Microsoft's struggle to compete with 'free'

Back in 2002, as Roy Schestowitz calls out, Microsoft was desperately trying to figure out a response to Linux. The problem wasn't Linux as a product-level competitor. The problem, as its Windows chief, Jim Allchin, told a small gathering of Microsoft partners (PDF), is that Linux changes the nature of software competition with odd things like "community" and "GPL licensing," the latter of which Microsoft didn't like one bit :

We feel a huge threat from Linux. Maybe we shouldn't, which is a question you could answer from your perspective...There's Linux the community. We're going to learn from Linux the community. Incredible what they did...We're going to practice and practice and practice (to learn how to respond to Linux)...

GPL is the licensing model. We thlnk it's very bad...We don't think it's the same as public domain. Somebody wants to put in a free DSB(?), we don't have a problem with that, at least on licensing. But GPL, we think it's very bad basically for the world, but especially for the United States.

This is not surprising, given that Allchin had earlier deprecated Linux as "an intellectual-property destroyer" in 2001.

But name-calling was proving not to be enough, and for a reason that Allchin and Microsoft struggled to grasp, but one that its partners, which distribute the bulk of Microsoft's software, felt first-hand on the front lines. When Allchin later asked the participants what the biggest driver of Linux is, they didn't mention its modularity, high performance, or other characteristics. Back in 2002 (and, indeed, today, in many instances), one thing mattered:

Linux was free.

Sure, there was the cost of deployment, training, etc., and Allchin called out the work Microsoft was going to do to "educate" the market through IDC and other analysts about the "true" costs of Linux, but price was why these Microsoft partners were starting to defect, in some instances, to Linux.

Allchin's response?

We'll never meet free."

And that is why Microsoft has struggled against open source, and why it will continue to do so. Ubuntu's Mark Shuttleworth called it out well over a year ago, arguing that the difference between $0.00 and $0.01 is huge and game changing. Microsoft can halve its price, and Allchin talks in the transcript about doing just that. But free? That's not its business model.

Given Microsoft's difficulty in competing with open source's price, it's perhaps not surprising that Allchin hinted at another way of competing with Linux and open source: patents. Imposing a patent tax on open source is a viable way of raising its price tag beyond $0.00.

There's going to be a patent lawsuit on Linux. It's bound to happen...and the patent lawsuit won't really be about the license. It will be simply, "Hey, these guys took intellectual property." And whether the lawsuit comes from Wind River or in X, Y, Z, there's going to be one. Guaranteed. As I sit here today, I will guarantee you at some point there's going to be a challenge about the patents...

(H)ere's indemnification that is being passed on when you buy products from Microsoft. You don't get that (with Linux). And eventually, you know, in the litigious society that we live in, something is going to happen.

Was Allchin just speaking of probabilities, or was he hinting that Microsoft was going to help ensure a certainty? Well, as we later found out through Groklaw, Microsoft was hard at work all this time supporting SCO's lawsuit against the integrity of Linux and its patent rights, and later as it went public in Forbes with wild accusations of Linux's infringement of 235 of its patents, completely without (public) substantiation.

To its credit, Microsoft has not directly launched a lawsuit against any open-source vendors, and it has become far less strident lately against open source in terms of patent FUD. Indeed, Microsoft's history is not litigious and I doubt it ever will file any such lawsuit.

But until it learns how to effectively compete with "free," there's always the risk that it will feel compelled to defend its "right" to a proprietary business model by launching a lawsuit. As I noted in 2007, "Microsoft makes good software; it doesn't need to be a lumbering Lenny of a patent troll."

I still believe that. Let's hope Microsoft does, too. It can compete on product quality. It doesn't need to compete on patent quality.