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In Utah, Microsoft/Skype deal shows power shift from software to services

Jeffrey D. Allred, Deseret News

SALT LAKE CITY — The announcement that Microsoft is shelling out $8.5 billion to buy Skype is yet further evidence that powerful technology companies aren't built the way they used to be.

In Utah, that lesson has been personal for a long time.

Brigham Young University was home base for the developers of WordPerfect, which set the pace for word-processing software and helped establish a high-tech economy in the state before briefly merging with Novell and then moving to Canada.

Evans & Sutherland's powerful simulation software, and Netscape, which, at one point, was the browser of choice for 90 percent of Internet users, came from ideamen who taught or studied on the University of Utah campus.

Novell's Netware products once ruled computer networking and made the Provo company the second-largest software company in the world — behind Microsoft. The company is just now in the final stages of a merger with Attachmate, which cost a lot of Utahns their jobs.

But today's lack of dominance in the case of all three Utah examples does not point squarely to any failure at the company level, but rather is a reminder that the era of near-monopoly-level dominance in key technology sectors has given way to something new.

We now have service-based giants that use existing off-the-shelf hardware instead of developing their own. We have the Internet as a business and distribution channel instead of relying entirely on stacks of floppy disks and printed instruction manuals shipped in boxes on trucks. And we benefit from the increasingly ubiquitous Voice over IP, which fuels the development of services like Skype.

Sure, Apple is a notable exception, growing by leaps and bounds as it maintains almost complete control over its hardware and is less infamous than Microsoft as a gatekeeper over compatible software applications.

But Microsoft buying Skype is an example of old technology money being used wisely — at least for Microsoft and its shareholders — and a shift from proprietary software and hardware giants to successfully marketed uses of today's advanced technology infrastructure. The successful results are obvious: Google, eBay, Twitter, Facebook and of course, Skype.

Microsoft started getting over itself years ago. Instead of spotting a software trend and only developing a product to join the market, it began buying successful applications and adding them to its lineup. That shift has been a key to its survival in markets beyond its Windows operating system.

The initial news that Microsoft had purchased Skype sent its own stock down and Skype's up. And the chatter on Twitter and elsewhere shows technology users embrace the Microsoft label like one would a rich and powerful relative who doesn't bathe.

How well users take to Microsoft's Skype acquisition, long term, might depend on the avoidance of significant branding damage (remember Myspace?) and the recognition that success is more likely to come by playing up brands that have become popular verbs, like Skype, instead of brands that have not, like Microsoft.

In Utah, the good news is that good ideas, not massive technology campuses or manufacturing facilities, can continue to reaffirm Utah's place as an innovation and technology hub as long as the state is home to people with creative ideas.

Commercial data centers and technology hubs that are the backbone to the eBays and Skypes and services yet to come can also find a profitable place in Utah as long as the economic climate and bandwidth capacity continues to grow.

While still speculative, the massive National Security Agency's spy center under construction at Camp Williams is expected to bring with it a significant capacity for commercial bandwidth, which will keep those Skype calls, Google searches, eBay bids and Facebook wall posts on a roll.

Steve Fidel is a KSL and Deseret News reporter who has covered technology developments since the dot-com boom and has been the editor of two news websites.


Twitter: SteveFidel