There comes a point during an occupation when resistance seems futile and the pragmatists collaborate. In
Silicon Valley's long struggle against Microsoft, we have reached that point.

Microsoft's domination of the web
has become first inevitable and, now, even convenient. Critics such as Dave Winer, an independent software
developer and the opinionated author of the Scripting.com website, are isolated. And pragmatists, such as
myself, have learned to love Microsoft. What has changed?

After all, Microsoft is as much the evil empire as it
was five years ago, when the company vowed to wrench the internet browser software market from Netscape.

First, Microsoft now appears less threatening to companies outside the technology industry. The failure of
Sidewalk, Microsoft's city guide service, has calmed the newspaper industry. Its bill payment venture, which so
worried the banks, has gone nowhere. And last month's sale of Expedia, the online travel service, marked
Microsoft's retreat from the frontline of e-commerce.

Second, Microsoft's software has improved by perfecting
the art of incremental software development through rigorous usability testing. The latest version of Internet
Explorer resizes images to fit the window, for instance. A small touch that shows it thought through the user
experience. MSN Messenger, Microsoft's instant messaging software, presents a cleaner interface than its
rivals. And no forthcoming piece of consumer software excites me as much as Windows Messenger, which adds
robust voice communication to instant text messaging. I love the simplicity of web publishing from Office XP
documents.

I have changed my settings so that Microsoft Word files save automatically to a web folder and in
HTML, so they are instantly available for viewing over the internet. What about software for developers?
Microsoft has long had a hostile relationship with independent developers. But it is the main force behind web
services, the notion that internet applications will be able to call on each other to perform specific duties; that,
for instance, a content personalisation system will be able easily to call upon another service to provide
integrated online credit card payment.

And web services are seen by many developers as the next frontier for
the internet. Rivals among the developer community, such as the Linux operating system, have lost momentum.
Even if Microsoft only appears innovative by comparison with an industry that it has stifled, the company is
producing more interesting technology now than at any time in the past decade. As a consumer, it is easier to be
warm to a company if you respect the ease of use of its software.

But that does not explain the acquiescence of
rival technology companies in Silicon Valley. For that, one needs to look at the effects of the collapse in IT
spending and stock valuations, the third important change in Microsoft's environment. The fall in the Nasdaq
stock market index, down more than 60% since its peak in April 2000, has undermined Silicon Valley's confidence
in itself. When the first pure internet companies collapsed, companies such as Sun, Hewlett-Packard and Oracle
thought they would benefit from a flight to security by corporate IT spenders.

Now, with their own sales falling
well below forecast, they are less complacent. When times were good, they could aspire to Microsoft's crown.
Now they appreciate that the computer industry's fate is wrapped up in Microsoft's. Hence the industry's
acceptance of Windows XP, which ties together the operating system and Microsoft's internet services even
more tightly than its predecessors. Rivals may not like Microsoft's power, but they are also desperate for a
revival of IT spending.

As Andy Grove, a former head of Intel, says: to restart demand for computers, an
"upgrade cycle" has always worked before. Even Silicon Valley's venture capitalists, and the start-ups they
finance, have put aside their hostility. Kleiner Perkins, which backed many of the past decade's would-be
Microsoft killers, spends more time pitching their portfolio companies as acquisition targets. Marc Andreessen -
having failed with Netscape to dent Microsoft - proudly touts the Microsoft relationship of Loudcloud, his new
company. Entrepreneurs, once fiercely independent, look enviously at the example of Hotmail, wise enough to sell
for $400m in Microsoft stock in 1998.

• Nick Denton founded First Tuesday and Moreover Technologies.