billwg wrote:
> Rex Ballard wrote:
> > billwg wrote:
> > > Robert Newson wrote:
>
> >
> > That is a very legitimate view. After all, if Microsoft is selling
> > roughly $20 billion in royalties on $200 billion worth of computers,
> > each year, those are some significant numbers. Of course, if $140
> > billion of those computers are getting upgraded to Linux, and the other
> > $60 billion of those computers are being sold at "fire sales", that's
> > not as good a number.
> >
> The only number in your hypothetical series that is important to
> Microsoft is $20B, rex, and the actual number is about twice that.
I was referring to the royalties from a segment of the market,
specifically OS royalties.
I was probably being generous about that. Desktop operating system
royalties from OEMs are only about 25% of the total royalties that come
to Microsoft. MS-Office is a big moneymaker. So is MSN, MSNBC, and
CALs royalties as well as server royalties also provide a great deal of
additional revenue.
Microsoft has wisely diversified it's income and revenue resources, in
many ways acting like a holding company, similar to Berkshire Hathaway,
which has made it much easier for Microsoft to maintain consistent
revenue streams even while OEMs suffer through "Slow periods" that
often involve layoffs, cost cutting measures, price wars, and even
years of losses, while Microsoft maintains their 85% profit margin year
after year.
> That $40B is what pays for the salaries of the MS employees and the
> dividends and accumulated earnings for the stockholders.
That is the total annual revenue from all revenue sources. Again,
Microsoft's diversification has made it possible to go far beyond
revenue streams based solely on income from royalties on Windows and
Microsoft Office. These are cash cows, to be sure.
> If the owners
> of the computers that the $40B in softare is running on decide to
> change to linux, that bodes ill for the reorders down the road, of
> course, but nothing pulls the original $40B back.
Even if all of the desktop computers sold in 2007 were sold with Linux,
Microsoft could quickly repackage a version of Office for Linux. And
even if they didn't, they would continue to generate revenue from
"secondary" streams including server royalties, income from
partnerships such as verisign, carpoint, expedia, and so on. Microsoft
owns pieces of something like 200 secondary companies. It would hurt,
and Microsoft might have to dip into their cash reserves to maintain
projects they considered strategic, or realign their development
efforts to meet the demands of Linux users, but Microsoft as a company
could survive such a transition.
Astor originally made his fortune providing barge and ferry services,
but by the time he died, nearly all of his company's fortune was based
on railroads, which had proven to be far more competitive for
transportation needs such as parishables.
Many companies, including IBM have "transformed" themselves to meet the
needs of new markets and shifting markets. GM, Chrysler, and Ford now
offer fuel efficient vehicles that feature fuel injection, small but
efficient engines designed to run for 200,000 miles or more, and
compete favorably with Honda, Toyota, and Nissan. IBM went from the
corporate "Mainframe" to consulting, distributed computing, and
business solutions, which often include Solaris, Linux, and Windows as
critical components of their solutions.
> > Of course, Open Source technology provides the access, routers,
> > servers, and support systems to generate nearly $4 TRILLION in revenue.
> > But there's no money in open source. ;-)
> >
> Well, rex, the money is not in open source, it is in selling those
> systems. I think that you are delusional in your belief that the
> importance of any OSS dependency is so high, but that is what makes you
> so cute.
Actually, the money is in USING open source to deliver the goods and
services that generate the $4 trillion in revenues. People don't
actually care whether the machine on the other end of their web browser
is running Windows or Linux, as long as it gets the order right, and
the ordered merchandise arrives on time, as ordered, and works as
advertized.
On the other hand, if the user is using a firefox browser, and hits a
web site that refuses to interact with anything other than IE, they
will simply go to the next result from Google, and order from one of
those competitors. On the other hand, if the site is "All Browser
Friendly" - accepting orders from IE, Firefox, Opera, Konqueror, or any
of the other web browsers, then there is no need to worry about saying
"were closed, go away" to a customer that was about to order $2 million
worth of merchandise.
If Linux can provide this service for $1500 per processor per year, and
Microsoft wants $15,000 per processor per year, and both servers can
generate the same amount of revenue, the economic law fluid dynamics
says that the market will follow the path of least resistance. Simply
put, even if the revenue were identical from both systems, the lower
cost solution will be chosen by the majority of customers over the long
run.
If Linux can run for months or years with minimal adverse revenue
impacts (crashes, reboots, routine maintenance, applications that need
to be manually restarted, manual supervision, and so on. It wil be a
very attractive solution.
If Windows 2003 requires redundant systems, carefully partitioned
applications to prevent DLL conflicts, and has poor support for 3rd
party applications, then Windows 2003 will more likely be limited to
"niche" situations, such as .NET front-ends to "real" servers.
If I have a customer who can't make up his mind about the user
interface, and changes it every 2 weeks, I might bring in a person like
DFS, who can whip up a new .NET interface to a "DAO Interface" 2-3
times per day. I just maintain control over the DAO itself, so that
the same DAO can also be integrated with things other than databases.
> > > After all, the pupose of business is to make money,
Funny, at IBM, they say "We are committed to the success of our
CUSTOMERS".
Yes, they might make money as well, but this is merely a reflection of
the benefit provided to customers. And those customers are usually in
the business of providing benefit to their customers.
A company that is merely in the business of "Making Money" often loses
sight of the importance of focusing on the success of it's customers.
If I can provide better quality, at lower cost, and help my customer be
more successful and profitable by using Linux with WebSphere than by
using Windows with .NET, I'm likely to at least make the offer. If the
customer decides that they really want the front-end interface to be
.NET, I can bring in the specialists who can provide that.
These days, it's not really a hard sell. Most customers tell me they
want Linux on their front-end systems, and they want AIX or Solaris for
the back-end Storage and Database systems. There might be a
"front-end" database such as a catalogue, or lookup tables that are
MySQL or SQL Server, but the back-end databases are almost always DB2
or Oracle.
These days, more and more customers are telling me they want to make
sure that they support both Firefox and IE. IE isn't ruled out, but
support for FireFox is becoming crucial. Many companies are even
seeing customers come in with Firefox, then reconnecting with IE, and
it happens repeatedly. They realize that customers are using firefox,
then when greeted with a "We won't talk to you unless you use IE" are
starting up IE. The delay between the two connections indicates that
users are waiting for IE to start. This doesn't make these sites
popular. And when that means you start losing costumers that make
$millions in orders, it's time to rethink your use of FrontPage and
other "IE Only" gadgets. Is an artistic IE only feature really worth
$millions?
I'm also finding that many consultants are now saving their documents
in ODF formats as well as MS-Office formats. Subcontractors are now
showing up with machines running Linux as their primary operating
system, and running Windows as a VM or Xen client.
When I wear my "Tux" shirt, many people recognize the symbol and want
to talk to me about Linux. Many of those who don't recognize the
symbol, don't have computers either.
> > > not establish mindshare in some population group. If you want
> > > to do that, you need to get into politics.
> >
> > That's what Ken Lehey said.
> > And Martha Stewart.
> > And Arthur Anderson.
> >
> > Silly politicians, they keep making those horrible laws. Except
> > copyright laws of course, those are good - especially copyright
> > licenses, and Digital Millenium Copyright Act.
> > Those are GOOD laws.
> >
> Kind of dopy there, rex. Are you proposing that the purpose of
> business is to win friends amongst the dweebs?
If a dweeb is selling $400 billion in Life insurance, you bet.
If a dweeb is publishing 167 publications all over the world, you bet.
If the dweeb is handling business from 20 of the biggest banks in the
world, you bet.
If the dweeb is providing a service that helps others, I need to be as
committed to HIS SUCCESS as HE is.
If the dweeb is just trying to suck as much money as possible from a
few "suckers" who are willing to pay for inferior products which are
rarely delivered on time, and rarely work as advertized, I'm probably
not going to be involved at all.
> > WordPerfect once had 85% of the word processor market. But then this
> > little nerd started bundling Windows and Word together in a "package
> > deal". Lotus 1-2-3 had 85% of the spreadsheet market, but then the
> > same little nerd put the spreadsheet in the same bundle. Eventually he
> > was hauled into court, and no matter how hard the DOJ and Microsoft
> > tried, they couldn't get the Judge to accept a "slap on the wrist"
> > settlement.
>
> Well, rex, you are falsely stating the facts. MS Office and Windows
> were never bundled by Microsoft.
Legally, this is true. Microsoft just told the OEMs that if they
DIDN'T want to include Office "prienstalled" with every machine sold,
they would have to pay $150/copy for Windows. If they DID install
Office on every machine, the price would drop to something like
$30/copy, and Office would be available for $140. Simply put, for $20
more, the OEMs got MS-Office.
Sure, the OEMs had a choice. But even the federal courts saw through
this, and ordered Microsoft to revise it's marketing and pricing
strategies.
> The reason that Lotus and WordPerfect
> lost their market shares of the office automation software market was
> their gross misjudgement of the probablity that Windows would triumph
> over OS/2.
> They were not very enthusiastic about dignifying Windows
> with the GUI versions of their premier products and so delayed any
> development for Windows in favor of OS/2 versions.
One of the problems was that nearly every release of MS-DOS had
"broken" Lotus 1-2-3, especially after Microsoft released Multiplan.
Similarly, WordPerfect was also "broken" while Word functioned
perfectly.
> When OS/2 failed to
> get off the pad, they were left holding the empty bag and never managed
> to gain back the customers who had switched to Word and Excel as the
> only available products for Windows.
It helped a bit that Bill Gates personally ordered the diversion of top
talent developed on OS/2 projects moved to Windows development team.
Eventually, Microsoft "settled" by paying about $2 billion, and giving
IBM complete source code to OS/2 2.0 and control over all of that code.
The code turned over to IBM turned out to be worthless. As delivered,
it wouldn't run for more than about 2 hours and took nearly 4 hours to
install from Floppies. IBM spent 6 months getting it fixed up enough
for market. Even then, it was not possible to use disk caching,.
> > Netscape had 85% of the web browser market, until the same little nerd
> > decided to defy the same court order that two other judges had
> > rejected, and then tried to tell the judge that he was stupid and
> > didn't understand the technology. He understood the law, but the
> > little nerd had his lawyer tell the appeals court that the judge was
> > stupid, and explaine their own version of the facts, their own way,
> > free from cross-examination - and the appeals court completely ignored
> > the original transcripts.
> >
> Well, rex, you are letting your biases overwhelm your sense of reality!
> LOL!!!
Actually, just referencing statements made by Judge Thomas Penfield
Jackson after he issued his ruling in the Microsoft case. It's not an
exact quote, but pretty close.
> Netscape had a virtual lock on browsers at an early stage and were even
> offered a sort of non-aggression pact by Sir Gates for the Windows
> world. The only kicker was that Netscape would have to make their
> money off of upgrades to what MSFT wanted to call a basic capability.
Meaning, "don't make an editor, don't do e-mail, and don't compete with
office or exchange in any way". Ironically, after AOL purchased
Netscape, they signed the deal, and eventually, had to publish the
source code as "Mozilla". The success of firefox shows that Netscape
was right, and that AOL's executives were idiots for signing the deal.
> NSCP was a little arrogant in their belief that no one else could get
> up the technology curve well enough to challenge their own monopoly so
> the deal was rejected and the rest is history. Turned out that
> Netscape was a one-trick pony that couldn't stay the course.
Netscape was offering communicator. It offered an interactive WYSIWYG
editor, e-mail services that worked perfectly with POP and IMAP
servers, and had the ability to "publish" to shared archives on both
internal corporate web sites "called intranet servers", as well as
public "Internet" servers. The bigger problem was that this technology
had been forged in an API which worked perfectly well on both Windows
and *nix, including BSD Unix, Linux, UnixWare, and Solaris.
It was that "cross platform" capability that was the biggest issue for
Microsoft.
> > Is it an applet or an application? Doesn't really matter, when you
> > knock a dominant player with millions of customers, who is getting
> > revenues from the services and residuals on advertizing - completely
> > out of the market by defying the court order. What was really
> > masterful though, was that the little nerd used the victims own gun to
> > do the dirty deed (bought Andreeson's Mosaic to kill Andreeson's
> > Netscape).
> >
> What court order, rex? MS offered Netscape the opportunity to own the
> Windows space, but they were spurned. They went to the second choice
> and purchased the incredibly nifty IE 1.0 for what ended up as $8M
> bucks.
Might have been the "Sale of the Century". It ranks right up there
with purchasing Manhattan for a box of cheap beads. Of course, the
Algonquin Indians didn't understand the concept of land ownership.
They thought they were selling trading rights, for a limited period.
When NCSA let Spyglass sell Mosaic, they thought that Spyglass was only
selling "Branding Rights". When Prodigy tried to remove the text box
for entering ANY address, the Mosaic contributors said "no, you can't
make proprietary extensions. Spyglass completely defied that
understanding when they turned over Mosaic lock, stock, and barrel,
with unlimited "dirivative products" rights.
> A lot of people thought the Spyglass product to be distinctly
> inferior to the one from Netscape and MS had to get their own boys to
> work in coming up with something better, which they of course did.
Amazing, the similarities between the performance enhancements made by
Netscape, and the performance enhancements made by Microsoft. I'm sure
it was just "coincidence". ;-
> > > You are looking at market share as some kind of popularity contest
> > > result and you are not understanding what it means.
> >
> > I think he understands better than you do. You only see the license
> > royalties, nothing else seems to matter. You get your pound of flesh
> > up front, and if the victim lives, you can come back for a few quarts
> > of blood later. Get those OEMs and milk them like cows. Get those
> > corporate CIOs on the support plan and milk them until they bleed red
> > ink. As long as you - er - i mean Microsoft, get's it's royalties,
> > your as happy as a pig in slop.
> >
> You can look at it that way, rex, but you are missing the true picture.
> " Keep your customers satisfied." was Bill Gates' secret plan. The
> corporate CIOs were eager for the opportunity to solve a few problems.
Yes. And Bill Gates' CUSTOMERS were NOT END USERS! Bill Gates'
customers were OEMs, and huge corporations with revenues of $100
billion or more. The Fortune 1000, and the S&P 500. Microsoft didn't
even go after MidCap companies directly.
But End users hated Windows, especially 3.1 through NT 4.0, and Windows
ME was particularly despised. Workers lost time as Windows crashes,
bugs, and viruses wiped out hours worth of work every week. They often
had to work overtime to make up for the failures. It was costing
corporations $billions, but it was the end-user who was footing the
bill, working unpaid overtime.
And along comes Linux. Letting workers work for days, even months
without reboots, viruses, or bug related information loss. Tasks that
take hours or days on Windows can be done in minutes on Linux.
Bill was still focusing in HIS CUSTOMERS - the OEMs. But the OEMs were
starting to look at THEIR CUSTOMERs, the smaller corporations and
end-users. These people were buying White Box machines and putting
Linux on them. They were testing machines on the showroom floor with
Knoppix and Ubuntu, and choosing the Linux friendly machines over the
"Linux Hostile" machines. Corporate customers were testing evaluation
machines with Linux, and those who didn't pass the Linux test were
simply rejected, in favor of "Linux Friendly" models.
HP has made a killing in that market, being the first to offer 64 bit
machines even though they run no faster when running Windows XP. But
they run MUCH faster on Linux.
OEMs were looking at Linux, not as a threat, but as a critical element
of their marketing and engineering strategy. To sell, Machines now
have to be Linux friendly.
> > > The conventional wisdom is that MS is in the game box business in order to
> > > have a nose in the future home network tent.
> >
> > That makes sense. They want control of the minds, of information
> > itself. What better way to attain that control, than to gain the
> > ability to examine not only what we do while working on a PC, but also
> > what we are doing when we are relaxing. Which commercials do we watch,
> > which do we ignore. When watching TV, which programs keep us glued to
> > our seat, and which have us talking on the phone at the same time.
> >
> What they are buying is "presence" and "expectation", rex.
Yep. Microsoft wants to get them early. They start with
"teletubbies", and then go to Video games, and then to recreational
PCs, and finally to professional workplace PCs.
It's a brilliant strategy. There are people today, in their 20s, who
don't even remember Commodore, Atari, or Coleco. They have never used
anything but a Microsoft machine.
> The poor
> souls and other sad sacks that populate the linux/OSS worlds do not
> seem to understand that, but when it comes time to plunk down some
> moola for a game box or a media center or whatever comes next, people
> see a familiar brand, like Microsoft, and are likely to feel more
> confident in making an early decision.
Yep. That Microsoft brand is right there on the teletubby. And the
first teletubby users are now using game machines.
Of course, their parents are the ones who have to work 60-80 hours per
week, their fondness for Windows waned a long time ago. The easier
Linux becomes to use, the more people defect to it.
> > Microsoft may not be able to "read our minds" but good statistical
> > profiling will let them get the highest possible amount of cash out of
> > our wallets in the shortest possible time, and at the highest possible
> > profits, and they can do so without ever having to deal with us
> > directly. Microsoft makes 85% profit margins, while it's agents, OEMs,
> > VARs, retailers, 3rd party software companies - are lucky to make 10%
> > profit.margins.
> > > What is most interesting
> > > is that the Home and Entertainment business at MS is more than $4B per
> > > year, which is a good sized business on its own. Bigger, I think, than
> > > the linux businesses combined.
> >
> > Actually not too far. According to one report I saw in January, Linux
> > is raking in about $4-6 billion/year in support licenses, royalties,
> > and hardware. Add another $2-4 billion in consulting. And current
> > estimates are that this will grow to around 16 million in support
> > licenses, royalties, and hardware, and about 6-8 billion in consulting.
> > And now they are thinking that this was underestimated.
> >
> Well it is a very stealthy cash flow then, rex! You should tell the
> IRS about it and maybe you could get a finder's fee on those unreported
> and untaxed billions! LOL!!!
Actually, that came from IDC and other reports published by IBM.
> Right now, the only visible cash is what is flowing into the hands of
> Red Hat, some billion or more a year. Novell has only about 10% of the
> linux cash that Red Hat seems to have corralled. No one else is making
> a dime.
Come now. License royalties for the OS are just the tip of the
iceberg. Seriously, if Linux were really the "crap" that Microsoft
says it is, it would never have survived in the server market. Instead
Apache makes up as much as 70% of 60 million web sites, most of which
are hosted by Linux servers. The Windows/ISS market is less than 28%,
even in a good month. And this has been the case almost since the
introduction of Apache.
An Windows license costs around $40 per PC. The PC is sold for $1000
to $2000. It is used by a worker who earns a salary or fees of around
$50,000, and has a productivity of 10/1 or makes about $1/2 million per
year for his employer. The employer has to purchase goods and services
from other organizations and all of this is now done using PCs
connecting to *nix systems.
When a virus, worm, spyware, or malware take down even one computer,
for even 2-3 DAYS, it can cost 10 TIMES THE PRICE OF THE COMPUTER, and
nearly 1000 times the price of the Windows OS license.
If a user can't find a document that is critical to the outcome of a
lawsuit, because it was stored in MS-Word format, and couldn't be
properly indexed and located, it could cost the company $Millions, or
even $Billions of dollars. If the raw disk is turned over to the other
party, and damaging evidence is found using OSS indexing software such
as word2xml, the damage can be devestating.
If Linux and OSS means that workers can spend more time being
productive, and less time "hunting for something". The payoff is HUGE.
If Linux and OSS means that information embedded in text, spreadsheets,
and slides can be captured, indexed, and mined, it can save $millions
every day.
If a competitor is using Linux, and is getting all of these benefits,
and you are still using Windows, and turning away customers because
your Website can only be read by Windows users, and your documents can
only be read by MS-Office users, and your finances can only be read by
banks using Windows and your version of MS-Office, then he has the
advantage. It could cost you $millions in revenue.
If you don't track proper information, and end up filing an inaccurate
financial report with the SEC, it could mean years in federal
penetentiary for the CEO, CFO, and maybe even the CIO.
> > These days, the customers are telling us to use Linux. Windows isn't
> > even an option.
>
> You think so? I don't.
Perhaps you've lost touch with the market.
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