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Linux leader on Microsoft woes

Jan 23, 2009 — by LinuxDevices Staff — from the LinuxDevices Archive — views

Foreword — Microsoft today laid off 1,400 workers, with another 3,600 on the block within 18 months. We asked Linux Foundation Director Jim Zemlin what if any role Linux played in Microsoft's misfortunes, how Microsoft will react, and what it could mean for Linux and the open source community. Enjoy . . . !

Q1 — Jim, thank you for your support in talking with LinuxDevices today. Do you think it was really Linux that hurt Microsoft? Or was it the emergence of netbooks? XP seems to ship on most, but Microsoft isn't making much money selling XP for low-cost PCs [story], are they?

A1 — When an OEM negotiates a price agreement with Microsoft, they now have a viable alternative. It changes the negotiating relationship. It's a combination of Linux, missteps by Microsoft, and not enabling Vista for a low-power, long battery-life device.

Q1b — Vista, codenamed Longhorn, was five years late. Do you think it was written for processors more powerful than Intel and AMD were ultimately able to deliver? Did Microsoft fail to anticipate the end of Moore's Law?

A1b — Microsoft's playbook has always been based on the assumption that hardware costs are decreasing, and PCs are becoming more powerful, with more memory and more CPU. And that's not what's happening.

There's a concept in product development called the “demand-side learning curve.” By having a seven-year product development model, where you set out a roadmap… as you approach your ship date, features slip. That doesn't happen in Linux, which has a transparent development model with constant incremental releases.

Microsoft had no insight into these netbooks, and they were unable to capitalize on them when they came out. Linux was [able to], because it has a very fast demand-side learning curve.

Q1c — …meaning that the supplier (in this case Linux) is able to learn what's in demand and deliver it very quickly?

A1c — Yes. The market has learned from this, and Microsoft is in fact behind. The market is moving toward Linux-based low-powered devices of all kinds, not just in netbooks, but in [lists numerous embedded and device market sectors].

Q2 — Investors view Microsoft as a bellwether of the technology sector. Yet, if Microsoft's woes are an indication that Linux has gained viability in new markets, isn't that actually a good thing for tech? Its affect on Microsoft aside, is Linux's maturation helping tech companies, and if so, do investors grasp that?

A2 — People will realize quickly that Linux is something they can use. It's a $12 billion investment [story] they can leverage to compete better in the market. That realization is happening.

[Companies] have learned that they can participate in the higher-value, higher-margin choice Linux offers, both in embedded and on the enterprise side. They can offer their own branded software platform based on Linux, gaining a more direct relationship to the consumer, instead of Microsoft branding [taking precedence]. If Microsoft is getting 75 percent margins, you would like some of that high-margin business. That is really the lesson.

Q2b — Exactly. But does Wall Street “get it”? Does it see Linux as a threat to a great American bluechip, without considering its potential to positively affect the broader tech market?

A2b — Microsoft was down, but HP was up, Google was up, and IBM came out with better-than-expected earnings. These are companies that have faced the innovator's dilemma and have overcome it. HP and IBM have been willing to innovate, and to base a lot of their solutions on Linux. I'd like to point out that both have lucrative Unix-based businesses as well. However, they're perfectly willing to offer a competing low-cost, high-value platform, knowing that they can make money on services.

Both HP and IBM started restructuring years ago. Both faced reality. Microsoft has only done so recently, for example trying to buy Yahoo! Now, they understand that they'd better web-enable, better get into cloud computing. But you see them reacting, not leading, while companies like HP and IBM enjoy the high-growth, high-margin opportunities.

In a tough economy, you see an acceleration, a sharpening of business trends that have probably been happening for a while. If there are chinks in the armor, those weaknesses are magnified 100 times when times are bad. Everyone's hurting, but especially companies clinging to old business models.

Q3 — Do you think Google Apps is also a force effecting change for Microsoft?

A3 — Yes, and it's not only Apps. At CES, there were several Android-based netbooks. There were also netbooks running Nokia's Maemo platform, and of course there's the Moblin initiative [story]. Without a doubt, there's a new generation of platforms that are going to effect Microsoft's strategy. What does Microsoft do next? How do they react?

Q3b — Well, they've had a scrape or two previously…

A3b — Yes they have. The layoffs announced today were a strong reaction from a smart company, albeit unfortunate because a lot of good people will be losing their jobs.

Microsoft will redouble efforts to get into online services, double down on being part of the digital home (with gaming consoles and media products), and they'll hit hard in the enterprise by returning to the tactic of decrying Linux TCO [total cost-of-ownership]. They'll try to debunk Linux's low-cost, cost-effective value proposition. And, they'll leverage the position they have with MS Office, where they have less competition. Why do you think they fought so hard over ODF? Office is extremely profitable, making more for Microsoft than their operating systems do.

Q4 — Yeah, they really figured out how to hold users' data hostage, with closed document formats that change from time to time, forcing upgrades. Any closing thoughts? It sounds like you've had a busy day.

Q4 — It sucks to see 5,000 people lose their job. It's a real shame. It's a sign of the economic times. So, let's hope that Microsoft is able to shift their business practices, be more open, and participate more in the open community.

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