Strategies for a discontinuous future.

Friday, August 13, 2004

How microsoft can embrace Linux. Businessweek's recommendation for Micrsoft is to port Office on Linux and extend its reach. What are the strategic implications of this for Microsoft as well as Linux?

There are a number of elements in the strategic position of Office:

1.Network effects arising out of the spread of its proprietery file formats. Winning this standards game allowed Microsoft to build the Office monopoly.

2.Tight control of the interfaces (Win32 API) as well as the OS itself allowed Microsoft to prevent competitors from offering the same features and functionalities as Office.

3.Leveraging the OS monopoly to cut off the distribution channels for rival products.

Does Microsoft have the competitive advantages to apply any of these strategies if Office were ported on Linux? Can MS extract monopoly rents on the Linux platform even if it did succeed in building an Office monopoly on Linux? Let's see:

1.OpenOffice and StarOffice have the incumbent advantage, and they have already reverse-engineered Office file formats to a large extent. In future, file formats are moving towards XML-based open standards for Linux-based applications. Even Microsoft has committed to "open" file formats based on XML, but protected by patents. Can Microsoft do anything to push its old proprietery formats or the new patented ones onto Linux? I don't think so. This also shows that the era of winning standards game and then leveraging proprietery protocols to extract rents is coming to an end. Markets are smarter now, they'll fight the emergence of de-facto standards more vigorously than they did in the past.

2.Microsoft does not own Linux or libc, the closest to Win32 API on Linux. This lack of ownership of the OS platform lelves the playing field for everyone, and fosters true competition. Without loading the dice in its favour, Microsoft has a much smaller chance of prevailing in this race.

3.Distribution channels aren't what they used to be in the nineties, thanks to the Net and the emergence of stronger players like IBM, Novell and Red Hat for Linux.

Clearly, these strategies cannot work for Microsoft. The greatest threat to Microsoft is not the erosion of Office monopoly, but the very platform that Linux represents. If MS validated the platform by porting Office onto Linux, it'll strike a strong blow to Windows platform and immensely weaken itself. The argument about non-US governments being ready to accept MS-Office on Linux are also invalid : they hate Microsoft, not Office. Just by offering Office on Linux, will their perception of Microsoft change overnight from a rapacious predator to anything better? I don't think so.

BTW, Microsoft itself knows all this and it has wisely chosen to ignore the sage advice from Businessweek. It's business as usual in Redmond : spreading FUD, buying PR, discrediting Linux, lies, deception, blah, blah, blah. Will that work this time around? I don't think so.

-- Mahashunyam // 6:00 AM //


Isn't the Win XP Starter edition a kind of admission that 'hey guys, we may be wrong in thinking we can ignore linux' thinking from MS?
// eskay // 7:48 AM

In a way, yes. However, I think Starter XP is just a classic strategic response of a stripped-down mass-market low-price point product offering. It's almost similar to, say, Honda introduces Civic in the market and GM competitively responds with a Saturn. To that extent, XP Starter is aimed much more at Red Hat or Suse than Linux per se.
// Mahashunyam // 2:52 AM
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