Why Microsoft fears open source more than other proprietary vendors do

Microsoft is running scared, and for good reason. Open source beats Microsoft on its own terms, on its own turf.

A thought hit me this morning while I was reading through Microsoft's latest garbage-fodder (also known as "research") on OOXML and Sharepoint. Here is the world's largest software company taking potshots at open source, which maybe affects 0.001% of its revenues today. If that.

Now look at Oracle, SAP, IBM, etc. You won't find a single other company making a concerted effort to fight open source. Not a one. Larry Ellison (Oracle) says open source is not something to be feared, but rather something "to be explained." They clearly see open source as something to work with, and sometimes something to work through, but not something to destroy.

Sure, these and other proprietary-software companies occasionally dip into mudslinging against open source, but they don't regularly buy analysts, set up anti-open source sites, rattle patent sabres, and generally insist on making a fetish out of open source's demise.

Just Microsoft. Why?


I think it has a lot to do with how Microsoft chooses to make money. Microsoft, more than any other vendor listed (and many others that could be, like Autodesk, HP, Sybase,, etc.), sells packaged software.

It relies, more than most companies, on a big, upfront license fee. At most vendors, such license fees barely pay for the cost of selling the product, causing them to rely on ongoing maintenance fees for their profits. So, whereas Oracle's revenue stream looks not hugely dissimilar from an open-source revenue stream, Microsoft's looks vastly different.

In short, Microsoft's business and revenue model is threatened by open source much more than most proprietary software businesses.

This is also true because Microsoft can't claim, as could SAP, that its software (or, rather, the services around it) is too complex to be easily commoditized by open source. Indeed, Microsoft's business has been commoditizing markets with decent, lower-cost software.

Microsoft's "house" is built on sand. The very factors that drove its success - easy-to-use, low-cost, integration between components - are the same things driving open source into the enterprise. Except that instead of lower cost, open source is free. Instead of integration of various components within the Microsoft-only ecosystem, open source's open standards and open source code makes integration between disparate components - owned by different companies and communities - much easier than in the traditional proprietary world. And new open-source applications, operating systems, and middleware are heavily focused on customer value - including ease-of-use - which is challenging Microsoft on that front, as well.

Microsoft showed the way to beat the incumbent proprietary vendors, and its strategies are now being used against it by the open-source world. Except that this time, there's one more huge value that Microsoft can never provide:

Freedom. Freedom from lock-in. Freedom to integrate and tweak and fiddle to make software work for the customer, because the vendors are no longer selling software. They're selling service to make that software sing for the customer.

Microsoft can't compete with that, which is why it's running scared. And rightfully so.