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Microsoft's Software Philanthropy: The Goodwill Ploy
bethanie writes "The New York Times has printed a story concerning Microsoft's plans to 'significantly increase its donation of software to the nation's nonprofit organizations, to a level that may approach $1 billion annually in the next three to four years. ...But the increase has also drawn objections from developers of 'open source' programs (programs for which the source code is freely distributed). Those critics say they believe Microsoft is using a giveaway strategy to undercut the so-called free software movement in the potentially promising nonprofit market.' What do you think? Is it true philanthropy or just another tactic to assimilate everyone into the MS collective?"
A good read is here
I'm not Seth.
This was one of the major holdups in the antitrust settlement. MS wanted to inundate the schools with free software vouchers and its competitors cried foul and demanded that the vouchers be replaced with straight-out cash grants. A similar tale has been repeated in europe as well.
The problem is that until there is a legal ruling on whether software-gifts are anticompetitive, MS will continue to do this. However, when you start to regulate software gifts, you risk classifying other similar acts as anticompetitive. Is it OK for apple to give free software? What about open source software? Its not long until the whole house of cards falls down.
Donations are tax deductable. Theoretically, if they donate enough, they'll eventually wipe out all their taxable income.
"Sure Mr. Elementary School Principal, every one of your students needs XP Super Advanced Enterpri$e on their desktops. Let me just fire up the printing presses!"
Simpler answer from a business undergrad-
There are federal standards associated with tax writoffs of good donations to nonprofit firms that dictate that relatively small amounts, on a revenue basis, are tax deductible. Microsoft will be able to write off revenue from some, but not a very significant portion.
More importantly, I responded because dividends are NOT pre-tax, they are paid from after-tax retained earnings. This is a very basic accounting rule and is important in many financial issues, from capital structure to the potential elimination of US dividend taxation.
Read jack phelps dot net
The nonprofits using CompuMentor's philanthropy program aren't giving up free (as in speech) software and swapping it for MicroSoft stuff because it's low cost. They're upgrading from old Microsoft programs to newer ones. If the program wasn't their very few of them would move to open source, they'd just stay on older technology for longer and be less efficient. This philanthropy program isn't where nonprofits get their first fix, that comes from pre-installed operating systems and software just as it does for most small businesses. CompuMentor's TechSoup.org site also distributes Lotus' 1-2-3 and Smartsuite Millenium, as well as providing links and resources for open source software, but the biggest demand is for Microsoft products. That demand will change in nonprofits when it changes in the for-profit sector.
No, MS can only write off the actual out of pocket production costs, without adding in research or other burden.
IRS is picky about this.
However, if you donate a car to charity, you can deduct retail, which is a mostly imaginary price.
Microsoft can't claim a tax deduction for the retail price of the software, only for the cost of providing the CD etc. to the nonprofits.
Since it all comes out of pre-tax income they don't get a return. They just get to say it is a legitimate business expense, so they don't have to pay tax on the money they actually spent administering the program.
Money or other gifts from an organization have to have a legitimate purose or they become taxable income as though they were actually profit (presumable this is to stop them giving gifts to share holders instead of paying tax on their profit before dispersing it).
The Billion dollar figure is just for public relations.
Your understanding is incorrect.
They can simply claim the expenses of producing and distributing the media (they send a single CD, regardless of number of licenses, for each product a nonprofit gets) and the cost of administering the program. These are expenses they actually incur.
Microsoft has undertaken a lot of underhand tactics, but I don't think this is one of them.
The licensing they're donating is under their Open Licensing system, which gives downgrade rights for almost all programs. So you can get a license for XP but actually run Windows 3.1 if you want (and there are way to many nonprofits that do want to).
I work for a NPO. We already use Microsoft products - Windows 2000, Office 2000, and Exchange would be the major apps. Due to budgetary constraints, we've decided not to upgrade until the Windows/Office version after the Longhorn release in 2005 (whatever that release may be... ); we started setting aside money for that upgrade in 2001. Budget is the #1 thing on the minds of every executive/manager at an NPO.
FWIW, at an NPO, any $ used comes out of a donation from a charitable person, institution, or corporation, who probably envisioned their donated $ going toward the benefit of whatever community the NPO services; I doubt seriously that most people envision their dontations going straight to Bill Gates & Co. when they sign their names on the check, be it for AIDS research, building homes for the homeless, etc. If MS is willing to provide NPO's with or reduced cost software, the end benefit is that the NPO will have more funds available to help their constituencies.
Oddly enough, I was involved in a discussion of this very topic today!
My mother is an office manager for a "Safety Council"; my wife is an administrator in the American Red Cross. I also worked for a compnay the designed a SQL Server-based databank for the Red Cross.
Both organizations are tied tightly to Microsoft, in part because of the freebies, and in part because of corporate culture. They'd be silly to turn down millions in free software, especially hwne it is the same software they already use.
Do I take the free (as in beer) software that I know, or the free (as in leberty) software that I'll need to retool and retrain my staff for? Add in data conversion and other factors to see why the non-profits drink the Microsoft beer.
I'd rather the Red Cross take free software from Microsoft than have them lay off disaster personnel so they can retrain and retool for "free" software. People don't give a flip about Linux-vs.-Microsoft when their house is spread across three counties.
As for non-profits being "lucrative" -- no organization that relies on donations is lucrative; non-profit means limited budgets.
That's not to say that Microsoft doesn't recognize the benefits of "giving." Perhaps someone at Microsoft gets a warm fuzzy feeling from donating software, and I'm certain that their accountants like the associated tax write-off. But I'm sure it hasn't been lost on Microsoft that giving software to non-profits is both good advertising and good training.
Is Microsoft being Machiavellian? Yes. Does it matter? Probably not.
All about me
See flamwar topic Free Software vrs. Free Beer :)
Little Brother, watching the watchers
I know most people don't study or have a clue about business on /., so let me challenge your conspiracy theory with, "No, MS can not get a tax writeoff for a $1000 Windows Server License", simply because a tax writeoff has to do with cost, not potential revenue.
There is no longer anything that can be done with computers that is nontrivial and clearly legal. -- Paul Phillips
"Free" means "Free"; period
A few points:
1. Linux distributions, like RH or SuSe, or Debian, or anything are Free, they cost nothing to obtain/modify/distribute.
2. Installing and maintaining Linux, as well as designing a network, requires time and skill.
3. Time and skill are assets to be acquired.
4. Even if skill is present in the organization, time is still an asset. Expending time incurs an opportunity cost.
5. If the skill is not present, it must be obtained.
6. I've worked on a volunteer basis for organizations that had donated software from MS. The software was: Windows 2000 Server, Windows 2000 Professional and Office 2000. The license provided had absolutely no strings, it was "FPP" software (aka, full packaged product, aka retail boxed stuff).
7. Before the donation from MS and my donation of time, they had no network, and no software, and no computers. With some thrifty ebaying, they obtained the required hardware for a few thousand bucks.
8. If the MS donation wasnt going to come through, the alternative was going to be RedHat Linux on all the machines.
9. In the end, the costs for MS software over a period of time is $0. For Linux, the cost would be $0 as well.
So the bottom line is that the costs for the organization here was $0 (minus hardware). If not for my time, they'd have to hire IT help to install it all, and that IT person probably would have recommended brand new hardware. That would have been additional cost. At the end of the day, it comes down to who has the time to donate.
As far as your claims about the "BSA", "hooks", and "outrageous license fees". Well that's just plain silly, and I can't find *any* basis for it in fact. In the cases I am aware of it simply is not the case.
Let me tell how it really is -- I'm the Director of I.T. for an NYC-based non-profit, high-end, very prominent. Your comments about MS hurting me more are pretty offensive, and wofeully uninformed. By the way, I'm a UNIX guy, I've been an admin, an engineer, all the way since 0.99pl4 so you're preaching to the choir about open source. But reality is different.
In the non-profit world, budgets are so slim as to be non-existent. You're working on yesterday's technology (for the most part), you cobble together what you can. But there are certain things that all non-profits must have, the basic "office services" that we all take for granted. But these places don't have them, they have a bastardised collection of w98 and w95 and god forbid novell on dos desktops, all somehow strung together with a chain of ancient hubs, etc. You get the picture. We as IT guys in these places have very little resources, both in terms of people and time - oh and the previously mentioned money. We need MAXIMUM bang for the buck.
As a UNIX zealot I already know that with OSS/Linux/*NIX there's nothing better than a free lunch. But - I also have 75 people in the office who know absolutely nothing about computers except to click Send/Receive and read their email, or use the Outlook calendar. Believe me, if I had the time and the resources to build and deploy my own Linux desktops, I'd do it - oh god would I do it. But I have to face cold, hard facts and the fact is that as an IT guy at a non-profit I have to give as much with as little as I get, and that little is the "Microsoft Office environment" and goddamnit thats what these people know, and its what they expect and it's all they'll ever know.
Having said that - the money that I don't have to spend on Microsoft Office and the various OS' that I need to run it on are ALWAYS used (at least anywhere that I work) on as many servers as possible to run the important stuff -- stuff like intranets running apache & php, monitoring with netsaint, my sendmail relay, my free/swan VPN - don't get me wrong. There is more than a huge void in the non-profit world where OSS could be used, and should be. And the more progressive IT people do I think head in that direction.
But the fact is that the non-profit will always be strapped for cash, and more importantly IT staff and time. And thats why a full *NIX adoption would always be difficult in that environment, along with the "standard" of MS Office being important in such a creative environment, with many files being passed in and out to such non-technical people. That said, the foresight and generosity of OSS folk and their beliefs and awesome software are appreciated by the more foresight-friendly non-profit IT guys.
I don't dispute that MS ultimately profits from their donations -- just look at the other side of the coin before you say the non-profits are being hurt, dude.
A lot of these Microsoft "donations" are not pure software donations. Rather, Microsoft donates money but imposes obligations that effectively require the recipient to buy a lot of Microsoft products in the market. That kind of "donation" may end up being tax deductible.
Hey, there is a long tradition of that. The US does something similar with foreign aid, "giving away" billions of dollars but requiring purchases of US goods and services.
People normally mix up market share and installed user base, primarily because installed user bases of software tend to do things like upgrade on a semi-regular basis. So, if Linux has a 5% installed use base, then those people will continue to "buy" Linux until they move to something else (on average).
How is there even what could be called a "market" for something that is free? Doesn't one have to buy or sell in a market?
You're thinking too narrowly. A market is just a flow of goods and services between economic entities. There doesn't have to be money exchanged at every stage of the game - companies compete in the market for free stuff all the time.
I think the Free Software people are just jealous because Microsoft, too, figured out that giving away their software for free is a good idea.
Yawn. Larry the cow is a more interesting troll. Free software isn't given away for free to make more people use it, it's given away for free because that is a fundamental part of the motivation for writing it.
God, it's like you people want to see non-profits be deprived of choices or special benefits in the market.
Oh, so there is a market now? Anyway, this is a somewhat dubious statement. We're in this mess in the first place because software is not something you can just pick up and drop as and when you please, once you start using proprietary software, it has momentum (same for free software but the consequences are less drastic). So being pleased that Redmond are giving NPOs lots of their software for free is rather shallow, you'd be foolish to assume it will always be free when there is no legal guarantee of that.
Aren't users now required to register
Nope.
the software online
Nope.
and accept an ongoing upgrade schedule as
Nope.
which doesn't have a prayer of running on the eBay'd hardware you already have
Not a prayer? I doubt thats an accurate statement. Really, its more like "its possible it won't", though judging by how little progress MS has made on the Palladium initiative, it doesn't look like things will make it for that version of Windows.
Hence the Licensing 6.0.
Licensing 6.0 is a gigantic flop, which virtually no one "upgraded" too.
Here's the deal with Windows Xp/Office XP:
All MS core software comes in multiple versions. The most expensive but most flexibly licensed (relatively speaking) is called "Full Packaged Product". This is what you buy at Staples. It comes in a box, you get a manual, you get phone-based tech support. The license explicitly recognizes the legal right for you to resell the software at a later date. This is the software that is also most often pirated, and therefore, MS decided (stupidly, in my opinion) to require it to be activated. Activation is a literally two second process (with an Internet connection; more like 5 minutes on the phone). It takes no personal information. It takes a hash of your PC's hardware. That's all that does. One copy of software cannot be activated on two PCs with a different hardware hash. The end-result is that you can re-install the software without problem, but to transfer it or give it away you need to make a call to MS, explain the situation, and have them reset the activation flag in their database.
There are other types of licensing besides FPP; for example, there is MSDN - which is subscription based software for developers. Then there is "Open Licensing". This is common in small businesses. You get a fairly respectable discount for forgoing most of the packaing. Instead you buy licenses in packs of "5 points" (which is usually 1 license per point, but not always). You can order - for essentially cost - software media (aka CDs/DVDs) for all the licensed software you own. So in a typical 5-user small office, you could go out and order 5 copies of Windows XP Pro and save maybe $500 over the FPP version. These have to be activated just like the FPP version, except the organization gets one key that is good for X number of uses. This software also comes with phone-based support.
Next tier up is the "Select" licensing, and then the "Enterprise" or "Corporate" licensing tiers. These have big-time dollar values usually, something like 30-50% discounts off FPP; you get no media (except for cost-priced media packs), and no phone support. This is what many companies with in-house IT staff use.
On "Open", "Select" and "Enterprise" licensing terms you can get "Sotware Assurance" which is trading some upfront costs for continual software upgrades. This means you get the latest copy of Windows, Office, etc without rebuying it. The problem is that the cost structure for this tright now makes for more attractive positioning as a standalone application.
This is all irrelevant though. Let's look at things for a second. In my example, lets say MS came back in two years and said "fine, screw you, lets see some audits". We up to that point have spent nothing at all on MS software (except time and effort, which cancels out with the Linux shop mostly). There is nothing at that point preventing the organization moving to RH or Debian or FreeBSD all of the sudden. That's the good thing.