Article

Hi Folks again:

Another interesting article on Linux and how it is
threatening Windows.
Also Google is mentioned.

Tony

***

  Move over, MSN, as new models parade the catwalk

By Graeme Philipson
December 6, 2005

For 25 years now, Microsoft has defined the computer
industry. Its
MS-DOS operating system powered the first IBM PC in
1981, and its
successor, Windows, has become even more dominant
since.

Microsoft is also the leader in desktop applications
software. Microsoft
Office's chief components have seen off most of their
competitors. And
its software is increasingly used at the enterprise
level - Microsoft's
SQL/Server database is now a viable alternative to
Oracle and IBM's DB2
family, and it has acquired its way into the ERP
(enterprise resource
planning) market.

But it is not just Microsoft's software that has
defined an era - it is
the Microsoft business model. Microsoft is the king of
software
marketing. It has made an art form of bundling, the
practice of
including extra features, or even whole programs, with
existing
applications. Microsoft has on occasion overstepped
the boundary between
sharp marketing practices and illegality. It has used
its dominant
market position to bully competitors and resellers.
Various anti-trust
actions have exposed it as an ethically challenged
company that will do
whatever it takes to improve its market position.

In other words, it has become your typical
multinational industrial
conglomerate.

The Microsoft model has been very successful. But
things change. That
model is being challenged by new ways of doing things
- new technologies
and new business models that threaten to knock
Microsoft from its
dominant position.

There are two big threats to Microsoft. The first is
from open source
software, and the second is from Google. But it is
about more than
Microsoft. There are many mini-me Microsofts, with
similar business
models. In a broader sense, we could say that there
are two big threats
to the Microsoft model - the open source model and the
Google model. The
open source model is now well established. Microsoft's
Steve Ballmer
calls it "un-American". Perhaps he's right - it relies
upon co-operation
rather than competition, and is driven by altruism
rather than the
profit motive. (SCO's Darl McBride goes a step further
- he regards open
source as a form of communism).

Open source software, as exemplified by the Linux
operating system and
the Apache web server, is everywhere. Major vendors
such as IBM and Sun
have embraced it, on the basis that the pie will be
bigger, and revenue
will come from other areas.

Open source software has found its way into desktop
applications, where
Open Office and Sun's Star Office are making inroads.
When Microsoft
releases Office 12 next year, its first totally new
version since the
original Windows products, there will be a serious
battle for the hearts
and minds of word processor and spreadsheet users.

Will people want to go through the learning curve of
adapting to
completely new applications? Or will they stay with
their current
version of Office? Or, faced with a change, will they
consider the open
source alternative?

You can find open source software at every level now -
databases,
customer relationship management, e-learning, even
enterprise resource
planning, the big financials software that helps
companies assemble
their widgets and pay suppliers. Open source is no
longer regarded as
fringe software. It is respectable and widely used
throughout industry.
Microsoft and others using the old 20th-century
proprietary software
model are worried, and rightly so.

Perhaps we should say the late-20th-century model. The
software industry
came into being in 1969, when IBM was forced by the US
Justice
Department to unbundle software from hardware. Until
then software was
"free" - hardware was the most expensive bit and
vendors could afford to
give the software away.

But perhaps an even bigger threat to the Microsoft way
of doing things
comes from Google and other internet-based outfits. In
many ways Google
is proving to be the Microsoft of the 21st century,
growing at an
astounding rate by adopting technologies and business
models suited to
an online world light-years away from the environment
that nurtured
Microsoft and other conventional software companies.

Bill Gates famously missed the importance of the
internet, believing
until the mid-'90s that a proprietary Microsoft
network could compete
(Apple made the same mistake). Microsoft may have won
the browser wars -
with inferior technology and dubious marketing
practices - but it's a
relatively small internet player. If it weren't for
the fact the MSN is
the default home page on the default browser on most
PCs shipped -
courtesy of Microsoft's near-monopoly of PC operating
systems - it would
be even further behind.

The internet model relies on small pieces of software
working together
to build applications, which are as much services as
products. That's
the technology - the business model is based on making
money by giving
things away. This is counter-intuitive, which is why
Microsoft and
others with mindsets stuck in the early days of the
information industry
just don't get it. The founding editor of Wired, Kevin
Kelly, wrote a
hugely influential book in the 1990s, New Rules for
the New Economy, in
which he explained how the internet turns conventional
business models
on the heads.

When wealth was based on physical objects, value came
from scarcity. In
the information age, value comes from abundance.
Google realises this;
so does the open source community. So does Microsoft,
in a way, but it
believes it can control that abundance. While it
thinks like that, it
will only be halfway there.

graeme@philipson.info <mailto:graeme@philipson.info>

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Received on Thu Dec 22 07:24:47 2005