Robert Pogson

According to ZDnet, M$ has cut the price of Vista in China, ostensibly to “combat piracy” (newspeak for undercutting illegal copies). According to L. A. Mettler, the cut is more about undercutting Linux (probably RedHat’s support agreements).

The earlier XP cuts may have served to legalize copies and the Vista cuts probably do serve to undercut legal copies of Linux with support/consultation. That will not prevent Linux to spread by diffusion/free downloads/cheap CDs, but it may preempt some large conversions/installations which make the news.

I disagree with Mettler’s assertions that Linux cannot compete head-to-head with M$ on price in developing markets. Even if M$ gives away that other OS, Linux community, open standards, resistance to malware, networking skills, maintainability and the ability to run on older/cheaper equipment either as a thick or thin client forms an insurmountable obstacle to M$ that price/piracy cannot overcome.

In the developed markets, a lot of the old guard of M$ fanbois are soon retiring and Linux enthusiasts will take more responsibilities for IT, malware will not go away, and price does matter. M$ will have to cut prices sooner or later to avoid the collapse of monopoly. As long as they make enough money to afford selling all kinds of products (other than that other OS and Office) at a loss, they do not have to cut prices to maintain monopoly. The Vista flop will change that this year or next.

It does pay to advertise and the enthusiasts’ market has grown by that means but the purchasing departments of businesses, the CTOs and the like do not linger on these pages. IBM, RedHat and Novell have done some selling to business but Dell, Lenovo, Acer and HP are still on the sidelines. They make more money charging a markup on the M$ licences than they would on a free licence. Deals like Dell-Ubuntu work because Dell gets part of the action on selling Ubuntu support but the OEMs largely see Linux as a freebie that brings in no cash. We have to grow the market so the OEMs can see new business selling Linux boxes. Dell is expecting 1% of their sales to be to Linux enthusiasts. If demand rose to be a substantial amount, they probably would see it as new business and worth promoting. If schools and businesses that are now customers of Dell start asking for Linux and new customers do the same, Dell will take the hint.

The imminent murder of XP to promote Vista may well be postponed but income from XP is falling. After all, regular customers who are fans do not want to settle for second best and large customers already have XP installed, so they do not need any more licences. M$ will have a hard time raising the price of XP to match Vista so they will have to cut Vista everywhere, not just in China. XP was obsolete in 2001 and its long history of malware is well known. The world will want a replacement and we should tell them about Linux.

M$’s partners and fanbois who know the price of everything and the value of nothing, believing they are getting a good deal tying their wagon to the M$ monopoly, are painting themselves into a corner. As long as the monopoly is doing well, the joy ride continues, but we are into the endgame now. As hardware prices plummet, M$ is taking a larger piece of the PC pie and M$’s partners are being squeezed from every side. They have to compete amongst each other for the last penny while M$ gets $50 or so for that other OS and hundreds more for Office with a huge profit margin. No doubt many OEMs feel M$ is giving them a big enough cut now, but what will happen when one OEM starts taking market share by selling Linux? M$ has a history of messing with partners. Who will be the odd man out when M$ starts to squirm? Will the partners feel the need to cut out the share that M$ is taking by distributing Linux? Will partners be content to give away their products for free while M$ lives off the fat of the land and gives them scraps? Will M$ bless a select set of OEMs in order to punish dissent? What will the OEMs do when competitors do well selling LInux?

IT is at an interesting point. There are many fronts:

• FLOSS/proprietary
• Linux/that other OS
• ODF/OOXML
• OpenOffice.org/OFFICE
• AMD/Intel
• lock-in/freedom
• the end of “software patents”
• the world making its own software cooperatively/M$ and other proprietary software vendors raking in huge profits while others starve

There are dramatic changes on every front but price is looming as a deciding factor for most of the expanding markets and those parts of existing markets that seek freedom to use IT as they see fit