Slashdot Mirror
OSS Officially On Microsoft's Financial Radar Screen
seldo writes "More news from Microsoft's latest quarterly filing: according to eWeek, Microsoft says it may have to lower its prices in response to competition from open-source software. From the filing: "To the extent the open source model gains increasing market acceptance, sales of the company's products may decline, the company may have to reduce the prices it charges for its products, and revenues and operating margins may consequently decline". This is a fairly major revelation from Microsoft, and if it happens, it may be one of the biggest wins yet for open-source software: what do you know -- competition works!"
Before the muppets start talking about products can't compete with free, remember support costs, staff costs etc etc.
One element on margin is that it is estimated that Microsoft work around the 30% mark, while IBM work around 7% and are booking multi-millions in association with Linux. So this means that Microsoft will be reducing their margin, not becoming unprofitable.
An Eye for an Eye will make the whole world blind - Gandhi
PR... nothing more than PR...
It's not that they're wholly unaffected by the advance of Linux, but this statement should be bundled with others they use to show that "We have brutal competition... really!"
It was about time.
The thing that pushes ppl to Linux and Open Source is the price. Depending if MS lower its prices too much, it may cause a lot of ppl not to consider OSS software at all.
Who would want use and a disgruntled OS if they may get nice box, nice gradient buttons, stylish consistent GUI for a reasonable price?
Maybe it forces OSS software to evolve from merely copying proprietary functionalities to actually improve users' life in order to make a differentiation. A reason for ppl to use it. For now, it's price.
So this is why the Microsoft Home Of The Future has no bathroom. They can't afford it anymore. Sweet.
Here's my scenario:
First, MS Office revenues will be hit and hit hard. OpenOffice does almost anything MS Office can do and it is not more difficult to upgrade from Office97 to OpenOffice than it is to upgrade to OfficeXP. - But a lot cheaper.
Only after an organization has successfully converted to OpenOffice, we will see full conversion to Linux.
Now we'll all have to see what Microsoft does without the hefty MS Office sales... Maybe XBox-gamers will have to pay a lot more because Microsoft can no longer afford losing millions over millions on it?
This is a fairly major revelation from Microsoft, and if it happens, it may be one of the biggest wins yet for open-source software: what do you know -- competition works!"
...Now if Microsoft interpreted the OSS threat the way they should and decided to counter it by open sourcing their stuff... THAT would be a major win for the OSS (by definition)!
Sigh. Since when was lowering Microsoft's prices a major objective of OSS?
This is *not* a big win. Contrary: it reduces the perceived difference between OSS and MS from a consumer's perspective and may even force Linux vendors to lower their prices and thus reduce their revenues.
This is really quite analogous with what happned when MS's cheaper solutions began to eat the Unix market from the workstation up.
At first, MS's main advantage was price, but gradually they innovated(*) and re-engineered so that their product was always high enough quality to attack the next layer up -- from word processing platform up through file/print server to heavy-duty servers and workstations.
Now MS are being eaten from below by a new generation of even cheaper systems. Like early MS systems, these open source offerings are both derivative and weak except for their price advantage. However, a price advantage is enough to secure a foothold, and over time open source systems will be strengthened and will begin to innovate and will be able to take over better and better MS-held markets.
In about 10-15 years, the cycle will probably start again, taking us another step further from the days of monolithic systems and proprietry hardware/os/support lock-in (which is where we were at before the Attack of the Killer Micros, young'uns). It's all good.
(*)Rather than freaking out and writing posts about 'M$' and so on, why not go outside and get some fresh air?
Whence? Hence. Whither? Thither.
A translation for those not fiscally inclined.
*large puffs of smoke appear, and a talking face begs you*
"Gosh darn it! Open Source is digging into our revenue. Lord knows that Open Source will be the down fall of all things good, look whats happening to our profits! **Ignore present world wide economic conditions they have no bearing here** I mean, we weren't really price gouging before, we were just looking out for our stock holders. Now our profits are going to go down because we have to lower our already, really, really, really fair prices or else we won't keep market share. It's unfair competition! **Ignore present world wide economic conditions they have no bearing here**"
***second translation***
"G*d d*mn this sucks, we have to compete now, we just can't buy Linus out. So much for our past competitive strategy"
"Science is about ego as much as it is about discovery and truth " - I said it, so sue me.
I don't think OSS is making a big dent in MS revenues - it's still virtually impossible to buy a new PC without windows pre-installed (and pre-licensed).
Instead, I think MS is suffering from a lack of innovation. There is simply no compelling reason for corporates to upgrade their software anymore - Windows 2K is fine for business use, they don't get anything in XP other than support problems. You might upgrade Office to be able to read other people's files, but there are precious few "must-have" features to differentiate the current offering from Office 97.
The most significant reason for users to upgrade in the recent past has been MS's change in licensing policy - signing up before the deadline gives "free" access to upgrades for a limited period. I know that many corporates bitterly resented this pressure. However, the next version of "Windows for Servers" keeps getting pushed back, and many corporates are only now upgrading their servers from NT4 to W2K - not to take advantage of new features, but because support is being withdrawn.
So, while OSS is undoubtedly snapping at MS's heels, providing a much-needed alternative and nibbling away at the revenues, the bigger problem is that historically, Microsoft have taken ideas developed elsewhere and "embraced and extended" them. Right now, there are precious few radically new ideas to embrace, and the only way for MS to continue to grow their revenue is to find new must-have features. In short, they need to innovate under their own power.
Welcome to the real world, Bill....
It's all very well in practice, but it will never work in theory.
You gotta be kidding me! This reminds me of the old joke... a US Navy Carrier sees a big blip on the radar, and sends out of the radio:
"This is the USS Big Ship to unidentified target, please change course." The response comes back:
"That's a negative, Big Ship".
"We are a Aircraft Carrier from the US Navy. Now please change course!"
"That's a negative, Big Ship. We're a lighthouse"
For chrissakes, OSS has got to be the biggest stack of rocks sitting on MS's radar that they've had in a long, long time.
-- james
Businesses are willing to pay for value delivered. They are not, however, willing to be raked over the coals, especially by someone who is making the profit margins that Microsoft makes in an economy that has everyone else scrambling to make a buck.
Add in the costs of continual upgrades -- required by Software Assurance, BTW -- and the hardware to support them, and the lost productivity due to bugs and security flaws, and we have some unhappy campers out there.
OSS alternatives mean that Microsoft will have to lower prices, probably to a level lower than pre Software Assurance days. Customer anger and memories mean that it may not be enough to keep some of those customers from going away for good.
Microsoft has only two profitable products (Office and Windows) that strongly depend on each other.
I adore how cute it is when some FUD is propagated on Slashdot, and soon you can hear it being repeated verbatim as stone-cold facts time after time by Slashbots. Microsoft has three profitable divisions: Client, Server Platform, and Information Worker. I'm hardly surprized that some dullards interpreted that as "Office and Windowz!", yet in reality those three divisions account for the overwhelming majority of products with the Microsoft name on it. SQL Server? Yup. Visual Studio? Yup. Visio? Yup. SNA Server? Yup. Indeed, if you looked within even the unprofitable divisions you would find a bevy of highly profitable items: The Home and Entertainment Divison encapsulates Microsoft hardware, such as mice and keyboards, which themselves are highly lauded and tremendously profitable, however their profitability is being masked by the xbox.
This is all so laughable anyways, and indicates the core naevity of most open sourcers. Egads Microsoft mentioned open source! The reality, of course, is that such filings must include forward looking risks of any sort, including potential lawsuits, and envisioned risks by the pundit community. The fact that open source is mentioned in there is a given. To make this even more hilarious, though, the prior quarterly report included the same risk statement, while the quarterly report before that included the statement "the availability of competitive products or services such as the Linux operating system at prices below Microsoft's prices or for no charge" as a risk factor. Looking at the annual report from 3 years ago yields the statement "With an increased attention toward open-source software, the Linux operating system has gained increasing acceptance. Several computer manufacturers preinstall Linux on PC Servers and many leading software developers have written applications that run on Linux. Microsoft Windows operating systems are also threatened by alternative platforms such as those based on Internet browsing software and Java technology promoted by AOL and Sun Microsystems. " and " The Company continues to face movements from PC-based applications to server-based applications or Web-based application hosting services, from proprietary software to open source software, and from PCs to Internet-based devices.". I'm sure I could go back two more years and find similar forward looking risk statements.
I suspect that someone read an SEC filing for the first time in their life and thought they found a real revelation (as did the Slashdot editors when they posted this), when it's the same thing that has appeared in their filings for years now.
That driver argument is starting to really annoy me. I've almost never installed any version of MS-Windows where I didn't have to install separate drivers from the manufacturers website: Video drivers, sound drivers, motherboard drivers, AGP drivers, network drivers, printer drivers, scsi drivers etc. On the other hand, I've seldom had to download anything for Redhat, all the drivers I've needed are included in the distribution. And considering that my fiance just had to buy a brand new scanner to replace her three year-old one because the manufacturer said that they were not going to support Windows XP, I'm just now sure how you can say that XP supports more hardware than Linux.