Microsoft vs. Open Source: Who Will Win?

Oracle

Interesting article from the Harvard Business School's Working Knowledge newsletter on Microsoft vs. Open Source: http://hbswk.hbs.edu/item/4834.html

Capt'n Midnight

Interesting that they point out that We found that in countries where piracy is highest, Linux has the lowest penetration rate..

The also mention the network effect, but not by name, in the sense that pirate copies of software increase the value by increasing the user base. So no points there for discovering "the bleeding obvious"

90% of consumer windows licenses are OEM so they SEEM to have Zero-Cost to the end user. For the other 10% the terms of VISTA have been changed such that's you can't replace the motherboard twice (more or less) so getting closer to what I believe is microsofts goal of "renting software". IMHO it's a milking strategy. /must check the volume license terms for VISTA, then again there are little or no cost savings by ordering a brand name PC without windows due to the derisory discount.

Don't forget that commercial whaling, is about money. Killing all the whales will get you a pile of cash that you can invest to get an income. If the income is greater than that you would get from substainable whailing why should you expect businessmen to save the whale. At the moment microsoft's best investment is themselves, to such an extent that they outsource a hell of a lot and have sold off a lot of their buildings to lease back. And they have huge war chest. So one possible scenario ( unlikely ) is that if the writing is on the wall they try to screw as much out of the customer as they can - take the money and run. Then they can ease back and still sell and give support to the reduced user base while doing something else with the money, it's not like they haven't been doing other other stuff apart from the core business.

We also look at the effect of piracy and ask whether piracy can ever be beneficial to Microsoft. This extension was motivated by analyzing data on a cross-section of countries on Linux penetration and piracy rates. We found that in countries where piracy is highest, Linux has the lowest penetration rate. The model shows that Microsoft can use piracy as an effective tool to price discriminate, and that piracy may even result in higher profits to Microsoft!

Well… we were wrong (and this illustrates the usefulness of developing a formal model). What we had missed is that Microsoft's initial advantage (larger installed base) together with its pricing power allow the company to price strategically to control Linux's market share going forward. By lowering the price of Windows, the demand for Linux shrinks to the point where Linux is not a threat to the survival of Windows. The model also shows that a "milking strategy" (setting high prices in the short term and leaving the market at some point in the future) is not desirable to Microsoft. The reason is that if Microsoft follows such a strategy, as the last period becomes closer and closer, the relative benefit of abandoning it and lowering prices to survive a few more periods increases dramatically.

DublinWriter

What a great debating point.

Ultimately it's the company with biggest marketing budget.

When Oracle pitched up against Informix in the late 80's, Oracle won out despite having a vastly inferior product at the time.

The same can be said about Microsoft and Novell in the mid-90's for the battle of the servers.

Yes, I know Open Source isn't associated with any particular company, but you have to realise that the dead-head IT decision makers are the ones most swayed by glossy presentations.

Having said that, I've seen Red Hat appear supporting mission-critical applications in many governmental agencies in this country that I would have classed as being the most conservative of all.

Microsoft will win the battle, but I think Open Source will ultimately come out on top via a war of attrition. Many techies have already snuck in Linux distributions through the back door for server duties.

Now Sun have gone open source with Solaris, who knows, you might see a Microsoft distribution of Linux in the next ten years, but I wouldn't hold my breath.

It's the battle for the desktop that is the crux. I think it will only be Microsoft's short-sightedness that will show them up - there's only so many times you can volume license new versions of the dancing-paperclip before organisations switch to Open Office, then go the whole hog and replace the desktop OS too.

gerryk

First off... Open Source is a philosophy, not a company, so it might be more accurate to say 'Open vs. Closed' or something.

Secondly, I don't see it as a war to be won or lost. Both MS and the Open Source world have plusses and minuses. MS do provide a good one stop shop in the server market. They do have a reasonable consumer OS. Where they fall down is mainly in security on the desktop. The web-app integration was a hugely bad idea in the beginning and even now is biting them on the ass. A simple move to Firefox is the single biggest thing the user can do to improve security.

The open source world's biggest strengths are also it's biggest weak points... choice being chief among them. Most people get swamped by the sheer numbers, which is probably the biggest plus point for Ubuntu... the cutting down to a single CD with most of what the user wants, vs. SuSE or Fedora's overwhelming 4+ GB installs .

Personally, I use both MS and Open Source software. I have an SBS server managing an office, but with a Linux fw/web cache/gateway. I also run a few Linux desktops and a BSD web server. I'm starting to look at stuff like Asterisk too... rather than giving some vendor 20k for a phone system and having to pay them huge sums to add an extension or some such, I reckon OS can really succeed in this sort of area.

philologos

Microsoft will always have hands up on Open Source unfortunately, (I love Linux and I don't use Windows) but that is only because of dodgy business deals and people not knowing about Linux or not being able to use it.

Beelzebub

Is it Game Over?
or the beginning of the end?
This doesn't bode well:

Headline: Novell Sells Out.
http://www.linux.org/news/2006/11/03/0006.html

and I was beginning to like SUSE...

Capt'n Midnight

http://www.novell.com/products/ - as you can see from the list Linux is one of many products they do. And they have been in the paid for OS Business for a very long time.
Now it's just as if they got SuSE for Free - Nice one !

Lets just hope they do better than most of the companies that took the micorosoft shilling and then got shafted big-time.

http://news.zdnet.co.uk/itmanagement/0,1000000308,39117592,00.htm

04 Nov 2003
Longtime Microsoft foe Novell has signed an agreement to acquire SuSE Linux for $210m in cash, while IBM, the most powerful backer of the open-source operating system, will take a $50m investment in Novell, the companies said on Tuesday.

http://www.theregister.co.uk/2006/11/08/microsoft_novell_money/

Microsoft is to pay Novell $240m for 350,000 subscription coupons of SUSE Linux Enterprise Server (SLES, to be released in annual batches of 70,000, according to a Novell regulatory filing. Coupons can be redeemed from Novell for single- or multi-year subscriptions, upgrades and technical support. To refresh your memory, $240m is roughly a quarter's revenue for Novell.

DublinWriter

Capt'n Midnight wrote:

And they have been in the paid for OS Business for a very long time.
Now it's just as if they got SuSE for Free - Nice one !

Novell are on the floor, coughing up blood, compared to 12 years ago when they had around 85% of the Intel-based server market.

Microsoft want an 'Plan B' with Linux. Now that Oracle have RedHat sown up, the nearest company they can partner with is Novell and their ownership of the SuSE distro.

The next ten years will be basically Microsoft vs Oracle, but I think Google will blindside them both.