April 16, 2007

how well does open source currently meet the needs of shareholders and ceo's?

ms4123.jpg

["Science Project": part of the Microsoft Blue Monster Series. Backstory from Steve and Kris etc.]

This cartoon was an attempt by me to sum up the answer to a very simple question: If Open Source software is free, then why bother spending money on Microsoft Partner stuff?

I already know what Microsoft's detractors will say: "There's no reason whatsoever. $40 billion per year is totally wasted."

This, however is not a very satisfying answer, simply because it doesn't quite ring true. Otherwise there'd be a lot more famous Open Source billionaires out there, being written up in Forbes Magazine or wherever. And Bill Gates would've been ousted years ago.

I know very little about software, so my hunch is that the reason Microsoft is able to make money, is simply that running a large business with 2000 people on the payroll requires very different ways of going about it, than just hacking together something in your garage. Open Source may be free [at least at first], but how well does it scale? How well does Open Source currently meet the needs of shareholders and CEOs?

You tell me. Anybody who has more insight than me [pro or anti Microsoft, I don't care], please feel free to leave a comment, Thanks.

[Comment- Darcy Moen:]"Hugh, the question you need to answer is: Does software drive business development, or does need drive software development?"

Darcy, I think that is a question we all have yet to answer fully. I don't think anybody has cracked it 100% yet.

The way you framed your comment [read it in its entirety below] implies that the gap that separates what you aspire to do, and what you are actually doing with software is minimal. Even knowing what little I know about how IT works in the REAL world, I am not entirely convinced.

The "Microsoft vs Open Source" question doesn't interest me so much. The question, "What/How does Microsoft have to do/change if it wishes to survive the next thirty years" interests me greatly. And not just Microsoft, either...

[UPDATE:] "Why are the open source business people not ultra-rich yet?" Serious food for thought.

[UPDATED:] JP Rangaswami. "10 Reasons For Enterprise To Use Open Source."

[UPDATE:] Seth Godin. "It's not often that I disagree with Hugh, but this time, I do..."

[UPDATE:] Rick Segal. "Shareholders, CEOs, and (for the most part) Investors are generally clueless when it comes to the beginnings of your great idea. You take the tools (whatever they are), your vision, and your passion into the game. You create a solution and see if the dogs eat it. You don't worry about pleasing anyone, just fix the problem. If it was worth fixing, if the product/service you offer has value/meaning to people, you are there. Your shareholders and your investors will be happy after your customers are."

[Comment- James:] If Microsoft views me as a customer, then why do they go out of their way to get me the tools needed to drive sales on their behalf? Why am I always getting reminders about the free services they provide? I have yet to be approached by Microsoft to purchase software/products. Not once. Other companies flood me with product offerings that they want me to buy. Microsoft doesn't. They give me what I need to drive sales, which ultimately some ends in MS's coffers, but also puts some in mine as well. I've come out ahead in my Partnership with Microsoft to this point, I wouldn't say I'm a customer based on that. Customers end up on the negative side of the money equation, not ahead.

[AFTERTHOUGHT:] I am sad to report that Microsoft's Steve Clayton has gone on vacation this week, so we won't be having his wonderful contributions in the comments section for a while. But I'm hoping other MS folk and Partners will join in the discussion in his absence etc.]

[Bonus Link:] "10 things they didn't tell you about blogging." Fabulous.


Posted by hugh macleod at April 16, 2007 1:06 AM | TrackBack
Comments

You are phrasing the potential answer incorrectly. Don't look for billionaires. The earliest valuable open source software has been core infrastructure software, such as the Gnu C compiler suite. The beneficiaries were:
a) The software developers who did not have to pay $500/person for a compiler suite,
b) The hardware sellers, who did not need to develop a custom compiler for their new chip

Another example is Sendmail/Postfix/et al. The beneficiaries are all the companies that use the Internet for email. The core DNS software is another example that benefits everyone.

Most of the easy examples of benefits are from what could be called a "pre-negotiated teaming agreement" among the software users to share development and support costs for software that they all want to use. Their benefit is that they pay only the software cost, not the extra billions needed to create those billionaires. The developers are usually just ordinary salaried employees of teaming companies.

Posted by: rjh at April 16, 2007 1:54 AM

"The developers are usually just ordinary salaried employees of teaming companies"

Sounds like those guys could use getting themselves a better agent ;-)

Posted by: hugh macleod at April 16, 2007 2:00 AM

I think it largely depends on who the target market is for the particular bit of software. Most of the major open source projects (things like sendmail, linux, apache, etc) were designed by geeks for geeks. They are highly configurable and very often extremely stable.

The closer you get to non-geeks though the harder it has been for open source software to match up primarily because of the extra amount of time that is required to make an application not just functional but also intuitive and accessible to people outside of the geekerati. Fortunately that is all changing now that a.) developer tools for environments like OS X make it much easier to develop beautiful applications, b.) designers are playing a more active role in open source projects.

Ultimately though there is something else at play here. The people who love Microsoft (or any large vendor for that matter) use the tools and rarely if ever exceed the limits of what the tool was designed for. When they do they tend to find workarounds and move on. People that dislike vendors like Microsoft often were initially users of the vendors' tools and move past what the tool was designed for and realize that the tool makes it damn near impossible to do something beyond what it was designed for. Finally they go look for something else and sometimes they find it (and it may be open source) or they may end up building it themselves (if they are so inclined) and realize that it is somewhat useful and so they open source it (or release it as a product).

One point though - open source doesn't necessary equate to "hacking together something in your garage". There are many open source projects in the world that are well engineered, probably much more so than their vendor counterparts in at least a few cases. When you do everything in the open it becomes very easy to separate the good from the bad.

Posted by: Anthony Eden at April 16, 2007 2:06 AM

I think your insight rings true. Startups like Linux as they begin because there are no apparent up-front cash advances for the technology and their tolerance for a little extra fuss to save the money is much higher. But as you point out... as the company matures, business accountabilities reign. As soon as someone in the company is responsible for payroll, support, reliability, attracting/keeping new talent, their decision criteria changes and business concerns eat up the cost savings. I liken it to college student vs. parent mentality. WHen you're a college student and can live on pizza, beer, caffeine and adrenaline, you'll stay up until 3am or whatever it takes to make stuff happen. Then, you have kids (accountabilities) and you find youself spending your (now larger) disposable income to offset time (which you have less of) to make stuff happen more easily and more surely.

The beneficiaries are whomever has that lower tolerance for risk and time investment.

Commenting under my personal account today.

Posted by: Kris Fuehr at April 16, 2007 2:18 AM

Apache - runs 2/3 of the world's websites - along with mySQL/PHP. Heck - it runs Arrington's place!

Are you implying that Microsoft runs large companies on its technology?

Who says Open Source has to be about billionaires? It's more likely to be found in smaller companies. Microsoft's target market.

Posted by: Dennis Howlett at April 16, 2007 2:28 AM

RJH: I'm a MS developer (well, I work with MS tools). I've never paid for a compiler (neither has the company I work for) - so that argument is kinda invalid. (we are an MS gold partner, so we get enough MSDN licenses for all developers)

the CPU one is, tho - however, the chip company still needs to write a backend for GCC, and have someone with mad GCC skillz inhouse. But atleast it's possible.

SOME opensource scales really well. Some doesn't. Linux is always taken as the shining example, however 99% of those on the core kernel team are PAID to be there. It's just they are paid by IBM, Sun and a load of others.

Why spend money on MS stuff? Most 'cos it's REALLY good. Everyone whacks exchange, but it's highly integrated, and usually works really well. Most of the problems with it are a result of the incompetance of the maintenance, not the software itself.

I think it would take a large number of 10,000's of dollars - or a lot more if you take into account the development - to setup an equivilent open source system - if one was available. Sure you can do email and maybe calendering, but what about the other stuff - webmail, mobile, push email to mobiles, shared groups stuff, integration with PABX, etc etc. It's a massive product. And thats only ONE of their products. The amount of stuff you have to ADD to linux to get near the funtions of 2003 server is crazy - if they are even available.

Personally, I dont like Vista much - and I dont like XP much either (I run 2003 server on my laptop, tho I do develop server-side software). I looked at linux, however it was just so..... hard to get everything working. So I went and got a mac. With linux - and my experience with most other open source - I've had to work quite hard to get it to work. With MS software (and macos too), I dont - which is fine, 'cos I wanna do stuff, not maintain my laptop all the time.

righto.

Posted by: Nic Wise at April 16, 2007 2:52 AM

Dennis, is the context of your question whether Microsoft's web technologies run in large companies or just MS technologies in general?

Funny, perception is sometimes that MS targets smaller companies, but really, target market is "scale". Definitely in Large Enterprise and Fortune X00. Want some data on that?

Posted by: Kris Fuehr at April 16, 2007 3:06 AM

Nic, good point on the "paid to scale" comment. Whether it's paid out of the box or paid by the hour, someone pays, right?

have you ever worked with embedded stuff? Some of your comments on GCC parallel the discussions on BSP (Board support packages) for embedded space. It's hard to get support for all platforms and they're hard to manage.

I think it's interesting to compare - not sure how the story ends.

Posted by: Kris Fuehr at April 16, 2007 3:15 AM

Hello there. I'm a software developer who really digs open source software, and your question has left me thinking... And while I can't offer an answer or some useful insight now, I can point you to this blog post I have stumbled upon just now, titled 10 reasons for enterprises to use opensource. It doesn't answer the question, but at least might be an interesting reading.

p.d.: besides being a developer, I am also a big fan of gapingvoid.com. your posts are always interesting and the cartoons are just freaking cool. keep up the good work!

Posted by: ricardo at April 16, 2007 4:20 AM

I remember reading the Cathedral and the Bazaar - a sort of manifesto of the open source movement(http://en.wikipedia.org/wiki/The_Cathedral_and_the_Bazaar) back in the late 1990s thinking - this is phenomenal. Here is an alternative way of doing stuff (business is only a sub-section of that). It is a networked model, still evolving, that satisfies a lot more than shareholders. It satisfies those involved in it, i.e. the developers in open source projects. In fact, the whole thing springs from their satisfaction and 'their needs being met'. And that is something very few companies (and no corporations) can create and sustain.

Perhaps the MS Partner stuff is a pale imitation of the open source way of doing things (not in creation of products but in distribution). Btw, MS is involved in many open source projects themselves.

Just like throughout history there have been many fundamentally different ways of organising the society and government, there may be many fundamentally varied business models. E.g. there used to be kings, now mostly irrelevant. Who's to say that the same fate won't befall CEOs? Hopefully, it won't take a bloody revolution to get there...

But I digress. :)

Posted by: Adriana at April 16, 2007 4:23 AM

Kris - Hugh wan't asking about that kind of data point.

But I should have been clearer. Depending on how you define what technology runs a business (applications/DB), scale (I think complexity + numbers) and which geography you're in (US, EU. Asia-Pac, BRIC etc) then M$ is a no. 4 player - depending again on which numbers you choose to measure by.

Hugh didn't say web though I mentioned certain technologies and that's certainly where the action is right now.

Posted by: Dennis Howlett at April 16, 2007 4:27 AM

Just remember that JP Rangaswami blogged about 10 reasons for enterprise to use open source recently. And he is a man who ought to know. :)

Posted by: Adriana at April 16, 2007 4:40 AM

I've been a fan of Hugh's work for quite some time. But when I listen carefully lately, I can hear the sound of Gapingvoid jumping over a very large Redmond shark, with a Koolaide chaser. It's very intoxicating to think one might get a piece of MSFT action, because the action is very large, and even a small fraction of it could make you a Paul Allen or a Charles Simonyi. Heady stuff, indeed.

There was some discussion earlier about being a "Microsoft partner". Based on over 30 years in the computing business, I can tell you what "partner" really means in Microsoftian. It's a synonym for "food".

Posted by: Maggie Leber at April 16, 2007 4:42 AM

One really good reason to avoid open source is the Microsoft/Novell deal.

Essentially the open source fanatics attempted to have SUSE and mono (open source .net) and Miguel Icaza excommunicated for making a deal with the devil (Microsoft). The hate that poured out was incredible.

I would NEVER trust that kind of fanaticism in my datacenter.

What would happen to a business if it bet the company on the wrong distro - one that suddenly was hated by the faithful for doing something wrong.

A 2nd really good reason is that open source is essentially a dishonest proxy war against Microsoft funded by IBM and others.

Posted by: NotParker at April 16, 2007 5:10 AM

Hey Maggie, fair enough, and thanks for the kind words, notwithstanding.

Yeah, I got a lot of "shark jumping" comments both when I started the English Cut project, and the Stormhoek project. It goes with the territory. And yes, it isn't risk-free, either.

But that's what keeps it interesting...

Posted by: hugh macleod at April 16, 2007 5:12 AM

Hugh - away on vacation but found an internet terminal while passing through Doha. The terminal was running XP on a ThinkPad :)

Not sure if we're debating the right question here and it seems the old MS vs open source chestnut is the hot topic for people. As I think Adriana said, Microsoft is involved in open source projects. check out http://port25.technet.com/

I think the more interesting conversation in light of microsoft partners was technology companies and their profitability selling open source vs. commercial software. I gotta go run and catch a flight but I liked some of JP's list - if I were setting up a business to sell tech would I go with commercial or open source as my offering? I have a bias so i'm not the right guy to answer but keen to see the discussion evolve :)

Posted by: steve clayton at April 16, 2007 5:22 AM

ehhh, being a Microsoft Partner myself, I can safely say I'm not treated as food. Whenever I have questions, it's only a phone call or e-mail away and I get the information I need to make an informed decision. Employees, like Steve Clayton, are going out of their way to make personal connections, leading me to believe there's a growing air of change in the way Microsoft will be conducting it's affairs (at least in regards to their Partners).

I can guarantee you that I have gotten more from Microsoft than they have asked of me. Microsoft has gotten $300 of my earnings so far, which went to the purchase of an Action Pack, worth considerably more than $300. I've gotten hours upon hours of free training, virtual servers/desktops online for hands on training, etc. which allowed me to pass the 70-282 Exam to qualify as a Small Business Specialist. That alone has netted me several clients that were in negotiations with other service consultants.

They may have had that mentality awhile ago, I can't say, but the picture you paint is definitely different than how they treat their Partners now.(at least in my experiences) If I sign up for a webinar, I get a phone call a week before, and the day before the webinar to remind me. This is something I don't pay them a dime for, and they still take the time to give me a friendly reminder. That shows concern for the partnership imho.

Posted by: James at April 16, 2007 5:31 AM

If you're question really is "how does Open Source meet the needs of shareholders and CEOs" I would have to tell you I have no idea. And like most "open source people" I really don't care. Open Source solves a lot of problems, and even if it's not better at it then Microsoft (although I firmly believe it is) it is certainly a hell of a lot more enjoyable. The freedom, the openness, the global exchange of ideas and solutions is such a breath of fresh air compared to the stale controlled environment of the MS-world.

But if your real question is "how come MS still makes money?" I would have to say it's just fear an inertia on the part of it's clients. The MS-way stands to Open Source as traditional media stands to blogging.

Posted by: Rick at April 16, 2007 8:27 AM

Hugh, I have to agree with you, you don't know much about software.

Are you aware that your GapingVoid blog is driven by PHP (an open source pre-hypertext parsing language) and MySQL (another open source project, database system)?

It's okay if you don't know the ins and outs of software, you have a lot of company, as many of CEO's and Shareholders know little about software either.

Hugh, did you install Moveabletype (the software that drives the Gapingvoid blog) yourself? Or did you have someone do it for you? I suspect you had people for that. Most CEO's and Corporations have people for that too, they are called geeks or IT departments. They invest or pay people to do the geek thing for them so they don't HAVE to learn much about software. They can stick to more lofty things like production, marketing, accounting, P&L, competing for and developing their business.

There are two ways to invest in technology to leverage your business:
1) you can license the use of proprietary software and invest time (and sometimes money) learning how to use it.
2) you can download, install, configure opensource software and invest time (and sometimes money) learning how to use it.

The big difference is: when your business or business model does not fit into the pretty little boxes software designers of proprietary software, you and your business are held captive to the systems provided to you, and you may wait for change or your software provider to adapt to your needs (if that ever happens). With opensource software, I can hire geeks to CHANGE sourcecode, or expand curent software functions to fit my business' needs. When I have a need, I am free to change or modify the systems my business is based upon. I can't do that with Microsoft CRM, Word, Excel, or Vista. I'm sorry Microsoft, I prefer to move my business at the speed of my needs, not yours, and as such, your systems will not restrain or restrict my companies' progress (and ultimately my bottom line).

Hugh, the question you need to answer is:
Does software drive business development, or does need drive software development?

Posted by: Darcy Moen at April 16, 2007 9:05 AM

@ James.
I've worked for Microsoft since 2000 and for the 5 years before that I ran a small partner. In those days I felt lower than food. Since I've been with Microsoft I've heard a lot of people who are trying to change that, but since I don't work in that area, I don't know if that is working. It sounds like it is. I keep telling people that Microsoft today is not the Microsoft of the late 90s. Some People (Maggie) don't beleive that we can change.

Posted by: James O'Neill at April 16, 2007 9:42 AM

How well does provoking two opposing interest groups promote a conversation across the blogosphere?

Posted by: John Dodds at April 16, 2007 9:49 AM

The strength of Open Source lies in its innovation around the outdated licensing model. That's where OS delivers - plenty - to CEOs and shareholders.

Posted by: James Cherkoff at April 16, 2007 10:27 AM

"If Open Source software is free, then why bother spending money on Microsoft Partner stuff?"

Simple. The cost of the software license isn't the end of the story.

Let's take two sets of people out of the picture. The feeble IT manager who thinks "No one gets fired from buying from the big player". And the "Anyone but Microsoft" Biggot. Neither actually makes a decision.

If you're talking about the comparison of two sets of desktop software how much more can people do with X Vs Y ? In business, over the 3 year life most people work, someone has to be less than 1% more productive to pay for cost of the Microsoft software. (If you're a lawyer billing at £200 per hour it's a LOT less than 1%). In the home Apple sell at a premium because - they argue - they can do things better / more nicely. You could ask Apple customers why they pay more than Windows ones - their answer would be "because it's worth it". If you ask Windows customers "Why not linux" - the answer is basically the saving isn't worth it.

For deployment, infrastucture and servers you look at support, solution availabilty (partners etc) ease (cost) of maintaining it and the people who do go with Microsoft conclude that overall story is better with Microsoft. And the people who don't figure the story is better with Linux, Old-school Unix, or (yikes) mainframes.

Posted by: James O'Neill at April 16, 2007 10:39 AM

There's a lot that Microsoft does right to support their direct customers, but despite their best efforts I think the channel lets the smaller customers down sometimes. Your question is quite a good one, as it acknowledges that open source software is not about saving costs ("free as in beer") it's about retaining the freedom to modify the software to suit your purposes. This will ultimately provide a more viable infrastructure.

Now, since open source isn't really an "industry" or a single company it's apparent that (at the moment) it isn't as focused on meeting the customer's needs out at the sharp end as businesses are. Nevertheless if you look at the way the Apache web server provides the infrastructure for a huge number of service providers as well as large private companies I think that the way forward has been mapped out.

This is what has been making Microsoft nervous (starting with the evidence of the infamous Halloween papers, and more recently leading to their focus on "software as a service"). They have a duty to provide a return to their stockholders, and yet they mis-perceive open source as "the enemy". Their real enemy is their own size, which has led to an inability to be as fleet of foot as smaller competitors, or to innovate as quickly as, say, Google.

Remember when IBM had 75% of the world computer market? They are still a significant business, but they no longer dominate the whole industry. Microsoft have saturated their market, and must adjust to being the first IBM of the twenty-first century. Open source will continue to develop and will meet the needs of its user base better as time goes by. It needs the involvement of a larger section of the community before it meets their needs. So, to answer your question: "It will".

Posted by: Steve Holden at April 16, 2007 12:11 PM

@James O'Neill

I've heard how MS used to be, I don't doubt that at all. I know that in today's Microsoft, as far as the small business is concerned, they make me feel like I'm a valued member.

It's the little things, like the phone calls regarding training or the newsletters of partner only promotions, or giveaways for being part of the first 100 to act on filling out feedback forms on how Microsoft is meeting the needs of the Small Business. Requests for feedback is a major indication they are working on changing their ways and it's a good feeling they are asking "me" how I view them.

I got a phone call at 8am on Friday by an honest to god live person informing me of a new product that was being released for testing and wanted to know if I'd be interested in having a CD shipped to my house. Things like that make you feel valued.

Anyway, I think I'm off-topic here (don't shoot me!) so I'll close this with Microsoft is doing a great job in involving it's Partners.

As for the OS thing, I'm too set in my ways at my age to want to fool with Linux, etc. I played with it several years back and just found it to be too much hassle to be worth the little bit of cash I was saving. That extra expense was well worth the full head of hair I still have on my head. The clients I serve are end-users and small businesses that don't need specialized applications, so I'll be sticking with Microsoft for filling their needs as I'm very comfortable with the products and can serve their needs better and faster. If I come across a client that needs something special that MS can't provide, I'll pass them on to my good friend who specializes in Open Source solutions. He does the same for me, so it's a good synergy.

Posted by: James at April 16, 2007 12:41 PM

This should be closer to home... Tablet PC. So long XP/Vista, hello Linux

Posted by: Adriana at April 16, 2007 2:47 PM

ERROR in my above post. I've worked for MS since 2000. Lord knows why I typed 2007.

How Microsoft WAS in the late 90s and what Microsoft ASPIRES TO BE now are very different. What I was trying to say (James) was it's really nice to hear we're being what we aspire to be.

--------

[Hugh: James, I've fixed the typo, no worries....]

Posted by: james O'Neill at April 16, 2007 3:01 PM

"What/How does Microsoft have to do/change if it wishes to survive the next thirty years"

That's an easy one: GET BOUGHT BY GOOGLE

Microsoft would need to truly embrace Free Software (not just "Open Source", that is NOT enough), shed all the "legacy mindset" about software development and release planning, strongly educate it's user base on the new mindset, and accept a substantial reduction in profit for the mid-term to survive in the long term... err, wait a sec...

Since that last part is mostly impossible, I don't think Microsoft can survive, not really.

NotParker: "What would happen to a business if it bet the company on the wrong distro"

What a pile of FUD!

It's actually funny, because NOTHING would happen; just switch to one of hundreds of other distros. Yes, they ARE actually quite compatible among them. I myself have a couple of success stories about switching distros on live systems. No, there is no comparable counterpart in the Microsoft world, sorry guys.


Posted by: JarFil at April 16, 2007 5:45 PM

Reframe the question: If Open Source software is free, then how can Microsoft make the partner experience worth the money?

Posted by: John Dodds at April 16, 2007 6:03 PM

Looks like Hugh wants to be the next Scobleizer.

Posted by: Dean at April 16, 2007 7:37 PM

Confined to web & blog site use for now ...

I suspect that open source projects like Drupal will get many more useful modules and plug-ins and widgets developed that will help many users do much more ... and that such applications will become much more scaleable over the next "x" years.

A fine example, as well, of much paid service work being wrapped around and stitched into open source software.

Posted by: Jon Husband at April 16, 2007 7:41 PM

Does the tool make the man, or does the man make the tool?

One can buy a set of Ping's, play a round of 18 on the links, and post strokes on a scorecard. Conversely, one can buy a set of no-name hack clubs at a tag (garage) sale, play the same 18 hole course, and also post strokes on the score card. Is the difference in strokes between the score cards a result of the skill of the player, the clubs used, the course, or course conditions?

If it is the club, then we could all play like Tiger Woods simply by buying the right clubs, right? If it is the player, then any old club in the bag would do. THAT is the entire argument at play folks: it's not the club, it's not the course, it's not the player, it's the SCORE that counts.

Opensource VS Microsoft: who cares? I could care less what clubs I have in the bag and who made it, I just want the right club in my hand when I NEED to make the shot! If I don't have the right club, I'll stop into the pro shop and buy the one I need (Microsoft). If the club doesn't exist, I'll commission the golfsmith to make it for me (Microsoft or Opensource). If I don't know how to swing the club, I can hire the golf pro to teach me how to use it (consultant). I can retain a Caddy to carry my clubs for me (consultant or employees). Heck, I can even sit in the club house sipping Gin and Tonics and have others play a round for me (CEO's and businesses).

The real value comes from the score the club generates. Do we really care who swings it or how it's made, just as long as we don't leave the clubs sitting idle in the corner of the garage!

In the open source world, anyone can innovate as the tools are there for anyone who wants to pick them up and create. Microsoft (to it's credit) has done some innovation, but I don't consider the firm to have an exclusivity on innovation. Are they as innovative as they could be? Dunno. Going from DOS to Windows, in my opinion, creatively adapting the Apple GUI interface was not innovation, but a reinvention or re-integration of concept that boosted use-ability. Kudos to Apple and Microsoft for it, but I can't give credit to MS for innovation on that point.

I CAN give MS credit for being wonderful marketers! No doubt, MS can sell, and sell like hell. They generate sales, and they can drive sales. They are the predominant sales system out there. They will remain a market leader as long as SALES and DOLLARS are the measurement used on the scorecard for their course they are playing. In Open source, does money really matter? Consider this: perhaps money is not the unit of measurement open source uses to determine the score in THEIR game!

How does one compete with FREE? How does one compete with people who don't care about money once the hosting and bandwidth bill for the next three months is covered? There is much more driving open source than money.

Do I rely on Microsoft to drive my companies' innovation and business growth? No. From personal experience, their lack of innovation in the direction I wanted to take my company limits my companies' growth. I found a better selection of tools in the open source world that fit my business needs better, and I also employ Microsoft apps in my business.

It's a blended application approach. My clients have concerns about 'best fit' of applications to their business processes. They are also concerned about 'buying the wrong application'. "Buying the wrong tool" is as limiting as waiting for innovation to occur.

Some of my clients are concerned about the Open Source perception, and open source support. I have a client downstream that does a billion dollars per year in sales, but is scared to death about deploying open source tools formally in their day to day business. Yet, the same downstream client has absolutely no problem paying me to deploy or utilize open source applications in the services I supply to them. It appears that as long as they have some one to hold their hand, or take responsibility for the use and performance of the system, that's fine. It's like some companies are only asking : 'make sure I can play my round of 18, and I'm cool with whatever you use'.

Wonderful. I can make a living as a chauffeur, providing the car is ready to drive whenever the owner (or who ever is paying the lease on it) wants to drive it, or, I get paid to drive the car for the client when they want to ride in the back. Occasionally, I can take it out on the track for a few laps myself whenever the client doesn't want to use it.

Who cares what car is in the garage and who made, as long as it's there when we need to get where we want to go. I could care less that Henry Ford didn't invent the assembly line, but I do care that he perfected the way to build cars. As long as I'm allowed to work on the cars, tweak performance of the engine, and get where I or whoever needs to go, when I or the client wants to go, I will be a happy digital mechanic (and I assume so will others).

Posted by: Darcy Moen at April 16, 2007 7:42 PM

Your cartoon and the first formulation of your question both contain false premises:

- That all of the software required by any business can somehow be delivered as shrink-wrapped mass-market software (whether from Microsoft and their ISVs*, or otherwise) ready to run. This is simply not true. Many business (most/all businesses, beyond a certain scale) require IT professionals, often as permanent staff in an IT department. For any business for which this is true, there is a considerable amount of internal engineering going on. Dismissing something that was built rather than bought, whether entirely or in part, as a "science project" makes for a great jab, but utterly misunderstands what most IT professionals spend their entire working lives doing, and indeed, what many of Microsoft's own products are purchased to do. That some of an organisation's internal systems and infrastructure were built, frequently on Microsoft products, does not indicate a lack of business acumen.

- That all software built by Microsoft's ISVs has OSS alternatives that do the job just as well. Stated this way, the absurdity is obvious. Doubtless there are ISVs pedalling closed software to suckers but in most cases businesses are using OSS where it suits them to do so and software from Microsoft and its ISVs where it suits them to do so. The margin where there is direct competition is important, but small. The question could be rephrased at that margin, but the latter formulation ("next 30 years") is more interesting.

That latter formulation is of course the better question and seemed trickier to answer until I noticed your "Penguin" post and realised what you hadn't grasped. The answer is simple, and should be rather obvious to the author of the Hughtrain: Microsoft needs to recognise the developers who produce OSS as market rather than competition and engage with them (converse with them :-)) accordingly.

That OSS projects may prove less readily digestable than "partners" do is the real "next 30 years" challenge.

- Raz

(*) Yes, I chafe at the term "partner" in this context. _Anyone_ who is a Microsoft "partner" is one of:
(i) Operating in too small a market for Microsoft to play in, in which case they are too small to have a relationship that could reasonably be construed as a partnership; they are simply a customer. The vast majority of "partners" fall into this category.
(ii) Operating in a market in which they have monopoly power and are strong enough to thwart threats not only from potential competitors, but also from Microsoft's own attempts to use its considerable leverage for its own advantage, in which case they are indeed in partnership; there are perhaps 50 organisations in the world for which this is true.
(iii) Operating in a large enough market for Microsoft to play in and without monopoly power in which case they are either (a) a future acquisition target and may in a limited sense be regarded as partners in the interim or (b) future roadkill, in which case any sense of "partnership" is a delusion.
Of course, this analysis is not limited to Microsoft; any rapidly growing large corporation will acquire markets as quickly as it is able to.

Posted by: Raz at April 16, 2007 8:09 PM

Jeeze, Raz, you spent 30 minutes typing away without even COMING CLOSE to addressing the issue I'm talking about ;-)

Posted by: hugh macleod at April 16, 2007 8:29 PM

Raz didn't type that, he used OS Monkey Type version 6.34. 1000 virtual monkeys and all that... ;-)

Posted by: Anthony Eden at April 16, 2007 9:40 PM

@Raz

I fall under Point #1 in your definition of a "Partner"

If Microsoft views me as a customer, then why do they go out of their way to get me the tools needed to drive sales on their behalf? Why am I always getting reminders about the free services they provide? I have yet to be approached by Microsoft to purchase software/products. Not once. Other companies flood me with product offerings that they want me to buy. Microsoft doesn't. They give me what I need to drive sales, which ultimately some ends in MS's coffers, but also puts some in mine as well. I've come out ahead in my Partnership with Microsoft to this point, I wouldn't say I'm a customer based on that. Customers end up on the negative side of the money equation, not ahead.

Posted by: James at April 16, 2007 9:48 PM

I think the answer is this: Google has more money than G-d. If running Microsoft software improved their business, they would do it, regardless of cost. But they continue to run open-source operating systems on low-cost hardware. Meets the needs of Google shareholders, Google CEO's, but far more importantly, meets the needs of Google users.

Posted by: Stephen at April 16, 2007 11:31 PM

The turkey doesn't feel like food until just before Thanksiving, either. :-)

I'm glad to hear there are so many people at Microsoft who want to see Microsoft change. I don't "believe it's impossible"; in fact I *know* it's possible, because I've seen IBM (the original "Blue Monster") go through exactly the same kind of transformation, in response to having their asses kicked.

By Microsoft.

So I do believe it's possible. It *could* happen, and Linux, Google, Firefox and the like may be the catalyst for Microsoft that the PC and Windows were for IBM.

I just haven't seen it happen yet. And manifestations like Mono and the MSFT/Novell patent trust and SCO v. IBM don't do much to convince me that the leopard has changed his spots yet...and in fact, a lot of the "this open-source stuff isn't ready for prime time" line sounds very familiar.

Last time I heard it, it was IBM talking about microcomputers...

Posted by: Maggie Leber at April 17, 2007 1:11 AM

@Raz

I fall under Point #1 in your definition of a "Partner"

If Microsoft views me as a customer, then why do they go out of their way to get me the tools needed to drive sales on their behalf? Why am I always getting reminders about the free services they provide? I have yet to be approached by Microsoft to purchase software/products. Not once. Other companies flood me with product offerings that they want me to buy. Microsoft doesn't. They give me what I need to drive sales, which ultimately some ends in MS's coffers, but also puts some in mine as well. I've come out ahead in my Partnership with Microsoft to this point, I wouldn't say I'm a customer based on that. Customers end up on the negative side of the money equation, not ahead.

Posted by: James at April 17, 2007 1:45 AM

Few large corporate decision makers know or care about the inner workings of software. They want something that "just works" and a toll free number to call when something doesn't work.

Microsoft speaks 'Big Company' and has well developed standards/certifications/training all of which makes them very corporately safe.

"No one (at large corporates) ever gets fired for buying IBM, and Microsoft"

To succeed in the next 30 years Microsoft need only stay ahead of corporate decision makers' fears. They are very good at this. But, don't expect earth shattering innovation from the same group that must be 'safe'.

Posted by: Ernie at April 17, 2007 5:03 PM

Here's the uncomfortable truth that everyone dodges around: They're all dirty, dirty communists at heart.

They don't care about money intrinsically, they wouldn't be in Open Source if that was their first concern. They want to get paid, but mostly just enough so they can keep doing what they really want to do, which is to make software.

At least, that's how this dirty, dirty open source advocate thinks about it.

Posted by: Danno at April 17, 2007 6:55 PM

Hugh: I deeply respect the blog related work you've done with English Cut and Stormhoek, but in each of those cases you were creating affirmative stories forward. Here you're regurgitating old Microsoft messaging under the guise of "starting a conversation" which perpetuates a theme they're too happy for their customers to believe. It's disquieting.

http://stephesblog.blogs.com/my_weblog/2007/04/gaping_void_and.html

Posted by: Stephen Walli at April 17, 2007 7:37 PM

Stephen Wall: Point taken. Hey, I'm new at this and trying to find my feet. Just like I was with both English Cut and Stormhoek. People forget the early flak I took on those two in the early days...

Posted by: hugh macleod at April 17, 2007 7:48 PM

@Danny

First off all, I think many OSS advocates, governments and economists would consider Microsoft to be the big 'communist' leader. They represent the 'top-down' 'we-decide' approach, whereas the OSS world represents the 'bottom-up' approach.

But you did raise an excellent point. Why do people (seem to) work for free? Capitalism is based on the premise that (financial) reward is the only way to motivate people to innovate and lower the price. I don't think that premise is wrong. There have to be rewards, but they don't have to be financial.

Capitalism is not an ideology, its a belief. All communistic countries eventually turned completely corrupt and the only way to get anything was to _pay_. Capitalism is not a choice, its a fact of live. You can accept it or fight it, but its not going away.

So, what is going on? Why are programmers working for free? What are their 'rewards'?

Perhaps it has to do with their mind-set:

1) Programmers are not neo-conservative imperalists. They consider their work their hobby and want to do no harm. They want to play fair. They, like most technically schooled persons, feel responsible for the world around them.

2) They are both very demanding consumers and producers of software. They prefer to live and use an infrastructure that 'works'. It might be their source of income, but its also their hobby and passion.

3) Socially, every one around them will treat them as ambassadors of software technology. They are being called to explain every usability error and incompatibility. Which is off course not fair.

They, at heart, are in favour of capitalism and free markets. As long as it is a free market. They can even tolerate the fact that the free market is sacrificed by the vendor-lock-in to have one common infrastructure.

But, with being in charge of this technical ecosystem, comes great responsibility. Instead of being the morally superior leader of this ecosystem, they turned out to be a brutal dictator exploiting every one dependent on that ecosystem.

The result of too many managers and marketeers and being located in a general business culture (i.e. neo-conservative corporate america) that is border-line criminal. Its about revenue and profit, disregarding morality and ethics.

But even all that, could be forgiven. Most of us still buy products from those companies that exploit other people. We still buy chocolate from south-america and india, when the cacao plantages employ work-for-free-or-ill-kill-you-slaves. aWe still buy clothes produced in India and China, when they are being sewed by kids. So, although, the ethics upset us, we are not setting up our own clothing factories, nor are we producing our own chocolate.

So, why do so many programmers embrace OSS , just to get rid of the Microsoft ecosystem?

Because we are passionate about progamming.
The software microsoft produces SUCKS. I'm not saying that OSS is beter (yet?), but the true incentive of OSS is the feeling it could be so much better, if only, the design choices wouldn't be limited by the vendor-lockin strategy and marketing agenda.

So there you have it. That is why people work for free.

What can Microsoft possible do to remedy this?
- embrace open standards, publish your own standards, and keep the patents _open_ for hobbyists and small competitors.
- allow any part of you operating system to be customized.
- sell different components of Windows separately, so external companies and hobbyist can create specialized versions. A windows server that is just a router, a kiosk cd, a live-cd for gaming, etc. We want to experiment. We want to tweak.
- fire your managers and make the marketeers report to the programmers.
- do not make any design decision based on market strategy. No vendor-lockin, no useless branding.
- drop your own vendor-lockin standards (directx, office-documents, win32 api, wma/wmv) or publish them and keep the patents open for competitors.

We were not aware of this issue, when we made you king. We, wrongfully, assumed you cared about us.

You say you've changed your ways. But what about the current and future plans:

- dropping openGL support in favour of DirectX: locking the gaming market with windows-only api
- trying to kill the well established PDF format: locking in the printing market with a windows-only document-format
- not supporting ODF in Microsoft Office by default: locking in all small and big office workers in the a windows-only format.

Microsoft has long stopped innovating. Instead they copy infrastructure that already exists and lock it into the windows eco

Microsoft is the real communist here. And the vendor-lockin the new berlin wall.

Tear down this wall.

Posted by: Ralf at April 18, 2007 12:35 AM

Nice speech, Ralf. I applaud you idealism.

Of course, what I find most interesting is how you didn't give your last name, a URL, or any indication of where you work.

Nobody wants to be known at the office as the guy who goes around saying Microsoft tech sucks and the people they work with are semi-criminals. Especially if the company you work for is one of them [which I'm guessing is a distinct possibility].

Call me old fashioned, but identity and accountability matters. Whatever you think of Microsoft, at least their work has their name on it. Too bad you don't think this should also apply to you.

Posted by: hugh macleod at April 18, 2007 10:32 AM

Hugh:

> Jeeze, Raz, you spent 30 minutes typing away without even COMING CLOSE to addressing the issue I'm talking about ;-)

(chuckle)

This suggests that I may have missed the issue entirely, but I thought that the strategic question "What/How does Microsoft have to do/change if it wishes to survive the next thirty years" was the important part of what you were talking about. If so, my answer was:

> Microsoft needs to recognise the developers who produce OSS as market rather than competition and engage with them (converse with them :-)) accordingly.

Is this not the issue that you're talking about?

(The rest of my comment addresses Micosoft's, and your, misframing of the situation. Reframing seems to me to be an essential part of surviving the next 30 years, so while it's a lot of detail it is somewhat relevant.)

More broadly, OSS development is a means of making software not, prime facie, a means of making money. From the standpoint of shareholders/CEOs, it is therefore a tactic, not a strategy (whereas developing software and licensing it for a fee has been a viable strategy for decades). For Microsoft to position itself strategically in opposition to a tactic, particularly one that is being used to great effect by the very sorts of people that it has always depended upon to grow its market (developers), is an error. For Microsoft to sustain strategic opposition to this tactic would be a grave error.

So, continuing to bang away at what I think the issue is (or should be :-)), in order to remain relevant for the next 30 years, Microsoft needs to find a way to engage with, and ultimately to sell to (/partner with(*)), OSS developers. This will require engaging in a way that fits the values of those to whom they sell. This is tricky:
- for many within Microsoft, the "write software, maintain exclusive control of it and sell licenses" mentality is dyed in the wool
- for a large number of OSS developers accepting the level of control that Microsoft currently seeks over its developers is anathema.
Quite how it might do this is not clear to me, which in turn makes answering the question about what value can Microsoft deliver to shareholders/CEOs difficult. Not impossible, just difficult.

Was my failure to address the value to Microsoft's-customers'-shareholders what you meant by not coming close to the issue?

(*) In this case I really _do_ mean partner, primarily in the sense of not reflexively seeking to posess the whip hand.

Posted by: Raz at April 18, 2007 1:54 PM

Thanks Raz, it's much clearer to me now.

"So, continuing to bang away at what I think the issue is (or should be :-)), in order to remain relevant for the next 30 years, Microsoft needs to find a way to engage with, and ultimately to sell to (/partner with(*)), OSS developers. This will require engaging in a way that fits the values of those to whom they sell."

Yep. I would agree with that.

I suppose I'm thinking, what the techies like, what the business likes and what Wall Street likes are not always the same thing. Most of the commentary here has been from techies, but that's not the only constituency I think about. You could argue that maybe it should be...

But I'm guessing the average techie has to make the same compromises MS does i.e. how to do what you love in a meaningful way, and still get paid.

Posted by: hugh macleod at April 18, 2007 2:01 PM

James:

> If Microsoft views me as a customer, then why do they go out of their way...

Umm, because they are good at looking after their customers?

> I've come out ahead in my Partnership with Microsoft to this point, I wouldn't say I'm a customer based on that. Customers end up on the negative side of the money equation, not ahead.

Erm, econ 101:

- Customer: one who purchases
- Consumer: one who consumes, often one who purchases to consume
- Consumer goods: goods produced for consumption
- Producer goods: goods produced for the production of other goods

Note that a customer need not intend to consume the the goods that (s)he purchases, they can also intend to use them for producing other goods of value for sale to others. If you're purchasing products from Microsoft for the purpose of operating your business, you're generally purchasing producer goods, not consumer goods. That you make money out of this process is still consistent with your being a customer.

If your concerns (as an individual business, not as part of a class of numerous businesses with the same concerns) were sufficient to cause Microsoft to make strategic alterations to its business, then you could reasonably be described as a partner. They're not, so you can't.

Posted by: Raz at April 18, 2007 2:03 PM

Ernie:

> Few large corporate decision makers know or care about the inner workings of software. They want something that "just works" and a toll free number to call when something doesn't work.

This is error is very common, yes.

Some years ago, I made the case at length to a former employer for letting go of concern about "support" when using a Linux kernel over an Irix kernel (specifically that the effort involved in solving problems in the Linux kernel was going to cost less resource and take less elapsed time (and thus less time to market) for their engineers than even spending the time explaining problems to SGI, much less getting them fixed). I was unsuccessful. Fortunately events overtook them and the decision to move to Linux was essentially made for them. I recently had the chance to discuss the current situation with former colleagues and, as predicted, most of the nightmarish stuff that they were struggling with was now considerably easier to deal with.

In this particular case, pursuing the feelgood factor of a tollfree number to call (the "throat to choke" mentality) was materially harming the business. Nonetheless, it's a real and common motivator for decision making; to the extent that Micosoft can tap into the "no-one ever got fired for buying" approach, it'll retain much of its existing business.

I believe that Hugh's looking at a larger concern, even if he doesn't see it yet.

> To succeed in the next 30 years Microsoft need only stay ahead of corporate decision makers' fears. They are very good at this. But, don't expect earth shattering innovation from the same group that must be 'safe'.

Spot on, for fairly small values of "succeed" (e.g. not collapse).

Posted by: Raz at April 18, 2007 2:13 PM

I think it's good you don't know much about software. MS has plenty of techies. What they don't seem to have is many people who can help them relate to the outside world. The Blue Monster is a brilliant example of a social object that inspires people and gives them a little hearth to warm their hands around whilst they discuss what's really on their mind. Splendid, just splendid...

Posted by: James Cherkoff at April 18, 2007 3:09 PM

> Thanks Raz, it's much clearer to me now.

You're welcome! You've been educating me for some time; I'm happy to return the favour to the extent that I'm able.

> I suppose I'm thinking, what the techies like, what the business likes and what Wall Street likes are not always the same thing. Most of the commentary here has been from techies, but that's not the only constituency I think about. You could argue that maybe it should be...

I don't think so. The opportunity here appears to me to be to make progress on structuring situations that benefit developers ("techies", but specifically those who are productive contributors to OSS), and Microsoft's shareholders and Microsoft's customers' shareholders all at the same time, to advance the interests of multiple constituencies simultaneously.

> But I'm guessing the average techie has to make the same compromises MS does i.e. how to do what you love in a meaningful way, and still get paid.

Right. So, coming up with a means to get everyone paid (roughly: meet Microsoft's customers' shareholders' desire for profit and then find a way to distribute the value created so that everyone stays on board) is probably essential.

Can Microsoft et al provide valuable products/services to its/their customers to support said customers' use of OSS within their IT investments? To what extent can this be achieved by creating new value for customers (either increased sales or greater efficiency) rather than by simply taking over from encumbent suppliers/staff? The latter is sound commercial activity, at least when not achieved through abusive/illegal means, but does not usefully grow the pie and, of course, treats developers as competitors not partners/market.

In such situations, can Microsoft resist touting its closed alternatives to encumbent OSS powerhouses? (I'm thinking particularly of IBM swallowing its pride and dealing with Apache, rather than continuing to flog Domino Go.) If it can, then perhaps there's hope. If it can't, if the drive to extract as much cash as possible from a customer rather than to create as much value as possible prevails, then Microsoft is likely to continue to struggle with this.

Posted by: Raz at April 18, 2007 3:38 PM

@Raz

I'm not so naive to think that little old me will ever, ever influence Microsoft's business practices. That, however, doesn't change that they don't make me feel like they're treating me as a "customer". Microsoft is very big on wanting feedback from it's "Partners" on how it is handling our concerns.

We could play semantics with the word "Partner" all day and it won't change the fact that Microsoft is concerned on how it is meeting it's "Partners" needs. One person submitting feedback on what they may perceive as an issue more than likely won't change a company the size of Microsoft's policy (other companies the size of MSFT have similar policies I would bet), but feedback from multiple "Partners" noting the same breakdown would likely warrant a hard re-look into that policy. We'll just agree to disagree on the whole Partner/Customer thing.

One aspect that hasn't been mentioned in the MS/OSS issue, is if the OSS IT Pro's salary offsets any savings gained by the software. I don't have any numbers other than that my OSS friends tell me that IT Pro's that are proficient in OSS Solutions command a higher price for their services. Genuinely curious regarding this side of things because I'm not entirely familiar with average salaries of OSS proficient Technicians.

Posted by: James at April 18, 2007 7:06 PM

@Ralf
You need separate "idealist commune dweller" from tyrants. I don't think Danny was equating the OSS community with Stalin. (I don't think Microsoft is a tyrant BTW).
"Programmers consider their work their hobby and want to do no harm. They want to play fair. They, like most technically schooled persons, feel responsible for the world around them."
Hmmm. Not all programmers are hippies. Some are professionals - they do a job and feed their families. Programmers are just as likely as anyone else to want to see fair play and do right by the world; not more. Not less.

You say
- drop your own vendor-lockin standards (directx, office-documents, win32 api, wma/wmv) or publish them and keep the patents open for competitors.

We do publish them - that's the whole point about the Win32 API and direct X - we want people to code for them! I'll bet you've never even looked at the tons and tons of stuff on MSDN.
You complain about "dropping OpenGL support in favour of DirectX" Actually Direct-X came about because people were still coding games to the hardware and not using OpenGL. Office Documents are an Ecma standard, and we've given the world a license to use anything we've patented to develop around the format. Anyone who wants to make a music player can license WMx ... Is that true for Apple's or Real Networks' formats ?

You say
- sell different components of Windows separately, so external companies and hobbyist can create specialized versions. A windows server that is just a router, a kiosk cd, a live-cd for gaming, etc.
We do that with server 2003 Web-edition, Storage edition, Windows CE and Windows embedded - these aren't targeted at the hobbyist.

- We want to experiment. We want to tweak.
- allow any part of you operating system to be customized.
No. This isn't a science project. It's a business.

You say
- fire your managers and make the marketeers report to the programmers.
- do not make any design decision based on market strategy. No vendor-lockin, no useless branding.

That's a lousy business model. You can either write what programmers want to write, and try to persuade people that's what they want to buy, or find out what customers want and get programmers to write it.

You talk about
"- trying to kill the well established PDF format: locking in the printing market with a windows-only document-format"

It will be interesting to see which way the world goes. XPS is an XML specification to do what PDF does with a Binary format. Does the world want such a specification ? Impossible to say. Will it be implemented on other platforms ? No one knows, but that's the whole point of using XML. You're not consistent when say we should let anyone use office formats without applying the same standard to Adobe - who threatened legal action if we put "Save to PDF" in the box with office 2007.

You talk about
"- not supporting ODF in Microsoft Office by default: locking in all small and big office workers in the a windows-only format. "
Actually it's the other way around. ODF doesn't support the things that office has been doing for years. Novell and others are supporting Office Open XML in products which run on Linux... So office file formats are emphatically not Windows only.

Posted by: James O'Neill at April 19, 2007 6:22 AM

Mr. MacLeod wrote,
"I already know what Microsoft's detractors will say: 'There's no reason whatsoever. $40 billion per year is totally wasted.'

This, however is not a very satisfying answer, simply because it doesn't quite ring true. Otherwise there'd be a lot more famous Open Source billionaires out there, being written up in Forbes Magazine or wherever. And Bill Gates would've been ousted years ago."

Seems to me there's an unexamined assumption here, or even a set of assumptions. Specifically,
1) Free markets work the way free-market economists say they would in an ideal world
2) Markets in general are in fact free, and specifically
3) There is no significant market failure in the software industry

All those things have to be true before the reality of what succeeds and gets sold corresponds to what the best offering would be. And the fact is, none of them happens to be true.
On (1), the neoclassical efficient market depends on a number of very basic conditions that don't, or even can't, exist in the real world. Most economists now don't in fact believe that free markets can be real or that in their absence, the closest possible approach to them (e.g. minimum government intervention, etc.) is optimum. Things like imperfect information and the existence of an uncertain future fundamentally undermine the efficient market. The purist free-market view is still widely publicized partly out of inertia and partly because it's useful to people rich enough to do things like, say, own newspapers.

On (2), markets in general in our world are characterized by things like oligopolies, externalities (including global warming, the most massive externality of all), corruption, subsidies, copyrights and patents (let's not forget, a *patent* is by definition a monopoly granted to an inventor--it is inherently incompatible with free markets), laws and regulations slanted in favour of various groups (often due, again, to corruption) leading to a warped playing field, and on and on. There is no reason to expect this setup to produce optimum outcomes, in which the best technology is always used.

On (3), software clearly is not characterized by free markets. It is heir to all the above problems. It is founded on copyright and similar restraints on competition. Increasingly it relies on patents. It is laden with oligopolies. Its basic characteristics, like the near-zero cost of producing additional copies, would massively warp the math of neoclassical efficient market theory, which assumes that each additional widget costs more to produce than the previous one. Yes, you read right, it's a little-mentioned fact that the neoclassical efficient market assumes *diminishing* returns to scale, rather than the *increasing* returns to scale we became used to in the industrial age--it's no great wonder things rarely look much like the "many small firms" model that theory expects.
Last and perhaps even least, but looming large in many people's minds, Microsoft holds a monopoly in a couple of very important segments of the computing marketplace, was convicted of illegally using the market power thus gained to maintain that monopoly, and was slapped on the wrist for doing so but never really stopped the practices for which it was convicted.


All in all, I don't think there's any good reason to imagine that the magic of markets would by now have made open source the big winner if open source software were really better. Markets can't work the way we're often still led to believe they do, even if they could they in fact don't due to many real world factors, and software markets in particular really, definitely don't. The invisible hand will not come to all our rescue. All is not for the best in this best of all possible market worlds. We cannot just duck deciding things on their individual merits by concluding that whatever is winning in the marketplace must be the best because markets are never wrong.

That isn't to say open source *is* better, just to say its failure to take over (yet) is no indication of the quality of the software one way or another.

One common example--most people reading this are typing on QWERTY keyboards, right? But the QWERTY keyboard layout was designed for early, very creaky manual typewriters, to stop anyone from typing fast enough to make the keys stick. It's designed to make people type slowly. But it got a first-mover advantage and has proved impossible to get rid of, despite the existence of vastly superior alternatives.

For another example, try a small thought experiment. Imagine that a small sofware startup with a small coterie of supergeniuses successfully write an operating system that is better than Windows in every way and can run Windows programs as well or better than Windows can. No geeky new-age methodologies or free software ideologies or garages, just a small company writing amazingly good software. Would they take over the market? Of course they wouldn't. Would they even enjoy the gradual success of open source software? Of course not. They'd go the way of Amiga and BeOS and so on and so forth--Microsoft would buy them, or Microsoft would lean on anyone who considered distributing their product and cut off their sales long enough for them to go under, or Microsoft would sue them for infringing some patent and burn through all their money before the end of discovery. Everyone knows that. So clearly the mere existence of better technology would not cause that technology to succeed.
The only reason open source has gotten as far as it has is precisely the unconventional nature of open source, its distributed production, lack of dependence on short term revenue, and licenses such as the GPL.

Posted by: Rufus Polson at April 19, 2007 7:27 AM

@ Rufus Polson
> One common example--most people reading this
> are typing on QWERTY keyboards, right? But
> the QWERTY keyboard layout was designed for
> early, very creaky manual typewriters, to stop
> anyone from typing fast enough to make the keys
> stick. It's designed to make people type
> slowly.

No. Qwerty was designed to separate frequently-used keys to reduce the instances of the bars jamming and it therefore enabled people to type FASTER. There were plenty of speed typing contests at the time, which qwerty (Remington) often seems to have won.

> But it got a first-mover advantage and has
> proved impossible to get rid of,

No. The first keyboards were arranged in alphabetical order. There were plenty of alternatives to qwerty in the early days, and very few people had used a keyboard so there was no inherent lock-in at the time.

> despite the
> existence of vastly superior alternatives.

No, there are no vastly superior alternatives. The Dvorak is claimed to be better but the ergonomics literature suggests the difference is very small -- less than 7%.

The vast majority of people could become much faster and more efficient at typing by spending a few hours learning proper touch typing -- a 100% improvement, for example. (I did much better than that.) Just switching from Qwerty to Dvorak requires more effort for a smaller improvement.

Spending time improving your Qwerty typing skills therefore offers a bigger payback than putting the same amount of time into switching to Dvorak. Switching to Dvorak also has many disadvantages, which is basically why people don't do it.

Otherwise, you might enjoy reading this:
http://www.shirky.com/writings/powerlaw_weblog.html

;-)

Posted by: Jack at April 20, 2007 3:59 AM

This is fun. I'm not 100% sur but the fact this discussion has gone on as long as it has suggests one thing to me - passion on both sides. Good.

But for all the OSS v M$ protagonists I think you'r ll missing a simple point. Microsoft, for all its wealth and for all its power is finding itself rendered increasingly irrelevant in the conversations around the next generation of software. That's a precarious position to find yourself in. Not now, but in the future. Think IBM c. 1990.

Irrelevance has a direct impact on long term profitability. Give Microsoft credit for attempting to make change. Give them even more credit for engaging Hugh. As for the guys over at Port 25 who called Hugh on this - what is it they say?

"However, Hugh’s approach is not in line with Microsoft’s strategy."

Does that mean it is sacrosanct? If so then Microsoft might as well 'go home.'

Posted by: Dennis Howlett at April 20, 2007 7:57 AM

"This, however is not a very satisfying answer, simply because it doesn't quite ring true. Otherwise there'd be a lot more famous Open Source billionaires out there, being written up in Forbes Magazine or wherever. And Bill Gates would've been ousted years ago."

You are talking about two different value systems here, Hugh. Think about a great man like Mitch Kapor, who is a billionaire and an Open Source guy. He certainly doesn't care about making the next Fortune 500 - he spends his time and money supporting Open Source projects, whether they lose money or not because they are important to the future of innovation.

Money is everything to some. Not everything to all.

Posted by: Tara Hunt at April 21, 2007 8:57 PM

Agreed, Tara. [Disclosure:] I was playing Devil's Advocate in this post. Just a tad.

Posted by: hugh macleod at April 21, 2007 8:59 PM

Hugh,

The CEO and shareholders of Google are quite happy, aren't they? All of Google's servers run on Open Source software - Linux. Aren't Sergey Brin and Larry Page billionaires?

Oracle is more than 2000-people strong and have migrated internal computers to Linux.

I suggest you have a look at an article I wrote in 2003:
http://www.yashlabs.com/gloss_article1.htm

There are plenty of interesting links there too. The article and the links will help you not only understand Free and Open Source software but also Microsoft more.

Also Eric Raymond "The Cathedral and the Bazaar", as well as "Open Sources" and "Free as in Freedom" are must-reads.

What can Microsoft do? I don't think Microsoft can do anything about their future since they consistently make the worst decisions with negative effects for their customers and partners (probably their employees and shareholders too).

The future for Microsoft is bleak.

You should try and work for Canonical and support the Ubuntu GNU/Linux distribution.

Seriously.

Take care.

Posted by: Josh Nursing at April 22, 2007 2:40 PM

"know very little about software, ..."

then shut the fuck up, you don't know what you're talking about.

Posted by: alex at April 24, 2007 11:56 AM

Hey Josh, Great. Congrats to Google.

But the main part of question still remains unanswered... if Open Source is as good as folk say, how does Microsoft compete? They'll sell $40 billion this year etc.

From what I learned since I first posted this, it's not a case of either/or, but more an more a mashup.

The way I see it is, ALL software exists within an ecology, MS and non-MS alike. And it's the ecology that matters, not which software you use per se.

Or am I missing something?

Posted by: hugh macleod at April 24, 2007 1:32 PM

"if Open Source is as good as folk say, how does Microsoft compete? They'll sell $40 billion this year etc."

There's a lot of market innertia there I'd say. MS got in there when it mattered, and have managed to become ubiquitous to the point of people just assuming they need Windows when they get a computer.

How many companies use MS Office based alsmot entirely on compatibility, and what their staff are likely to know?

In my list job I investigated switching from MS Office because of the stupid license prices. Open Office could do a lot of it, but it would have required retraining all the staff to use a different app. These are people who learn what buttons they use to do their job, not people who know how to use a Word Processor generally. They don't find transferring skills to a different app easy.

One of the best things going for MS I think is the Exchange/Outlook combination. Pretty difficult to beat for a lot of people. It's software that works, and works fairly well. I know a lot of people could probably come up with examples of technically better options, but at the end of the day, Exchange and Outlook for for end users. Certainly better than the appaling Oracle system I'm forced into at my current work place.

Open Source is good. This blog, Hugh, I imagine is running on a linux server, quite probably using a MySQL database. You're not using it, but you obviously know a lot of people who blog use Wordpress, utilising PHP. An entire open source setup.

You talk about avoiding becoming a commodity at times Hugh. Is that exactly what some of MS' software is? Commodity products that have become so big, the mass markets assume they need them?

As a consumer desktop, Linux still has a way to go to catch up with Windows. Mac's, well, they are a different kettle of fish. They have a slightly weird persona in the mass markets I think. And Apple seemingly get away with stuff that MS don't get away with, based purely on their lower market share. Look at some of the fuss being made over iTunes and DRM and stuff, because it's an area Apple do have a much larger market share.

If Mac's got a reasonable amount of market share, beyond the little group in the corner who make more noise than three quarters of the Windows userbase put together, I think they would find themselves with some MS like issues. The way Apple try and lock you into their own technology is frustrating and have an arrogance about them that puts Sony to shame IMHO.

Open Source is out there is huge quantities. But because the prime goal is not about making money, not about cashing in, the kinds of money and fame the people involved are getting is not in the same league.
Though Mozilla and MySQL seem to manage to generate funds.......

Posted by: Adrian at April 24, 2007 2:50 PM

There were two discussions going on and I picked out a few. I haven't read through all these comments yet, but this is how I see it.

One commenter stated that Microsoft gave more than his $300 purchase in development and partner tools. And another asked how Microsoft still makes money.

Those go hand in hand. If Microsoft can basically give away these development tools that promote development on their platform, they almost guarantee that application will be written to support only their platform. With these applications out there, Microsoft milks the rest of the industry because they can't get the same applications on other platforms. Open sourcing scares Microsoft because they are in the software business. If people start sharing the source for their applications, people will port them to other OSes. As seen with Mono, Microsoft doesn't want to let their development environment to get out of their hands. They want to control it as they were not able to do with Java.

Microsoft relies on developers to continue to promote the Microsoft way. That's why the developer tools are usually a step above everything else they do. That is also why Microsoft basically gives it away to colleges and people. More Microsoft Developers = more money in Microsoft's hands. And they know it. If developers start moving elsewhere, Microsoft is screwed.

Open sourcing is a different way of thought in the general world structure. It's the free sharing of information and processes. If it picks up we will be looking at a different economy. Open sourcing and Socialism fall hand in hand. If the customer doesn't have to pay as much for an item, they don't have to make as much at work. They can usually find a way to do what they like as opposed to what pays the most. If more and more hardware goes "open source" the battle won't be to out-engineer your competitor, it will be about who can make it the cheapest. If the trend catches on people will find that money means less and less as things get cheaper and cheaper. I realize it's a stretch to imagine, but some of the great Sci-Fi writers imagined this. The most famous being Star Trek. In that universe, people do things because that's what they enjoy. You don't have people cutting each other's throats for money. You have people doing what they want to do (hopefully). Of course, we probably won't see that come anytime soon. But if open-source continues to break the software barrier into other things, it's a very real scenario.

Posted by: nschubach at April 24, 2007 7:38 PM

Because you want to target the 90% of users who have Windows on their desktops.

Also you won't find any more billionaires amongst lower-level development - not even in closed source. You find them at the services layer - Google etc. who btw, mostly use open source software as leverage

Posted by: Nik Cubrilovic at April 24, 2007 7:57 PM

Hugh, you might make more headway thinking about the situation if you make the following substitutions in your original post (at least in the first few paragraphs):

Microsoft => New York Times
Open Source software => blogs
Open Source billionaires => Pulitzer prize-winning bloggers

My two cents: Open source software is a lot like blogging. It is about collaboration and participation and solving problems indirectly. Just as blogs don't render the Times worthless, open source software doesn't make Microsoft software worthless. They co-exist, serving different purposes and interests.

Posted by: Ken Dyck at April 24, 2007 7:59 PM

"Otherwise there'd be a lot more famous Open Source billionaires out there, being written up in Forbes Magazine or wherever. And Bill Gates would've been ousted years ago."

If that is your metric for success, then you are clearly a trend follower. So nothing I say will matter, you're not going to act until more companies like Google (who use quite a bit of open source) exist.

Have fun paying for Microsoft "upgrades" and licensing concerns.

(I know I sound like a troll, but debating trend followers is as bad as debating fan boys. In fact, they are fans of success.)

Posted by: Stephen at April 24, 2007 10:45 PM
"if Open Source is as good as folk say, how does Microsoft compete"

Compete at what, exactly? The question is vague and confusing.

In some areas, Microsoft doesn't compete. Internet servers, for example. Something like 85-90% of the internet is built on Linux or UNIX-like systems. It started out at 100%, and Microsoft did have that down to 70% at one point, but they couldn't sustain it and they lost ground again.

On the other hand, in the business world, they're very good at selling their office suites. Why? Because everybody else uses their office suites, and compatibility is important. Microsoft leverages this almost total domination of the market to lock their customers into a continuous upgrade cycle. Really, what did the last 3 versions of Microsoft Office have new that really impacted your business in a positive way? Also, they lock in via proprietary formats. Their new "Open" document format is a very good example of this, as while it's an open format, it contains dozens and dozens of references to old versions of Word and such that make no sense without actually having the source code to Word. So "open" doesn't mean "anybody can do it" to Microsoft, like it does to everybody else.

Microsoft competes in a lot of fields. Some they are winning, some they are losing. The thing is that Open Source is gaining ground on most of those fronts, and only has positives. A lot of companies are seeing the light. That light is simple: You *don't* need Microsoft software to run your business process. The value add to Microsoft software is minimal at best.

How does Microsoft compete? Currently: Inertia and lock-in of existing customers via some rather shady practices.

Posted by: Otto at April 25, 2007 5:44 PM

Thank you Otto, for your very objective answer ;-)

If inertia and lock-in were enough for what you say, I doubt they'd have 70K people on the payroll.

Posted by: hugh macleod at April 25, 2007 7:34 PM

Peace people

We love you

Posted by: HelloWorld at April 28, 2007 12:26 PM

Hi Hugh,

Microsoft cannot compete.

As a company whose core business is building operating systems, it has failed to produce innovative and leading operating systems for a long time.

Porter identifies two ways to compete:
1. Cost advantage
2. Differentiation advantage

MS cannot compete on the cost: their inferior software is tremendously expensive whereas the superior, open-source and standards-based ones can be obtained freely.

Therefore, MS has as only recourse to dump their products - $3 for the Windows XP + Office combination.

http://news.softpedia.com/news/3-Windows-XP-Faces-Though-Competition-from-1-Windows-Vista-53694.shtml

MS has no differentiation advantage either - many of the features it has in its latest OS is pumped from Apple Mac OS X - a 5-year delay.

Overall MS has two strategies:
1. E.E.E.: Embrace, Extend, Extinguish
2. F.U.D.: Fear, Uncertainty, Doubt

They have used EEE before several times.

http://www.catb.org/~esr/halloween/

And the latest round of FUD is fresh - it's from yesterday:

http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100033867/

Another way MS cannot compete is the example of document standards. ODF, the Open Document Format, is an International Standard, supported by OpenOffice. Microsoft uses the word 'Open' in its own new format, calling it 'Open XML'.

However, putting some XML tags around a previously closed document format, doesn't make the new one 'open' at all, does it? Therefore, MS blames IBM.

In conclusion, since MS cannot compete by making a better product, they resort to crass tactics and perverted marketing and PR stunts to try and manipulate opinion.

MS blames IBM, Apple, the Free and Open-Source community for everything when they are themselves incapable of building better products and offering better services.

Do you really think that MS has the same values as you do?

It's just posturing to show a facade of cool and hip vis-à-vis the connected community. MS is not cool nor hip, nor will it become this way unless the crappy leaders are out.

Any relationship with differing values is bound to be a short-term one.

Best,

Posted by: Josh at May 14, 2007 5:30 PM

Josh, thanks for your well thought-out comment. I found it rather simplistic, but there ya go.

Posted by: hugh macleod at May 14, 2007 10:05 PM

Simplistic? Let's say it's not that easy to compress more than a decade of industry observation into one post comment.

But, vendor lock-in has already been mentioned by somebody else. And if you did read my previous comments together with the Halloween documents, you'll notice one thing:

MS hasn't learned from its mistakes. In the Halloween docs (which are their own words), it is written that a FUD strategy doesn't work against open-source. And it hasn't since open-source software is still gaining grounds as its the better engineered software and relies on secure software, open standards and open protocols.

Guess what MS did yesterday? More FUD.

Do you really think they'll sue users or companies? If they do that they're obliterated by the people or by IBM who also has a slew of patents.

So it's just to lie and instill fear in people.

Why did they commit that mistake again? Because the leaders are inept.

In other words, and you of all people will understand mine, MS doesn't get it. Google does. Canonical does. Red Hat does. By your own manifesto, MS is not a company that should be worth your working for it.

MS values lies (a most perverted form of marketing) instead of the truth, and you value Love and authenticity and spirituality (at least by what I gather from reading your blog and manifesto).

Here again, since you wrote of the spirituality of a brand, Ubuntu does really well. Among the many translations of this Sub-Saharan philosophy, there is "you're human through other humans".

The actual nature of MS shines through - it has been, it is and will be a monster. Making it a cartoon doesn't change the symbolism of it.

Best,

Posted by: Josh at May 15, 2007 2:36 AM

Again, Josh, I find your argument simplistic. My bad.


Posted by: hugh macleod at May 15, 2007 2:45 AM

As long as nuggets of simplistic arguments clarify your notion of what MS is, I'm fine :)

Your latest post on MS and the patent/litigation threat-wielding shows you are getting a clearer picture of the Tech/Biz ecosystem and that the Blue Monster hasn't yet gobbled up your soul.

Thanks for your comment on my Google post at YashLabs - much appreciated. I guess you liked the line you referred to because you also like to cut through all the exterior facade to reach the essential truths - which is what I did.

Best,

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Posted by: Surber at June 13, 2007 10:03 AM