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For Microsoft, Market Dominance Isn't Enough
chemstar writes "Last summer Orlando Ayala, then the top sales executive at Microsoft Corp., sent an e-mail titled 'Microsoft Confidential' to senior managers laying out a strategy to dissuade governments across the globe from choosing cheaper alternatives to the ubiquitous Windows operating system. Ayala's e-mail told executives that if a deal involving governments or large institutions looked doomed, they were authorized to draw from a special internal fund to offer software at a steep discount, or free, if necessary. Steve Ballmer, the Microsoft chief executive, was sent a copy of the e-mail.
The memo, which focused on system software for desktop computers, specifically targeted Linux, a still small but emerging competitor. "Under NO circumstances lose against Linux," Ayala said." Perhaps that's because, as roomisigloomis writes, "Seems that MS' licensing practices are working against the company," pointing out this article which "suggests that open source, Linux and other software is actively being sought."
Product activation isn't present in the corporate editions of microsoft software.
This week, Steve Ballmer donated 25 million euros on licenses to Spanish govt to put Windows in schools (English ) (French), one of the places in which Linux is spreding more thanks to Linex and other projects that other places here in Spain are starting.
But as I see it, this is positive. This means they're afraid anough of Free Software that they have to give for free Windows licenses.
Copyright © 2003 The International Herald Tribune | www.iht.com
For Microsoft, market dominance doesn't seem enough
Thomas Fuller/IHT International Herald Tribune
Wednesday, May 14, 2003
Discounts for biggest users are aimed at keeping software rivals at bay
BRUSSELS More than 90 percent of the world's personal computers run on Microsoft software. For Orlando Ayala, that was not enough.
Last summer, Ayala, then the top sales executive at Microsoft Corp., sent an e-mail titled "Microsoft Confidential" to senior managers laying out a strategy to dissuade governments across the globe from choosing cheaper alternatives to the ubiquitous Windows operating system.
Ayala's e-mail told executives that if a deal involving governments or large institutions looked doomed, they were authorized to draw from a special internal fund to offer software at a steep discount, or free, if necessary. Steve Ballmer, the Microsoft chief executive, was sent a copy of the e-mail.
The memo, which focused on system software for desktop computers, specifically targeted Linux, a still small but emerging competitor. "Under NO circumstances lose against Linux," Ayala said.
This memo as well as other e-mails and internal Microsoft documents obtained by the International Herald Tribune offer a rare glimpse into the inner workings of a company with so much cash - $43.4 billion, as of December - that it can aggressively discount its products in a bid to protect its huge market share amid the wreckage of the technology sector.
The documents show the muscle that the world's largest software company is prepared to use to protect its dominance, including a relatively benign form of corporate spying and discounts to capture "big plays" - a Microsoft term for deals involving the world's biggest clients.
Yet these sales tactics also come with risks. The covert intelligence gathering - including one case where a Microsoft employee attended a Linux trade show pretending to be a consultant to an elementary school - raises questions about whether Microsoft has pulled back from the aggressive business practices that got it into so much trouble with antitrust regulators in the 1990s.
Perhaps more importantly, certain discounts may run afoul of European market regulators, who are currently investigating claims that Microsoft violated antitrust laws.
Discounting is a normal corporate practice. But under European law, companies that hold a dominant market position, such as Microsoft, are prohibited from offering discounts that are designed to block competitors from the market.
Microsoft has been concerned with the legality of its discounts in the past, at one point consulting a London law firm on a specific discount plan.
But in an interview Wednesday, the chairman of Microsoft operations in Europe, Africa and the Middle East, Jean-Philippe Courtois, defended the use of the special fund described in Ayala's e-mail, saying it was part of a strategy to be "competitive" and "relevant" in the market for big government and educational deals.
"Linux is obviously a key competitor," Courtois said. Rivals use similar tactics, he said.
Sun Microsystems Inc., for example, "is giving away StarOffice to basically governments and schools," he said. The suite of programs runs on both Windows and Linux systems.
Courtois also said Microsoft sometimes gave away software to "very low income countries." He cited a program where Microsoft donated software in South Africa and helped train teachers to use it.
Ayala's memo says the discounting fund could be used for "developed and developing countries" but says an "initial focus" was being put on Latin America, Africa, the Middle East, India and China.
In his e-mail, Ayala focused on governments and large institutions. A separate memo obtained by the IHT shows a discounting program for corporate customers worldwide. Two days after Ayala sent his memo, Mike Sinneck, head of Microsoft's services depa
There is a huge difference between driving down prices (legal) and giving away your product for free (illegal). This legal rule captures the more general principal that price discrimination (charging different prices according to the purchasers ability or desire to pay) is highly economically inefficient and should be avoided.
You're assuming that the "cause" of slashdot is to promot Linux, or to counter Microsoft.
The stated "cause" of Slashdot is right there under it's icon, on every page.
"News for Nerds. Stuff that matters."
The direct "cause" of Slashdot (and OSDN and all of it's pretties) is money. It may have been different at one point, like when it was first started, and even until it became part of OSDN. But now, it is a business. They make business decisions.
Just like Linux advocates who work for Microsoft...their personal desire to see Linux "win" doesn't change the fact that the company they work for is in it for the money.
Ho-hum...
_lpp
Looks like Microsoft has lost all fear of the anti-trust implications of their actions.
I have to blame our dear president. I don't think he'd allow the Microsoft anti-trust case to go forward no matter how damning the evidence.
I like some of Bush's decisions, but he really sold out when he told DOJ's trust-busters to dismiss the Microsoft case. It was such a strong case too...
Bush has lost my 2004 vote over this alone.
Actually you don't need an EA (Enterprise Agreement) to get products without product activation. Open Business media does not require product activation, and can be acquired with a purchase of as few as 5 licenses. You still have to have a license key for Open Business, but you never transmit any hardware information to Microsoft.
"You can't fight in here! This is the war room" --Dr. Stra
> It seemed that they would do anything not to lose to Linux
They're crapola software engineers, but they do understand the concept of a landslide. If cutting over to Linux ever becomes the 'in' thing to do - for whatever reason, good or bad - then Microsoft stock will share a spot in the bathroom beside SCO's. Unlike IBM, Microsoft can't adopt free software and live off hardware sales and technical services.
This is raw survival for Microsoft. If it were almost anyone else I'd feel sorry for them.
Sheesh, evil *and* a jerk. -- Jade
Da Blog
Hey, most of the pics at that site are mine. I went to LinuxWorld 2000 in NYC, and while my friend was playing Quake 3 all day, I was busy snapping choice shots of Ceren's (her name) hot bod! No fair!
s.j.
http://studiousjew.blogspot.com
Ceren was 17 1/2 at the time those pics were shot (by me), and that was February 2000. So she's 20 now. Quite legal.
s.j.
http://studiousjew.blogspot.com
So we started a policy that banned XP for "security reasons" and made a sweet deal with Red Hat. Unless you had a valid reason to use an XP product, you used Win2K or Linux. Linux meant that we could use older machines on our server farms and pay virtually nothing because, funny enough, Red Hat gave us a site license for support. Not that we use it (or need to) very much.
Suddenly, Microsoft "produced" a disk with Product activation disabled (sort of, it's kind of complicated), but claimed all kinds of voodoo like it had a copy protection so complex, we couldn't burn a new one from the master... even sector-by-sector copying. Bollocks. You could use any XP disk, just as long as you followed the directions MS gave us for the "master CD." Now we have a lot of the CDs all over the place, with a site key (and no, I won't give it to you, use Linux and be free) and the "process" to make it work legally by our contract. It took them two years to backpedal that far.
It's weird, because for so long, Windows was essentially "free" (although, not legally) because until WinXP, more than half the people I knew had "borrowed" an OS CD from "somewhere." Microsoft knew that (I mean, come on), and like a drug pusher, made sure the buyer was hooked before they started charging (my proof is how they made MSIE a dominant browser over Netscape). But it's not that easy anymore. Linux desktops are getting better and better, and while Windows is easier to use for the most part, it's lack of flexibility, anti-customer anticompetitive stance, and their brazen arrogance in the field is really dulling their blade.
But in this case, I can't fault them for trying to give away freebies, I mean, trade shows do that all the time. But what we should really be wary of is when they get politics involved, and claim stuff like DeCSS is proof that Linux should be banned in the US or something equally as stupid to us techies, but is all greek to your average politician who could be $wayed by $ome other thing$...
__________________________________________________
www. - where else can you get blogged to death?
Disclaimer: I'm an IT consultant for a small business using Access as its only DB.
I've currently got a project that is easily 2 months overdue because of stupid bugs in Access. The worst is this one: if one of the databases becomes corrupted, all of the databases which synchronize with that DB will become corrupted as well. I've actually witnessed databases losing records during a synchronize because some stupid jerk of a programmer at MS thought that the good thing to do would be to delete records to make the tables match. So instead of the good copy filling in missing records in the bad copy, just the opposite happens - good records get deleted from the good copy, and now both copies are bad.
At this point, it simply doesn't matter if Microsoft gives its software away - consultants like myself are going to charge you so much for working with their bit-trash that you won't be reaping any savings. Honestly, there's a reason why I charge more for MS support, and it's not because I'm greedy, but rather, because I recognize the headaches that it presents to the average developer.
Quite frankly, I'm getting sick and tired of explaining to my customers that the reason why they're losing thousands of dollars a day in downtime and lost data is precisely because they chose to use Microsoft software. Get clue! - Microsoft does not care what happens to your data; they've already got your money, stupid! .
The society for a thought-free internet welcomes you.
... if you're in a position to help increase Linux' piece of the market, use it! I recently started a new job at a company running virtually all MS kit, but soon realised they were far from happy about the cost of renewing licenses and keeping tag of all their paperwork to prove they'd bought everything.
;-)
;-) I've never tried the Linux exchange alternatives, but I'd be interested to hear of anyone who's done this...
There was a glimmer of hope though, a couple of rack-mount linux boxes sitting idle. It was obvious that someone had attempted to set up some services at some point, but given up I presume so they were mostly badly configured or just plain broken. So I set to work in my (brief periods of) spare time. Samba, named, squid, apache, dhcpd, PHP, MySQL, iptables and some other bits and bobs later and just about everyone was impressed at how well they intgrated with the rest of the network. They actually make it much easier to manage the hundreds of Win98/2K PCs in use around the place! In fact, all server replacements/upgrades and additions will now be Linux boxes (currently changing all printing servers over too). I'm no hairy-chinned guru; so if I can manage this, I'm sure plenty of others (especially here) could take some time out to do some good
The only hurdle is Exchange, although I'm sure the management would be thrilled to find a "Free" replacement without the quota limits (the version in use has a limit on the amount of disk space that can be used for mail storage, apparently you can pay more for a version with the FILESIZE_LIMIT=xxx constant set to -1
Can't see the desktops changing over to KDE or Gnome, since the software just isn't available for our needs, but in the server room, MS is simply an innefficient and unnecessary expense.
Code, Hardware, stuff like that.
At first glance, this looks like an egregious violation of most anti-trust laws. But digging a little deeper, one must consider that 'Linux', although a competitor of sorts', is not monetarily infringed by Microsoft's actions. 'Linux' doesn't lose revenue by Microsoft taking 'Linux' marketshare. IANAL, but I think anti-trust infringement requires either competitors or customers harmed, generally monetarily for an valid infraction to noted.
Now if RedHat, a competitor who could be monetarily harmed, were to complain, Microsoft could be held in violation of anti-trust laws
25 cents a copy? Maybe if you JUST focus on manufacturing the actual cds. don't forget though, a company like MS isn't just a one-shot-get-the-product-out-the-door-and-fold-won der. Where did the software to put on those cd's come from? Plus there is ongoing research to fund, advertising to pay for, company salaries, lobbying, etc., that all contribute to overall comany overhead and expenses. How do you think that's all paid for? The money tree? This all contributes to the end price of a product. Basic Economics 101. And because MS is so huge and because expenses are so high, even if they slashed the prices of their products to razor-thin margins and covered just their overhead and no profit - they STILL could never lower Windows/Office's product prices low enough to beat the price of Linux (free to dirt-cheap).
Windows NT is fading away. Win2003 is a good piece of work from what I've seen/heard - I wouldn't be so fast to declare Linux superior, not any more. If you think Microsoft are just going to sit still while Linux motors on, think again. They move fast too.
This memo demonstrates an important shift in their strategy: they are now in a position where they are competing against Linux on thedesktop, having lost many key battles on the server side.
I'm pretty sure Windows has a higher market share in the server side of things (still). Sure, Linux is growing quickly, and it's hurting Windows, but it's easy to forget amidst all the hype that Linux is still the little guy, even after all these years.
The last bit of the rant I can't agree with either. Desktop Linux is not "ready", where by ready I mean I would be happy giving it to most reasonably intelligent computer users. We're not there yet, the software generally needs more spit and polish, and we need to get software installation really nailed. Too much stuff is just currently plain old broken (menus anybody?)
What's old is new again!
Charging for individual services is somethings that IBM has done in the Mainframe camp for years. DEC also did it with VAX/VMS and VAX Unix. To effectively do this, you need a (near) monopoly so no one has anywhere else to turn for less onerous alternatives. It's very hard to pull that kind of nickle-and-dime-them-to-death crap-ola in the open source world.
More recently, most of the commercially-available Unices (AIX, SCO, among others) were also sold piecemeal by services and per-user licenses.
You had to purchase an N-User license to run N-1 serial (or virtual, later) terminals on a given system.
Oh, you want TCP/IP networking? That'll cost you. X-Windows? That piece (Open Desktop) used to cost more than the base Unix (Open Server) package it ran under (Kinda like Windoze on DOS).
Print Services? Costs extra. PC Interoperability (PC-NFS File Services)? Ka-Ching.
This is the big reason I have been able to convince most of my consulting clients to switch away from SCO x86 Unix (once the IBCS2 emulation got all the bugs out) and run *free* Linux instead, which has all the bells and whistles the others charge an arm and a leg for *for free*, and would run their custom SCO binaries compatibly.
Fortunately, in recent days, because of the fierce market competition Linux has provided, most of the commercial Unix vendors have "gotten real" in their pricing structure - most now offer the base package for free or low (media) cost, but still charge big $$ for "optional" packages such as network, X-Windows, or multi-users.
if Microsoft doesn't learn from history - it'll be their fault if that policy causes big end-user backlash.
-- You are in a maze of little, twisty passages, all different... --
No. Any photograph becomes the intellecual property of the photographer (not the subject or model) the moment it is taken. Depending on circumstances, there may be restrictions or limitations on using photographs of someone for commercial purposes (especially in advertising) without permission, and that's why "model release forms" exist, but a photographer still has complete copyright on all photographs he takes.
Linux does no different, except the price it "sells" its wares for is zero. Certainly it is taking a loss, and if you ask people its explicit purpose is to shut out a competitor. At the point where Linux "sales" exceed Microsoft's sales, will that make Linux the "wrong thing" because it "sells its products at a loss to shut out a smaller competitor"?
"Linux" is not a company. "Linux" is not a business entity. "Linux" is not subject to rules and regulations like it was one of those things, because it isnt. Microsoft is.
Red Hat, SuSE, Caldera, Mandrake....they are all businesses. They sell sevices and some proprietary software in their distributions. None of them are selling under their costs to try to shut out a competitor.
It isnt dumping for linux to be free (as in beer).
Plus, the creators of Microsoft have a motivation to make their products solid first time,
I cannot think of a single software product from microsoft that was solid the first time. There's a reason for the saying that you should never install a microsoft product before it hits version 3.
because they'll lose sales otherwise.
Unless they're a monopoly and can dictate terms to the clients.
The makers of free software presently have competition, and so are motivated to compete.
The makers of free software will always have competition because they compete with each other. If there is an ideological disagreement or a methodological disagreement, the project will be forked and compete against itself.
But once they've knocked down that competition, I suspect they'll get lazy and start releasing buggy versions first time out of the box, making me pay if I want a working version.
If they get lazy and start releasing buggy versions, they'll lose their project to another maintainer or it'll be forked and continue under more competent leadership.
And they cannot make you pay for a working version because of the licensing scheme. The only way they could do that is if the copyright holder on it released a buggy version under GPL and a non-buggy version under a proprietary license. The result from that would simply be that the buggy version would be fixed by the community who uses it and would replace the proprietary version and the original copyright holder would be ostracised for his underhandedness.
Darth --
Nil Mortifi, Sine Lucre
The funniest one's gotta be the British government. They were sold the line that kitting the UK gov out with Windows would get them a £100 million discount over the first three years with a kick back when other governemts bought the same system making the British Government ( a public body that ethically should not directly involve itself in the workings of individual businesses) a Microsoft Business Partner.
So far no other government's bought it so no kickback, it runs on Passport which the EU declared violates European Data Protection law and once MS is installed end to end you can see the discount evaporating.
Gullible, I'll bet. At the beginning the gov. ripped out Linux servers that had been in place for years running UK Online, a system that had received many international awards for excellence and replaced it with MS stuff that only worked with IE5 and has been pilloried for being a bad deal for end users, badly designedand over complicated to navigate.
Apparently, MS donated £11 million to UK aids charities around this time and in exchange for this was paid £15 million for a crap system. Funnily enough this leaves the charities £4 million worse off than if the gov. had donated the money straight to them.
Of course to suggest that the government was forming partnerships based on the desire of the prime minister to be seen with rich and famous people would be terribly cynical.
Hmmmmmm..... Deep fried and look like Squirrel.