Microsoft to open source: Please don't compete on price!
Microsoft must really love open source and want to see it succeed. Recently, Microsoft's open-source team lead, Sam Ramji, urged open-source vendors not to compete with Microsoft on price, but instead focus on "value."
While I'm sure Ramji meant well, I'm equally certain that Microsoft would like nothing more than to not be reminded of how expensive its products can be compared with open-source solutions. After all, Microsoft was the company that turned the software industry on its head by introducing lower-cost solutions years ago to undermine the Unix businesses of IBM and Hewlett-Packard, and the database businesses of Oracle and IBM.
If anyone knows the importance of pitching the market on low-cost, high-value software, it's Microsoft. And if anyone knows how to stick its finger in the eye of more expensive rivals, it's Microsoft, too, which has recently been blaring a "We're cheaper! Buy from us!!" message to combat Apple's in-roads against its Windows dominance.
Now Microsoft is being out-Microsoft'd by open source and doesn't much like the feeling. I weep for it.
Open source, in many ways, is doing to Microsoft and the rest of the proprietary software industry what Acer is doing to the personal computer industry, as highlighted recently in BusinessWeek:
(Acer CEO Gianfranco) Lanci's strategy? He has used Acer's bare-bones cost structure to get extremely aggressive on price. He moved faster than HP and Dell in marketing a broad selection of the inexpensive portable computers known as netbooks. By selling basic machines for $300 to $600, Acer swiped chunks of market share while the rest of the PC business tanked..."To run a business with lower costs is good when the market is growing," he says. "It's even better when the market is not growing."
...(Acer's move into higher-end machines at low price points) may be good news for penny-pinching shoppers, but it will create new challenges for Lanci's competitors. HP and Dell will have to face down Acer not just at the low end of the portable market but with higher-end products too..."They're changing customers' perception of what you should pay for a computer," says Richard Shim, an analyst with the research firm IDC.
That's a perfect way to describe what open source is doing to the industry, and, yes, price is a big component of that. Open source can lower the price of running e-mail (Zimbra, Open x-Change), CRM (SugarCRM), ECM (Alfresco, Drupal/Acquia, Joomla, KnowledgeTree), ERP (Openbravo, Compiere), IT management (Puppet, Hyperic, Zenoss), and other systems to $0.00.
Why shouldn't the open-source companies competing for market share trumpet their lower-cost offerings?
Gartner recently reported that:
Lower TCO and flexibility to launch and develop cost-prohibitive projects continue to be top reasons for using OSS (as open source helps) organizations cater to new opportunities for improving productivity while maintaining costs.
This is something to be heavily marketed, not hidden.
It's also something that has worked for some of the industry's most successful companies, a fact pointed out by Zack Urlocker, vice president of Lifecycle Marketing at Sun Microsystems:
While competing on price isn't the only way to run a business, it's worked well for Intel, Dell, Wal-Mart, Salesforce, JetBlue, et al.
That's good company to be in.
No, price isn't everything: it's simply a fruitful way to start a conversation. The reason that commercial open-source companies are thriving in the downturn is precisely because they can make healthy profits while charging a lot less.
Microsoft may not like that but, well, this is competition, not charity.
Follow me on Twitter @mjasay.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
That's good company to be in."
There is also good company to be found in companies that DON'T compete on price.. Luxury car makers, Apple, etc. Maybe not in this economy, but still.
There are really three considerations for sale: price, quality, and performance. You have to decide which balance of the three you want. Cheap and does what you want, but has low quality? Cheap, good quality but doesn't quite do what you want? Expensive, but great quality and does what you need? Choices!
You don't have to be a tech nerd to get the feel of linux (thats what Google is for) but have the will to learn something new, all linux cost is your time & alittle education.
Google has taught me how to use linux (Ubuntu/ gOS3) and its been cake & ice-cream ever since, I've dug soo deep into linux, all I ever need M$ for is gaming & my preference to use M$ Office.
In my honest views I think OEMs who consider linux should distibute easy to use distros like Ubuntu & ubuntu variates as a gateway, not to knock the other distros but strenghten exposure.
Microsoft should keep light on Windows 7's price because I feel this lashout on open source pricing is just to soften the blow for a hefty OS pricetag they have in the pipeline.
It will take many more years to undo what Microsoft has done (proprietary lock ins, for example). I am not bashing anyone here, so don't take it as such. Open source has a strong backing and hopefully will only improve over time. This should also help innovation on the commercial software front.
Not everyone uses MS or Apple because they think Linux is too hard. I use to use XP and Linux (Ubuntu) and found it pretty simple to use once you learnt the basics of a new OS. I now have a Mac and have Ubuntu in VMWare but I choose to use a Mac because I prefer it, not because I find Linux too hard. I think Linux needs to add more polish. I think the current Ubuntu for example is better than XP but not as good as say OSX Leopard. There just needs to be more attention to detail. Ubuntu is heading in the right direction though.
You should try a legitimate Linux distro, you might be shocked at how it is pretty much on par with OSX.
lol ... I look forward to a Linux campaign showing how much more expensive a Windows PC is against a Linux one. The joke is already on Redmont, ah the irony! these people have no sense of humour .... I guess is quite fitting given their uneducated, skint lowly-paid customer base. Windows OS is to software as McDonalds is to cuisine
Speaking of uneducated, it's "Redmond", not "Redmont".
Nice ad hominem. You know why McDonald's is successful? Great marketing and product consistency. You can ***** about the lowest-common denominator all you like, but it won't change the fact that companies like Microsoft and McDonalds will continue to utterly dominate their respective market spaces as long as competitors take an Ivory Tower approach to their competitive marketing activities.
It's the same reason Ubuntu is kicking the ass of Debian -- Ubuntu's marketing presents a meme that is friendly, helpful, and easy to use. Debian presents a marketing meme that is based around standards conformance, GPL compliance, and a social contract. News flash: most OS customers don't give a damn about the GPL, establishing a Rousseau-like social contract, or asolute conformance to open standards. They just want to use good, easy-to-download-and-install software, and that's why Ubuntu will win the Linux desktop.
And for what it's worth, I'm a PC user with a M.Sc. from Johns Hopkins and an outrageously large salary. And I'm not nearly as well-educated or financially endowed as many of the PC users I know...
The only two things Microsoft still has any (albeit a thin) edge on is familiarity and featuresets. I'm thinking along the lines of MS Office and its integration within an enterprise when I say that. Otherwise, their products are expensive and overly-complex (we won't even bother to bring up their security woes, at least in any detail).
If Zimbra or SuSE OpenXchange Server ever get seamless integration, Microsoft is toast.
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/16/AR2009041601393.html
What a sensationalist load of bull. Show me the IT shop that has reduced costs to $0.00 for ANY service...please, I'd love to see it. Perhaps you can make a case for reduced TCO versus a Microsoft solution, but I don't see any proof of that in this article. This is another one-sided article only slightly less researched than the "Microsoft Bridge" article.
You only get $0 TCO if you don't include the cost of the hardware, the power costs, the building costs, and the costs of your IT staff's time. You can argue that OSS can reduce TCO below other options but there is no way you can reduce it to $0. Its an accounting impossibility.
You have to admit this reaction from Redmond is a little ironic considering their new laptop ad campaign against Apple. "Do what we say, not what we do" - LOL.
Anyone that is arguing that the TCO of something is $0 is deluding themselves and spreading misinformation. I don't see how reminding people that computing, of any sort, has costs associated with it, is a bad thing. Asay himself argued that using OSS can bring costs to $0.00 which is just a ridiculous statement to make. Like I said, you can argue that the costs will be lower but 'free'? There ain't no such thing as a free lunch. Anyone saying that is trying to pull one over on you.
Has everyone forgotten that it's a matter of taste? If I want a bargain, I buy a Hyundai, if I want more, I buy a Lexus... BUT IT'S MY CHOICE. my dime, my taste, my opinion. I'm not a stupid consumer ... I don't belong to a cult.
Let's let the free market decide, and can we please cut out the rhetoric.
-G$
How about: Cheap, good quality and does exactly what you need? That is not impossible you know.
You're falling into the expensive means quality trap there.
Expensive does not equal quality..
Just ask all those peeps who bought AMD Vista machines that had to reload their OS after the SP3 debacle...
And hey, a lot of Intel based machines had problems too..
the fact is Money makes the world go round
unfortunately no one trusts free
also without Financial backing and cutting deals behind the scenes
it's impossible to increase Linux adoption !
Hardware sells software not the other-way around
Linux devs can a learn a lot from Apple !
ease of use and marketing are King
Price matters little in the end !
Also, I'm not aware of any Linux distribution that also sells hardware. Someone like Dell/HP etc. should start there own distribution and market it and see how it does.
The Linux story is..."it's free sir." Wait, this Enterprise distri is not free.... it's cheap, "what about support?" More expensive. All this desire to remain vendor neutral and keep all your options open for basic infrastructure... it's hokie if you ask me. Different point solutions... higher support costs. there's no if, ands, or buts about it. If you had a car and you started putting a bunch of different parts in it (after market, non-OEM) just expect support costs to increase - some things gotta give here. The more after market, "pimp my ride" strategy you take the more challenges problems and key higher COSTS.
The Microsoft integration story is by far better, whether you like the company or not.
In my opinion your infrastructure shouldn't be shuffled around.
Ramji did say that Microsoft's open source allies should stress value, given what they have learned about their customers' reaction to tight budgets. He's suggesting they fish where the fish are. It's good advice.
Move along; nothing to see here.
http://graphjam.com/2008/12/20/song-chart-memes-usability-by-operating-system/
go there. it's hilarious.
second, so what if you have to pay for support for your open source software? You pay for it already with both MS and Apple, it's just included in the total price already. Apple offers Applecare, an extended service plan, and most places that you buy pc's from offer an extended service plan as well (Black Tie Protection from Best Buy's Geek Squad)
The thing that gets me about all the debates about "No, MS is better, No, Mac is better, No, Linux is better!" is that it ISN'T about which is best overall, it's about which is good for the application you need. Macs are able to processess audio and video more efficiently than MS and Linux, MS is fairly user friendly (keep in mind user friendly meaning friendly to the users that aren't very experienced, not the tech-saavy geeks that do a good chunk of the posting on articles like this) and also the most popular gaming platform, and Linux distros are an alternative to both that might not be as easy to use as MS or as processor-efficient as Macs, but save you quite a bit of money for a teensy bit of extra work. I don't care how smart or tech saavy you are, if you can't understand that each system has it's strong point, it's niche in the computer world, then you're not as smart as you seem.
And to the nit-pickers that tear articles like this apart (TCO bashers), YOU'RE MISSING THE POINT OF THE GOD DAMNED ARTICLE. It's assumed by the author of the article that no one is really stupid enough to believe that you can run a server mainframe for nothing. What the author probably means is that the cost for the SOFTWARE to run said server can be reduced to nothing. Honestly, saying that the TCO is 0 is MARKETING in favor of OSS. Got it?
Of the 110 open source companies who attended Microsoft's 3rd annual Open Source ISV Summit, we got positive feedback on the strategy and guidance that we offered on how to succeed as a software vendor in the downturn.
What Matt overlooks here is that Microsoft's business model is based on the financial success of our partners. The guidance I gave was on how to win customers - for the benefit of our partners, who contribute 96% of Microsoft's revenue. We deeply appreciate them and attempt to give them the best market intelligence we have to help them succeed.
Sam
Sam Ramji | Sr. Director, Platform Strategy | Microsoft Corporation
- by wickedsmart77 April 27, 2009 2:22 PM PDT
- Yes, it?s all about price! Price is typically not thought of as an asset in large part because of the way that most firms go about their pricing decisions. The dominant pricing methodologies in most businesses have not changed much over the past 30 years (e.g. cost-plus rules, margins, everyday low prices, etc.), and these approaches don?t address something fundamental about the price structure: that near-microscopic up or down tweaks of individual prices throughout the firm?s voluminous opportunity set can result in dramatic profitability gains. These ?tweaks? are quantitatively-derived outcomes of analyzing the cross-elasticities between all of the products (SKUs) on offer and the customer demographics, geographic locations, marketing vehicles and distribution channels, as well as outside influences such as seasonality, macroeconomic forces or competitor actions. This process, i.e. Scientific Micromarket Management, allows you to assess how each customer values your product and offer that exact price every day in every market. Here at Sentrana, we've been producing unprecedented returns for Fortune 100 clientele, take a look at our site today for pricing optimization software:
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(39 Comments)Joe Smiley
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