Correction at 6:35 a.m. PDT: This article was initially written on the assumption that the study was new. It was actually published in 2005.
For those waiting for a grand cataclysmic battle between Gog (Linux) and Magog (Windows), with one supreme victor, don't hold your breath.
I was reading through a 2005 study by Harvard Business School professors Pankaj Ghemawat and Ramon Casadesus-Masanell, and was surprised by how little has changed in the past four years, despite Linux and Windows duking it out in ever-increasing intensity.
Since that study was released, Linux has continued to swipe at Microsoft's Windows market share. But, as the study predicted, Microsoft's huge installed base has proved both a strategic beachhead and an impenetrable fortress against the Linux threat.
Not that Microsoft can afford to rest on its laurels. Open-source interest and adoption grows from strength to strength, with government adoption, as recently highlighted by Gartner, feeding into enterprise adoption. This, coupled with Microsoft's weakening core business in Windows client software, suggests an opening for Linux that its proponents are eager to exploit.
And yet, as the study's authors surmised, a duopoly between the two is much more likely than a monopoly by either. What's most interesting to me is that this same duopoly dynamic seems to be playing out across the open source/Microsoft divide, most visibly in the browser market. Open source seems to beat many proprietary vendors relatively easily, but Microsoft is tough.
The study, despite its vintage, gives hints as to why Microsoft remains a formidable competitor for open-source alternatives like Linux:
Our main result is that in the absence of cost asymmetries and as long as Windows has a first-mover advantage (a larger installed base at time zero), Linux never displaces Windows of its leadership position. This result holds true regardless of the strength of Linux's demand-side learning. Furthermore, the result persists regardless of the intrinsically better design and potential differential value of Linux. In other words, harnessing demand-side learning more efficiently is not sufficient for Linux to win the competitive battle against Windows.
Microsoft's huge installed base and its ability (and willingness) to lower prices to compete with open-source solutions like Linux keep its moat broad and its gates high. It's one thing to be able to trounce Unix with a massive price differential, but it's quite another to displace Windows with its comparatively low cost and ecosystem benefits (i.e., Microsoft can lower the cost of Windows while keeping the cost of complements like SQL Server or Exchange high).
This is why we see Red Hat displacing Unix at a torrid pace, but so far doing little to cripple Microsoft. It's why other open-source solutions manage to topple non-Microsoft proprietary solutions first, with Microsoft generally the last target.
Most proprietary vendors lack the breadth of Microsoft's offerings. Most also have prices that start so high that it's difficult for them to credibly (and profitably) drop prices enough to effectively compete with open source. Microsoft is different.
Perhaps this explains Microsoft's visceral, early response to open source. I once asked Microsoft's general counsel, Brad Smith, why Microsoft stands largely alone in its adamant opposition to open source. He didn't have a compelling answer, but this study suggests a couple: Microsoft has fought open source so hard because it, more than any other vendor, has perhaps the most to lose and because it has the best tools to fight with.
All of the strategies the study's authors noted for fighting open source (selective pricing discounts, FUD, co-option, etc.), Microsoft has deployed. If the authors' suppositions continue to prove themselves correct, we'll continue to see much more of this over the years, but we're unlikely to see either Linux or Windows ultimately topple the other.
Follow me on Twitter @mjasay.
Larry Lessig, professor of law at Stanford Law School, is leaving the West Coast to head to the Stanford of the East, Harvard Law School, according to Harvard. Lessig used to teach at Harvard Law School, so it should prove to be a comfortable change, and perhaps in keeping with his shift from "West Coast code" to "East Coast code", to an emphasis on overcoming corruption in politics. (No, not that kind of corruption.)
Lessig was my professor at Stanford Law School, and became a mentor to me there, though I fought his ideas for the first year that I worked with him. In his class "Open Sources" I rejected what I then viewed as a cavalier attitude toward the growth of open source: he saw a rosy future for open source, but I was less sanguine, believing that without viable business models open source was doomed to niche status.
We were both right. As it turned out, open source has done just fine, but precisely because we've figured out how to integrated open-source code with commerce. My early foray into this idea was, in fact, my third-year thesis paper [PDF], which Lessig advised.
I've developed a huge amount of respect for Lessig over the years. He's an exceptional person, and an amazing scholar. I'll be sad to see him leave Stanford for Harvard, but if it makes him more geographically proximate to the problems he's trying to solve, all the better for the industry.
Having given in to gravity, America's elite graduate schools are taking on open source.
In recent research published in Production and Operations Management, Deishin Lee (Harvard Business School) and Haim Mendelson (Stanford Graduate School of Business) teach would-be business executives how to "Divide and Conquer: Competing with Free Technology Under Network Effects."
The professors argue that:
(T)he ideal scenario for the commercial vendor is to bring its product to market first, to judiciously improve its product features, to keep its product "closed" so the open-source product cannot tap into the network already built by the commercial product, and to segment the market so it can take advantage of a divide-and-conquer strategy.
But what to do if the open-source product gets to market first?
In that case, the commercial vendor does well to enter the market with a compatible product and then invest in new product features to make its product compelling even though it costs more--a strategy sometimes known as "embrace and extend." In this case, being "open" (or compatible) helps the commercial firm tap into the network created by the free product. Then, the commercial firm must compete by out-innovating the free product.
It's nice to see that $48,921 in Stanford MBA tuition going to a such a worthy cause.
More intriguingly, despite open source's still-small market share relative to the Microsofts and Oracles of the world, it's surely meaningful that professors from the world's elite business institutions are turning their attention to figuring out how to beat open source. If it weren't a threat, there would be no market for research like this.
It's about time that United States elite academic institutions finally got around to not only using open-source software, but also teaching it. In the April 2008 edition of Harvard Business Review, Harvard gives its MBA students a taste of the decision facing every company that leverages technology as part of its business (namely, everyone):
Should I embrace or fight open source?
In the case study, "Open Source: Salvation or Suicide," HBR tags along with Evan and Martina ("Marty") Dirweg as Evan tries to persuade Marty that her successful business will become even more so with open source, rather than as a proprietary software/hardware vendor.
Marty's dilemma is palpable, as open-source competitors (who grew up on her company's technology but have now opened it up to the world) start to eat her lunch:
...[Marty] challenged [Evan] to come out with it: What could be wrong with the company's so-far highly successful strategy of jealously guarding its intellectual property? Why should she open the software in Amp Up, as he had so casually suggested on the phone? Why should she invite the open-source community into the company vault, so to speak, and allow it to play with the crown jewels? on open-source software....
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