Microsoft to open source: Please don't compete on price!

Price isn't the only reason to use open source, but it's a pretty compelling one for a lot of businesses, which may be precisely why Microsoft asks open source to not focus on cost.

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.