windows installed base, no PC application can achieve wide distribution - that is, be a "best
seller" - that is not offered on Windows. Another effect of this cycle is that manufacturers
of
devices, such as printers and graphics cards, tend to focus their resources on ensuring their
products work with Windows (often to the exclusion of other operating systems) because of
the
demand for Windows and the number of applications available on Windows. By contrast in
OS/2's case, we have had to pay manufacturers to ensure their devices work with OS/2.
This
results in a further ongoing advantage for Windows.
11. As a result of the applications and device support
for Windows, in my view,
suppliers of PCs have no commercially viable choice but to license Windows and to offer it on
the
vast majority of PCs they ship. Not only OS/2, but none of the other operating systems
available
for desktop or mobile PCs (for example, PC DOS, DR-DOS and Santa Cruz Operation's
("SCO") Unix), are shipped in any appreciable quantity. PC suppliers cannot reasonably
base
their businesses on these alternatives, due, in large measure, to the lack of applications and
device
support. In fact, even though IBM popularized the PC and co-developed OS/2, IBM's own
PC
Company offers Windows with the desktop and mobile PCs it sells, and it has done so since
the
early 1990's. Today, IBM's PC Company does not ship OS/2 preloaded on the current models
of
its PCs in the United States. The PC Company has offered Windows despite the fact that,
at
various times, OS/2 has enjoyed technological advantages over Windows in a number of areas.
For instance, OS/2 Warp Version 3 offered 32 bit capability, multi-threading, and
symmetrical
multiprocessing support prior to the introduction of similar capabilities in Windows.
12. As I have mentioned, according to IDC,
Windows and Microsoft DOS accounted
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for roughly, ninety-two percent of all PC operating systems sold in 1996. Given Microsoft's
application advantage that I described above, I do not expect the installed base or shipment
percentages for Windows to decline with the advent of Windows 98.
13. Today, Microsoft's enormous installed base,
along with the wealth of applications
and hardware device support for Windows, noted above, makes it difficult for IBM or any
other
company to successfully offer a new operating system for desktop and mobile PCs. Any
company
that attempted to do so would have to invest an enormous amount of money and time on
development, marketing, and support. Given the price the company could expect to receive
for
each license of its operating system, the company would have to "sell" tens of millions of
copies
of its new product to recoup its cost. The task would be easier if there were some
reasonable
way to ensure that all the applications now on Windows would run on the new product.
Unfortunately, there is not. Microsoft does not provide on a timely basis the information
that
would be required. The operating system developer would have to find some way to
duplicate
the function provided by the Windows APIs without being accused of violating Microsoft's
license agreements and intellectual property rights. And once again, the restrictions
Microsoft
often imposes in its tools agreements would come into play. ISVs can not market those
applications that include Microsoft redistributable code for use on other operating systems.
Based on our experience with supporting some Windows APIs on OS/2, supporting
Windows
applications on another operating system would be an expensive and time consuming process.
As
Microsoft ships new releases of Windows, APIs are changed and added. In total, the number
and
complexity of the Windows APIs has increased significantly over time--there are now
several
thousand. Not only is it difficult to reliably duplicate the function of each API, another
company
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can not realistically duplicate the function of all of the APIs since Microsoft continues to
introduce new APIs. Applications will not work correctly if they use APIs whose functions
have
not been duplicated. Therefore, there will always be a risk that some application important to
a
user now--or in the future--will fail. This uncertainty places a heavy drag on any chance for
long-
term success. Given the expense, time and uncertainty involved, I do not think supporting
Windows applications on another operating system for desktop or mobile PCs offers any
reasonable opportunity for a positive financial return, and I would not recommend that IBM
attempt to provide additional support for Windows applications in OS/2.
III. BROWSERS
14. From late 1994 to September 1996, IBM offered
its own web browser, Web
Explorer for OS/2. IBM offered Web Explorer as an application program a user could install
on
OS/2. From the initial shipment of OS/2 Warp 3 in October of 1994, Web Explorer was
available
for download at no charge from the Internet to users of Warp. Starting in April 1995, Web
Explorer was included in the OS/2 Bonus Pack, a set of applets (small, limited function
applications) shipped on a separate CD in the box with Warp at no additional charge. Users
could
install any or all of the applets as they chose. Users always could choose to install Web
Explorer,
any other web browser which runs on OS/2 in lieu of (or in addition to) Web Explorer, or no
web
browser at all. The alternative chosen by the user had no significant effect on the function
or
performance of the underlying OS/2 operating system.
15. In 1996, IBM began to offer the Netscape
"Navigator" browser as an application
for OS/2. IBM chose to offer Navigator on OS/2 rather than offer a browser from Spyglass
which would have also run as an application on OS/2. IBM chose to offer Navigator because
it
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was the leading brand of browser at the time and because IBM had received specific
customer
requests for an OS/2 version of Navigator. Navigator had features not available in Web
Explorer,
such as frames support, which allowed a user to view Internet content in a more productive way.
Navigator was offered as an application for OS/2 at no additional charge despite the fact that
IBM
paid Netscape for the right to do so. As was the case with Web Explorer, users could choose
to
install or not to install Navigator, and to use another browser or no browser at all. The
alternative
chosen by the user had no significant effect on the function or performance of the underlying
OS/2
operating system.
16. The browsers offered with OS/2 have always
been offered as separately installable
applications--they have never been integrated into the OS/2 operating system. The Web
Explorer
browser IBM included in the box with OS/2 in 1995 was on a separate CD, the OS/2 Bonus
Pak.
In the case of all browsers IBM provided for OS/2, users had the option of installing
browsers
other than IBM's; installing no browser or of installing any browser available for use with OS/2
in
lieu of (or in addition to) Navigator. The alternative chosen by the user had no significant
effect
on the function or performance of the underlying OS/2 operating system.
17. Although many customers licensing IBM's OS/2
operating system use browsers in
conjunction with the operating system, some customers do not. I am aware of some
customers
who request that browsers not be installed with their PC systems. In some instances,
hardware
constraints in terms of disk space or processor size require a customer to prioritize which
applications should be used, and a browser is not as important to them as other applications.
In
other cases, enterprise customers want to control the applications which can be used by
employees in the enterprise, and do not want employees to spend time "surfing the Internet."
As
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another example, some enterprises use OS/2 for specific purpose systems for which browsers
are
not required, such as systems used by baggage handlers or bank tellers.
18. As I've explained above, IBM's Web Explorer
browser for OS/2 has consistently
been offered as an application which can be used with OS/2. And, in addition, IBM has made
it
possible for OS/2 users to select Navigator and run it as an application on OS/2. It is clear
from
this history that IBM has not found it necessary technically to integrate the browser with
the
operating system - the browser works well running on the operating system like any other
application.
19. Just as IBM has treated Web Explorer and
Navigator as separate from OS/2,
Microsoft itself has at certain times treated Internet Explorer as separate from Windows. In
the
fall of 1997, Microsoft held a major public relations event to introduce Internet Explorer 4,
independent of Microsoft's promotion of Windows. The first shipments of Windows 95 for
retail
sales did not include Internet Explorer, which was added some time later. Microsoft offers
a
version of Internet Explorer for use with Apple's operating system.
IV. CAPABILITIES OF PC
SUPPLIERS
20. PC suppliers generally have sophisticated skills
with respect to both hardware and
software and are capable of performing complex tasks, including integration of software
products
for use on their machines. Major PC suppliers have significant software staffs which
include
skilled programmers. Often these programmers have been trained in software companies.
For
instance, I am aware of programmers and other technically skilled individuals who worked in
the
development of OS/2 and who subsequently left IBM to work on software related activities
for
PC suppliers. PC suppliers employ this highly skilled staff in numerous ways. For instance,
PC
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suppliers create complex programs, known as device drivers, which enable and control the use
of
other devices with their machines. Device drivers are important because they can provide
the
machines with better performance and/or increased capability which can provide product
differentiation for the specific PC supplier. Another example is the development of software
to
provide specific function for the system, such as enhanced system management and
configuration
capabilities, and installation routines. A third example is the providing of support to users.
Software suppliers often provide better pricing to PC suppliers if the PC supplier responds to
the
support calls from customers and handles the initial analysis of potential problems. This
activity
can range from simple to very complex and can even involve review and analysis of the
source
code for the software involved.
21. These examples of software activity commonly
executed by PC suppliers require
more technical expertise than the process of loading and configuring applications onto the
suppliers' machines. PC suppliers, therefore, generally have ample ability to include
applications
such as a browser with an operating system and load this combined set of products on their
machines.
22. In fact, suppliers of PCs generally install and
configure operating systems and
applications, such as word processors, spreadsheet programs and popular games, on their
machines prior to shipping them to their customers. Similarly, they can install browsers on
the
operating system on machines they ship, so long as they are given appropriate information by
the
browser supplier and are given any information specific to the particular operating system
involved by the browser supplier or the operating system supplier.
Page 11 V. SOFTWARE
DESIGN / INTEGRATION
23. As a general matter, because of the nature of
software and software design, a
software developer can choose to combine or separate any two (or more) software products
or
functions. And if the developer chooses to combine such products or functions, it can be done
in
ways that make it relatively easy or relatively difficult to separate them. There will always
be
some arguable advantages and disadvantages to combining any particular software
products.
24. More particularly, when a software developer
decides to implement a function,
because of the nature of software, the function can be done in a number of ways, for example:
(1)
multiple functions can be combined in a single application that runs on an operating system,
(2)
functions can be allocated between applications and the operating system, and/or (3) functions
can
be combined with, that is, "integrated" into, an operating system regardless of whether such
combinations create any benefits to customers. This distribution of function between
applications
and the operating system is influenced by numerous factors, and the same function can be
implemented in different ways depending on the developer's technical and marketplace
objectives.
Also, the developer has numerous
options in deciding how tightly to integrate two programs. At one
end of the scale, two programs could be tightly integrated - even to the extent that it would
be technically difficult, expensive and time-consuming to separate them again. On the other
end
of the scale, the programs might be packaged together - that is, offered together at one price -
but
not actually integrated at all.
25. Accordingly, an operating system supplier - for
example, IBM with OS/2 or
Microsoft with Windows - generally can choose to integrate functions into its operating
systems,
and this can be done whether that integration achieves any technological efficiencies or
confers
any benefits on customers. Indeed, integration could be inefficient and disadvantageous to
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customers. For instance, integration generally increases the size of the operating system,
and
therefore, the size of the hardware required to run it effectively. In addition, it may slow the
use
of other applications, and may provide function which certain customers do not want.
26. Because of the inherent flexibility of software and
the fact that Microsoft,
therefore, has the choice to integrate (or simply package), virtually any software products with
its
operating systems -- Microsoft can achieve high volume shipments of any particular
software
function. This ability to integrate or package particular software for accomplishing virtually
any
function - even a function previously offered by other companies in applications for Windows
-
enables Microsoft to use the pervasive distribution of Windows to leverage its applications
over
the products of specific competitors. The demand for products which compete with
functions
integrated or combined with Windows for no additional charge may be reduced. In this
way,
Microsoft's actions can make it more difficult for these competitors to be successful with
their
products.
27. Irrespective of whether Microsoft combines
Internet Explorer and Windows in a
manner in which they are difficult to subsequently separate, or whether Microsoft simply
requires
the two to be shipped together, certain significant effects follow. For example, in light of the
fact
that PC suppliers, as a practical matter, must offer Windows, and Microsoft has chosen to
offer
Internet Explorer with Windows, virtually all new desktop and mobile PCs come with
Internet
Explorer. The PC supplier does not choose Internet Explorer; it is simply included. As a
result,
even if there is customer demand for another browser, the PC supplier has to consider the cost
of
the second browser. Even if the other browser supplier offers it to the PC supplier for free, the
PC
supplier will incur substantial additional costs, including additional testing, distribution and
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support costs.
28. An additional effect of Microsoft's including
Internet Explorer with Windows is
the advantage it gives Microsoft's implementation of Java technology. Java was developed
by
Sun Microsystems. The Java technology from Sun is designed to allow Java-compatible
application programs to run on a wide variety of different hardware and operating systems.
This
would provide users with the benefits of increased number of applications and would reduce
the
cost of ISVs of developing applications for multiple operating systems. This characteristic of
Java
also has the potential to undermine the Windows application advantage I've described above.
Microsoft licensed Java technology from Sun, and has released its own Java implementation.
Microsoft tuned its version of Java for Windows, inhibiting the potential for application
developers to write applications once and have them run on many different operating systems.
The reason this relates to browsers is that Netscape Navigator has been the prime
distribution
vehicle for Sun's Java technology while Internet Explorer contains the Microsoft version of Java.
Wide use of Microsoft's version of Java negates the potential that Java might undermine
Windows application advantage.
29. In the case of IBM, in addition to the decision to
provide OS/2 customers with a
version of Navigator as I've described, we made a corporate decision in 1997 for IBM units
to
ship Navigator because it included Java. Even though IBM decided to ship Navigator, the
IBM
PC Company (the part of IBM which develops, manufactures and sells PCs) also continued
to
ship Internet Explorer since it came with Windows. IBM chose Navigator. While the PC
company might have chosen to ship Internet Explorer at some point, it never had a choice since
it
is included.
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VI. SCREEN
RESTRICTIONS
30. It is my understanding that Microsoft included
provisions in its agreements with
PC suppliers for machines shipped since early 1997 which forbid the PC supplier from
modifying
the procedure by which the operating system is initially loaded (the "start up sequence"), such
as
by changing any of the screens displayed by Windows during the start up of the machine or
placing programs in the Windows startup folder. If so, these restrictions would prevent PC
suppliers from customizing the start up of windows on their PCs and from automatically
launching customized screens or "shells" to create different user experiences through changes
to
the user interface. These restrictions would also prevent PC suppliers from rearranging the
desktop in ways which remove--or move to different folders--various applications provided
by
Microsoft with Windows. Finally, these contractual restrictions would prevent PC suppliers
from
configuring their machines so that a particular application is displayed on a user's computer
screen without first displaying the standard Microsoft Windows screen when the machine is
turned on.
31. IBM has not included similar screen restrictions in
its OS/2 license agreements. In
fact, IBM promotes the fact that its "Workplace Shell" user interface is highly customizable.
IBM
allows PC suppliers (and end users) to change the OS/2 user experience in a variety of
ways,
including by adding logos to the initial screens, customizing the user desktop and
rearranging,
adding or deleting the programs in the initial screens or folders. In fact, a PC supplier could
override the entire desktop in favor of a customized desktop or could set an application to
start
automatically when the machine is turned on. The desktop may also be modified for
specific
actions, such as changes to what happens when the user clicks on a particular icon. These
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characteristics of OS/2 allow our customers to select and customize the OS/2 end user
experience
so that it will be most productive for the particular users. For instance, OS/2 systems for
bank
tellers or insurance adjusters can be set up to automatically start an application with a
custom
interface covering the user's daily activities without presenting the general OS/2 Workplace
screen. PC suppliers may replace the standard OS/2 background with their own logo or with
the
logo of a particular customer. Even the image which is displayed during the start up process
is
customizable. For PC suppliers, this flexibility allows differentiation for particular customer
sets
and permits the supplier to create a more unique look to the system with individualized logos
and
shells. I am aware that a number of our customers have in fact made such alterations.
32. IBM's licensing practices and the technical
features of OS/2 have facilitated such
changes. In my opinion, if an operating system supplier imposed restrictions such as those
described above, the operating system supplier would limit customer choice and innovation by
PC
suppliers. On the other hand, I do not believe IBM or OS/2 has been negatively affected by
our
not imposing those restrictions. For instance, I am not aware of any confusion on the part
of
users of OS/2 as a result of variations in the user experience caused by changes made by PC
suppliers, and I have seen no erosion of OS/2's goodwill because of changes such as I have
described.
33. Preventing PC suppliers from modifying the start
up sequence means the operating
system supplier, not the company that sold the user the PC, controls the initial user
experience
with the computer. Preventing PC suppliers from starting applications during the start up
sequence or deleting applications (and the icons associated with them) the operating system
supplier provides with the operating system gives the operating system supplier the opportunity
to
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ensure that its applications will be prominently displayed on the desktop of everyone using
its
operating system, on the first use of the machine.
34. As a result of the restrictions described above,
Microsoft could ensure that its
applications are always included on the Windows' desktop screen and have favorable treatment
in
this critical space compared to other applications. Given the almost ubiquitous distribution
of
Windows, Microsoft's restrictions would ensure the broad distribution--and prominent
featuring--
of whatever software Microsoft chooses to advantage on virtually every new PC shipped.
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