20 September

Turn of the Screw

SCO's Q3, Linux v. Windows, and Open Source Software

Too busy this month, but SCO posted its Q3 results. Easy to miss, given the news coverage, where the Salt Lake Tribune happens to be the lead paper, and it gets barely a column inch of copy from the hometown rag.

They made $31K of UNIX licensing (sold a third of a license maybe?), while expending 2.3M in litigation to defend it. They might even survive til the start of the IBM trial in 4 months. Pathetic at best.

But, what if they run into a Justice Stevens decision like the Grokster one? Read more.

Linux is seen as Microsoft's key rival against Windows, and as the first stage in "taking out" all Open Source Software (OSS), which Harvard Business School economists see as battle of "first mover" verses "demand learning".

Lets first ignore the massive stupidity that lines this long conflict, a not insubstantial obstacle for any judge to stomach. Or as well the blatant gamesmanship of the supermassive corporations IBM and Microsoft - not exactly the kind of conflict anyone would care to be in the middle of. Lets just focus on Microsoft's dream here - the wounding of Linux.

What if SCO inflicts either a major or a minor wound on Linux integrity, irrespective of scoring on IBM's business practices, which you'd think would be the goal a real business would be shooting for - what might happen?

My bet is that in the minor case, Microsoft might dream up another "partnership" or "alliance" to float SCO more litigation dollars, hoping to prolong the agony IBM-style in the chance something big might happen. In other words, pretty much the status quo.

But if they scored a major hit, I'd expect that a quick acquisition "pay off" of a prior "partnership" might occur. That way, MS can take advantage of resources to selflessly rid the world of the scourge of pirarcy embedded within. For more justification of this, see again the comments of our prior mentioned Harvard economists as they detail how a certain amount of the presence of piracy actually helps Microsoft, oddly enough.

In short, clearly illegal activities create a price tension that can be used with a stratified pricing model to drive up the price - sort of like how prohibition increased the price of alchohol. In essence, as long as Linux is a pathetic, ruined competitor to Windows, it denies the space for a real competitor (e.g. like the tolerated opposition maintained by a banana republic dictator), while thrashing the customer base to push up the market price of Windows. Microsoft then is the only one who makes money off Linux - indirectly.

Given the academic view, the only way this cycle gets broken is if Linux breaks the "first mover" advantage and exploits "demand learning". What if the first time a business encounters a need, they find a rational process with Linux and necessary open source additions ... and that becomes where they search for solutions. Then, business looks first not to Microsoft, but elsewhere. Actually, Microsoft should be scared about this, but they're not, because they're too big to imagine this - its too simple a solution. And it doesn't depend on tech as much as social and marketing reasons.

But then we get into why this doesn't happen anyways. Many in Linux and the various open source groups get narrowly focussed on the same kind of featurism and low-level mindset that dominates Microsoft as well. Unlike Microsoft, they can't see peril and advantage from advocating for the average user, who wants a simple use of technology. With Linux, its you get it for free, and then you pay for your bargain for the rest of your life.

Since Windows comes first, the average user sees it as "free enough", embedded in the price. And Linux costs too much ongoing. To change the perception, Linux and open source have to be a solution worth more than the PC, that then just is bought to run it, and the overwritten copy of Windows has no market value. Not unlike the way that NetWare started, costing more than the PC you ran it on.

So its the perception of value that matters to the business model. And focussing on the "Free", whether it is in "Free Software" or "FreeBSD", kills the perception and works against the value proposition desired by the user. Conversely, the "Open" in Open Source Software is the energizing component that sells the promise of an direct, quick path to a valuable solution. One must deemphasize one and emphasize the other to compete.

Posted by william at 00:58 | Comments (0)
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