Subj : Re: Open Source Leaving Microsoft Sitting on the Fence?
To   : comp.os.linux.security,comp.os.linux.admin,comp.os.linux.misc,comp.os.linux
From : Juhan Leemet
Date : Thu Jul 22 2004 07:25 pm

On Thu, 22 Jul 2004 16:55:20 +0000, e7 wrote:
> DaveAI wrote:
>> Microsoft, it seems they have not taken a solid or plausible position
>> on the use of open source applications as an alternative to Windows.

They're stuck. Fishing around for a "good story".

>> I read on a daily basis the latest ventures of Microsoft from the much
>> publicized "war on Linux" to surrendering and publishing portions of
>> their source code. In their first argument, executives of the Redmond
>> Washington company regard Linux as everything from a "waste of money"
>> to a threat to the well-being of the software industry. 

Spin doctoring. Trying to figure out a "bait and switch" tactic?

> ...Follow the lead of IBM,...
> IBM has already achieved the breakthrough,
> and created billions in new jobs and winning new contracts.
> There is no real room for these managers in M$
> who can't cooperate with the open source community.

Ah, but there is a problem. M$ really only sells software.

I've been intrigued with the marketing and business rationale behind open
source concept for decades (since Richard Stallman's GNU project started).
The main problem is that all individuals/organizations have to generate
revenue to live/survive. Somehow they have to at least pay the bills, and
even make some profit? If all software is free, and it takes you
time/effort to use it and fix it and create it, then where is this money
going to come from?

I think Richard Stallman's original idea was that open source free
software was going to "pull through" sales of services (consulting,
contract software modifications, support, addon products, etc.). Many
companies are wrestling with these concepts and their implications.
Stallman's essential principle was that programmers should be paid for
what they actually do (now! today! this hour!) and not some "residuals"
(like more savvy musicians or actors, in perpetuity?) for previous work. I
suspect Stallman likened cost structures required to support "residuals"
to be restrictive to development and dissemination of S/W invention. The
new trend to S/W patents is even worse (an extension on what was wrong!).
He thought that people should be paid for work they actually do. Hmm.

RedHat and SuSE (and others?) have spun off "enterprise" versions of their
software packaging, including some kind of update service, support,
perception of "validity", some other intangibles, etc. Hey, if someone
likes that deal, and feels warm and fuzzy, then it is good for them to
buy. So, they are implicitly "pulling through" sales of other services.

IBM's take seems to be a bit different. I read somewhere a simplistic
analysis of product costing/pricing. They made the point that if you can
"commoditize" co-products (other products that work together with your
main product, or are required by your main product) then you enhance the
marketing position of your own product. Makes sense: $Y < $X + $Y. So, if
you can drive the cost/price of $X down to zero, then $Y is better! This
writer claimed that IBM was taking that tack: they want to commoditize
software so they can enhance the sales of... hardware (I guess?), and
services (which is becoming IBM's most profitable business these days?).

Back to M$... Their problem is that they really ONLY sell S/W. They have
managed to create a sweet deal: self-sustaining (co)monopoly of sorts: M$
Office requires Windoze & the main applications for Windoze is M$ Office
(thanks in part to a number of dirty tricks over the years!). This is the
1,2 sucker punch to most in the PC computer buying marketplace. Then once
that is sown up, and Windoze & Office have the majority of the market it
acquires an inertia of its own. How is someone going to get rid of Windoze
and Office when they have 1000s office workers using it? Easier to upgrade.

Maybe that is also what lulled M$ into some kind of complacency? relying
on that monopolistic hold? The suckers couldn't possibly run away, could
they? If/when the tide turns, though, the effects will be brutal! It might
slowly be happening now? M$ increased license costs accelerates the trend.

So, M$ only sell software (leaving aside keyboards, mice, network boards,
Xbox, dunno if any of those actually make any significant profit?). They
CANNOT take the approach of commoditizing (i.e. driving the cost down to
0) software, because they have no other products who's sales will be
supported or enhanced! If they support commoditizing software, they are
effectively cutting their own throats! I expect them to fight: tooth and
nail, every dirty trick in the book, right down to the bitter end. They're
really big and they could last a long time, in any case.

You might say, why don't M$ do like IBM and refocus on "services" and
"consulting"? I don't think they have any credibility there. Furthermore,
their slash and burn co-marketing deals in the past (check out Intuit:
Quicken vs. M$ Money?) make any company wary of cooperating with M$. Next
thing you know they might try to steal your market out from under you! Can
you affort to fight their marketing might? Their lawyers? How long can you?

I find some of these analyses interesting, fascinating even.

Note: IANAL

-- 
Juhan Leemet
Logicognosis, Inc.

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