What's a contestable monopoly?

"No longer a monopoly", as it turns out. The estimable Tim "Mr. Scandium" Worstall gets to do the end-zone dance in The Register as his 2010 prediction about China losing its rare earths monopoly comes true:

In November 2010 I pointed out (here again) that two mines, Molycorp and Lynas, could alone provide a goodly portion of demand, replacing the Chinese production. We're in December 2012 as I write and as the first quotes show, those prices have been falling fast as the Chinese hold over supply is broken. Even to the point that the largest Chinese mine itself was closed for November of this year in an attempt to maintain prices.
Good call, Mr. W.

So the question then arises: in today's modern technology sector, are there any monopolies which can't (yet) be effectively contested?

Apple's iPhones? Nah, Samsung's shown that can be contested. Facebook's Ts&Cs? If they really get bad enough, Google+ is only a couple of clicks away. Google pleasuring company-owned results in the listings? Microsoft's "Scroogled" campaign is certainly trying to challenge that. Ebook pricing? I can't see that anyone would be able to exploit a monopoly there for any length of time: maybe on the back catalogues perhaps, but not on the new material.
In fact, in the current state of flux I'm not sure that I can see any non-contestable positions in the general computing market. There's enough VC money out there that anyone at all truly trying to exploit a monopoly position is going to face someone contesting it.
This seems like a reasonable challenge: can we identify a likely tech monopoly which can be preserved for (say) at least the next 5 years? Let's talk about Microsoft Office.

There have certainly been no shortage of challenges to Microsoft Office in the past, but it has settled down to being the de facto solution for text documents, spreadsheets and presentations in the enterprise. Its hold on email is weaker: corporate support for web-based email and calendaring like Gmail has managed to provide effective competition for Exchange and Outlook, helped by the need for any email sent externally to conform to the major content standards. Databases have to speak SQL and so you can in theory replace Access with any number of free, supported or propietary (Oracle) alternatives. But Excel is the spreadsheet format in financial industries, and Word is the de facto standard for exchanging text documents - every bloody time a recruiter has spoken to me, they've asked for my CV in Word format.

In theory it is not a particularly difficult task to write a spreadsheet program or word processing program that does nearly everything important that Excel or Word can do, and make it perform better and be easier to use than its MS Office counterparts. The problem is, though, you have to work with a massive installed base of Excel and Word users who will demand that you be able to receive, view, edit, and return their documents in their original format. Despite the availability of the binary file format information for these documents, this task still turns out to be stupendously hard. Joel Spolsky wrote a fascinating and detailed piece in 2008 on why the Microsoft Office file formats were so complicated:

It's very helpful of Microsoft to release the file formats for Microsoft and Office, but it's not really going to make it any easier to import or save to the Office file formats. These are insanely complex and rich applications, and you can't just implement the most popular 20% and expect 80% of the people to be happy. The binary file specification is, at most, going to save you a few minutes reverse engineering a remarkably complex system.
Anyway, unless you're literally trying to create a competitor to Office that can read and write all Office files perfectly, in which case, you've got thousands of years of work cut out for you, chances are that reading or writing the Office binary formats is the most labor intensive way to solve whatever problem it is that you're trying to solve.
Note how this is different from the examples of email and calendars which have been successfully challenged - email has always been open, and replacing it with a proprietary format is a non-starter. Calendars were implemented on so many non-MS devices that open formats for calendar information interchange such as CalDAV were well-established; Microsoft Outlook and Exchange had to support them in order for users' mobile phones to be able to sync calendar information. Spreadsheets and any text document with a more complex structure than RTF have never required such exchange.

Anyone trying to contest the MS document monopoly therefore has to think of better ways around it. One approach is Google Apps for Business which takes the view that, since any modern computer has a decent web browser and most businesses have good internet connectivity, why not manage not just email and calendar information but also spreadsheets, text documents and presentations on the web. Documents are stored in Google's data centers; anyone wanting to view or edit a document just needs the URL of that document (and have the author grant their user ID granted permission to access it) and can then view or edit it live online. This has several benefits, notably the saving in a company's IT costs - no need to have much document storage space, a version control system or backup pipeline, Google does all the work. It also means it's easy for several people to view and edit the same document at once. You can see how Microsoft is concerned about this selling point by its launch of Office 365 which is essentially Office in the cloud.

The two top problems which Google is going to have to tackle if it's to eat away at the MS Office monopoly are offline access and file format compatibility. If all your docs are online, and your company's Net access goes down for an hour due to a ISP problem or failed switch, all your employees are blocked from getting anything done; this is a very visible potential pain point. How to fix it? Google seem to be tackling this with some support for offline doc editing although presumably it's only good for working on docs that you were viewing before the Net connection went down. The second point is going to be the tricky one - how do you receive a Word doc via Gmail, store it somehow in a format that Google Apps can edit, edit it and then export it in the same Word format without encountering the Chinese whispers problem? It's going to be entertaining to watch how the format wars play out. Expect some manoeuvering from Microsoft if any competitor looks to be close to a fix for this.

There's a third problem regarding how to make available nearly all the functionality of Excel, Word etc. in a combination of JavaScript client code and server-side code without making the interface painfully slow to load and run, but I suspect a combination of improving client and network speeds and smart design should nail that eventually.

The hardest non-technical problem is going to be persuading the IT admins and management of companies currently running MS Office to shift to an alternative solution. Since they have likely spent most of their lives working with Office (oh, the horror!), it would be a poor career move to throw away all their accumulated expertise and adopt an office docs system where a spotty graduate knew as much as (or indeed more than) they did; any CTO worth his salt would shortly be asking pointed questions about what, exactly, these high-paid MS experts were spending their time on. I suspect that moving from MS Office is going to have to be pushed from the top down; in the short term, I expect to see Google Apps waved in front of Microsoft by many of their corporate customers as a tactic to reduce their annual fees.

Given the above, I claim that MS Office is, at the moment, an effective technical monopoly in small-, medium- and large- sized businesses. I expect it to be challenged and de-monopolised in small businesses in the next year or two, but it should hold on and be near-unassailable for at least the next five years, unless Steve Ballmer does something even crazier than normal.

Update: (2012-12-26) Mr. Worstall responds:

Whether Office's near monopoly is contestable in the economic sense is an unknown as yet. We'll only find out if it is if someone manages to replace it. However, it is most certainly being contested by Google. And the very fact that it is being contested is going to put a brake on the ability of Microsoft to exploit that near monopoly position.
It's a fair point. It'll be interesting to see the position in 1-2 years. I think you could get a reasonable metric of the degradation of MS's monopoly by comparing the per-capita cost of MS Office licenses being paid by medium and large enterprises in 2010 thru 2014, discounted by RPI. If you see prices being forced down significantly across the board, you can assume that MS is being beaten over the head by credible threats to move to Google Apps or similar alternatives, and the monopoly is cracking.

1 comment:

  1. Yeah, I think Office might qualify at present.

    As you say, it will get broken, but not immediately.


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