Turner: Free Software's 'Fraudulent Perception'
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News Analysis. Today, Kevin Turner, Microsoft COO, laid out a convincing "competing to win" strategy. |
Kevin mainly focused on sales and marketing opportunities, particularly emerging markets. But he also made a surprisingly strong attack on Linux and other open-source software, what he called the "fraudulent perception about free in the marketplace." Whoa, fraudulent. Now that's nicely stated counter marketing. Fraudulent is loaded with all kinds of nasty connotations.
As COO, Kevin Turner is Microsoft's big picture organizational guy, and he has quite the knack for emphasizing positives while skimming over negatives. He has good stage presence. He's a looming figure, and he's convincing. I wouldn't call it an Apple Kool-Aid experience, but to properly assess what Kevin says requires postkeynote fact checking. That will have to wait.
Kevin made clear Microsoft's main objective for fiscal 2009: "It's all about growing share." He shared an anecdote involving Wal-Mart founder Sam Walton. Kevin is a former Wal-Mart executive. Sam told Kevin that in tough economic times, successful companies don't play the tough economic times game. They focus on growing share, which apparently is Microsoft's strategy for beating back the tough economic bears.
Kevin spent some time talking about the future, which is one of Microsoft's strengths as a companyplanning. Microsoft is quite good at developing plans five years or more ahead. "Where are the people going to be?" Kevin asked. The question is highly relevant. Sales growth is shifting from mature markets to emerging ones. The slides below are from his presentation.

The U.S. and Canada now only "account for 45 percent of our business," Kevin said. Microsoft tracks six developed markets, which had 14 percent growth in fiscal 2008. Besides North America, the six include Germany, Japan and the United Kingdom. But some of the countries' importance will diminish in the future. By 2050, "Japan completely falls off that chart," Turner said.
With respect to PC consumption, the United States, while still important to Microsoft, is increasingly less so. The U.S. accounted for 23.5 percent of global PC consumption in fiscal 2008 compared with 38 percent in emerging markets. Kevin didn't say this, but I will: Microsoft and its OEM partners hugely benefit from the weak dollar, which strengthens overseas sales.

By contrast to modest growth in the six mature countries, Microsoft sales soared 54 percent in Brazil, China, India and Russia during fiscal 2008. China and India grow more important, particularly as PC consumption shifts from more mature markets to Chile, Kevin emphasized. He described Brazil, India, Russia and China, "as bric countries."
In the Czech Republic, Indonesia and most of Africa, Microsoft revenue grew 21 percent in fiscal 2008 compared with the previous year. "In 87 countries around the world, we grew in double digits," Kevin said. The double digits turned out to be only 10 percent.
Microsoft has offices in 109 countries and Windows is available in 96 languages.

Kevin shifted focus to competitors. Microsoft organizes its main competitors into two main categories: Enterprise and open-source companies, and cloud computing vendors such as Google. It was during this part of the keynote that Kevin used "fraudulent" to describe the free software concept. He's right that free really isn't free, but he ignored that Microsoft is one of the reasons.
Earlier this week, Al Gillen, IDC's research veep for System Software, explained the problem with free: switching costs. "Acquisition price may be an important metric for some market segments (such as consumers in particular), but is only one dimension of a corporate decision. The cost of change is high...even if a new solution is cheaper to acquire at the basic hardware/OS level." This is particularly true if the company has already made big investments in current infrastructure.

"This is one of the barriers to entry (in the corporate space) that has held Linux back, which already is less expensive to acquire than Windows solutions," Al asserted.
So there is another kind of misstatement, what I won't call fraudulent, coming from Kevin. Free isn't free mainly because of the high costs of switching out Microsoft software.
At one point, Kevin said, "It's about choice. You decide." What choice is there if the reason for sticking with one solution is that it costs too much to switch to another one?
[Please send your tips or rumors to watchtips at gmail.com].

Comments (17)
"BRIC" - _B_razil, _R_ussia, _I_ndia, _C_hina ...
not "brick".
Posted by Joe7Pak | July 24, 2008 5:01 PM
" What choice is there if the reason for sticking with one solution is that it costs too much to switch to another one?"
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Thats the whole point of the Lock-in ware, to make it harder to switch. Take MS Office as the prime example with its protocols.
My point is, businesses and home users, are better off switching now, because the MS game plan is to roll out a new Windows and Office, every 2 to 3 years now, forcing an Windows upgrade cycle that will be very expensive. Plus, this upgrade cycles, will cause retraining just for the MS products Windows and Office itself. At this point there is no real gain staying with the Microsoft ship, as its still the malware target of operating systems, and software and hardware expenses and requirements, are too high.
The one thing I found a little bit confusing on your graphs Joe, is the EU one on the top, and then you broke those countries down in the second set of graphs. My guess is that way because of where you go the sources of that data. Both it would have be interesting to compare, and to see that the largest mature market is the EU. Also, while MS chooses to play up the emerging markets stategy, the truth is they only contribute a tiny tiny amount percentage wise compared to the mature markets, to the profits of Microsoft. And that will not change for a considerable amount of time.
Posted by chips | July 24, 2008 7:15 PM
The whiner Chip is at it again. The graphs are not confusing at all Joe, only to Chips. See Chips those graphs show the world. You obviously can't read as MS has tons of new revenue from emerging markets. MS is a player Chip and will be. Get over it. And Chip as you type and blog and play with yourself understand you can't do anything about the technology sales of Intel, MS, IBM, Google, etc. See Chips companies like to make money even your friends at Red Hat and Google.
And please Chip switch off of MS products, and go offer comments on Linux sites on how to load and maintain that crap.
We don't want you here on relevant enterprise issues.
Posted by TK | July 24, 2008 9:41 PM
Survey predicts upgrade disaster for Windows Vista
http://www.tgdaily.com/content/view/38543/140/
Quoting:"El 60% de los 1.162 administradores encuestados afirmaron “no tener planes” para desplegar Vista. Esta cifra es un 7% superior al resultado de una encuesta de opinión similar de la misma compañía en noviembre de 2007. Así mismo el 92% de los administradores indicó que el lanzamiento del Service Pack 1 no había conseguido que cambiaran de opinión."
-------------------
chips; the same 'issue' again , 'The attack of the shills' part 3 or 4, well you are an expert on these things and we could await more about:
Microsoft looks to 'Mojave' to revive Vista's image
news.cnet.com/8301-13860_3-9998
"The Mojave project is likely to be just one of many efforts designed to resuscitate Vista's image as well as lend strength to the Windows platform among stepped-up competition from Apple and Google."
"For the time being, Veghte and Windows engineering chief Steven Sinofsky will both report to Ballmer, who has called the work on Windows the company's top priority"
Posted by Marco | July 25, 2008 1:07 PM
Excellent article Joe -- Good work on the stats and the presentation. Seems to me that there is only one person having a slight problem understanding the numbers here.
Say, you're using Office 2007, Excel, right?
Thought so, that's why the major success in your presentation by the way.
"'fraudulent perception about free in the marketplace.' Whoa, fraudulent. Now that's nicely stated counter marketing. Fraudulent is loaded with all kinds of nasty connotations."
A bold statement, a factual statement from people and especially enterprise level views of the lack lustering performance, of how I shall say?
Open Source alternatives...
Say, I am also curious of all those so called companies and government groups that tried Linux and realized that the negatives far out-weighed the possitive aspects in going over to the open source. I am wondering how many companies actually came back to the realization of the rest of the world and embraced a real enterprise level solution -- ie Microsoft.
TK's right, we don't need Linux Shills whining and destracting this article from reality with the pointless chatter.
Marco;
This is an English publication. The heading in your mind numbing FUD is in Spanish -- Are you running out of english speaking resources to suport your dilerium?
Oh, I do have to say one thing for Marco -- He certainly stood his ground well passed the point of absurdity with his bout of getting Vista removed from his computer. I also have to agree that Dawn did buy him off to shut him up -- $200.00 is pretty cheap these days, about two tanks of gas,isn't it?
Posted by Douglas S. Taylor | July 25, 2008 2:08 PM
Ha,ha,ha
How I got a Windows Vista refund.
http://equiliberate.org/?q=node/3
"So, world, it CAN be done - this is ~34% refund bringing the total cost of my laptop to $399.99+tax. Don't take NO for an answer. Know your rights and enforce them, or you may one day no longer have them."
"This will be my last HP product - I have read Dell customers get OS refunds in a matter of days."
---------------
Posted by Marco | July 25, 2008 6:08 PM
PC-Windows bundling, first hearing at TGI in Paris : UFC Que Choisir against Darty
http://www.aful.org/communiques/court-paris-ufc-darty
Ironically, as the hearing for the first out of three assignements introduced by French consumer association UFC-Que Choisir against systematic sale of pre-installed Windows with Personal Computers was held in Court in Paris, we learned that manufacturer Asus was condemned in Caen, Normandy (case Hordoir vs. Asus, 30 April 2008) to reimburse the client for unwanted software licences. While the judgment in Paris is pending, this decision should encourage computer manufacturers to reimburse clients more willingly, otherwise they might be subjected to frequent assignement and
condemnation, given the success obtained by the Reimbursement Guide published recently by the "Racketware" team.
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Painful?
Posted by Marco | July 25, 2008 6:10 PM
Why should it upset someone (Taylor, TC) when the possibility of costumers being able to return a product is given (a practice which is normal in Business)?
Why could they insult a person simply because they are defending the rights of others?
The answer is rather obvious.
Posted by Marco | July 25, 2008 7:08 PM
"Turner: Free Software's 'Fraudulent Perception'
News Analysis. Today, Kevin Turner, Microsoft COO, laid out a convincing "competing to win" strategy.
"Kevin mainly focused on sales and marketing opportunities, particularly emerging markets. But he also made a surprisingly strong attack on Linux and other open-source software..."
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There might be more that a verbal attack against Linux. And this could very well be a bombshell. The whole point is, who is really behind this..IF that is really the case?
Allegations of Foxconn deliberately sabotaging their BIOS to destroy Linux ACPI
http://ubuntuforums.org/showthread.php?t=869249
Posted by Ralph | July 25, 2008 9:10 PM
First of all on Marco's behalf I'd like to beg the pardon of those who can't use Google's language tools to translate a simple paragraph from Spanish to English. I wonder if they, confronted with a search result in German simply skip it or ask for the translated version. I find it extremely troubling that we see this type of comment against Marco's post in a article addressing emerging markets. Markets in which countries with Latin based languages (read LATIN America).
Now back to the matters of FREE. Clearly there are switching costs. That's a not hard to figure out. But FREE and OPEN have different connotations depending on context. It can be free as in beer. Meaning zero purchase cost, but clearly NON zero switching costs. It can be free as not centrally controlled by any one "revenue interested entity". This means not based on proprietary standards, but open standards. More so an open standards based solution need not be free as in beer nor open source.
I can develop a closed source solution based on an open standard while using closed source and open source tools AT THE SAME TIME. What is the benefit of this? Well that a tool that complies to a well known standard can be interchanged with another one that complies with the same standard with relative ease. For example you can move your web site from Apache to IIS without having to change all the browsers in the world.
Another not so trivial example could be a web service. You can have complexity in the application, but as long as the same communication standard is used the actual implementation can be switched without having the other end notice.
How does this relate to Microsoft, Linux and the whole Open Source Open Standards debate? Well Microsoft has kept to proprietary standards. So the cost of switching from a Microsoft solution to an open source or open standard solution arises because there is no clear cut "interface divide" in which to separate the applications. You just can't drag and drop your [put your application here] software from Windows to a Linux or Mac box because it was not built platform independent. This is the root cause of the cost involved in switching.
This cost exists because people decided to commit to the Windows platform. Falsely believing it would last as is forever. That their platform would be a dominant market player for all eternity. This is simply not true. Experience over the last three years has shown us the contrary. Windows has become incompatible with itself. I'm not talking about the Open Source Holy Grail of total Linux adoption. Just the simple fact that the Microsoft upgrade path is becoming an ever increasing concern for companies.
My experience has been that the open source upgrade path is by no means as troublesome as the Microsoft upgrade path. We have two roads with a forest in between. One is keeping relative flat and smooth while the other one is becoming an uphill bumpy road. The key point to define here is at what point is it cheaper to risk a cut through the forest from one road to the other than staying on this uphill path.
Surely for big companies and developed countries with a big investment in tools based on the Microsoft platform the forest may seem too a high a risk. Thus the stated hidden costs of the migration to a FREE platform. They are finding themselves up a well known creek without a paddle. It is too expensive for them to switch and too expensive to stay. Thus they are holding back on all the new Microsoft products. This leads to all the articles quoted that show lack of Vista adoption.
I beg those who so quickly shoot down Marco's quotes to consider the implications of this situation and why brushing it "under the bed" only makes things worst. For me lack of Vista adoption is synonymous to lack of innovation. I might think that Vista is the worst Microsoft OS to date, but it is where Microsoft innovation is going. Staying out of it means staying in the past and in the end uncompetitive.
The message I get from the open source community is stay open and stay independent. Do not commit everything to one provider. Open source products run on a huge set of systems and architectures. This is a good lesson to learn and if your troubled by intellectual property rights and similar issues then take the open source community's adherence to open standards as an example and rule of thumb. BTW, using open standards has nothing to do with giving your product out for free or open sourcing it.
If you play by these simple rules you'll find that your investment, your property, that software you so dearly depend on will be yours and functional for many years to come. Unlike the present day situation in which it can become obsolete at Microsoft's whim.
Posted by Gerardo Tasistro | July 26, 2008 2:35 PM
Mr Taylor:
Your points are well taken, but your presentation reminds me of a character on TV from days gone by....Archie Bunker.
Marco:
There is no need to argue a truth to the Nth degree. Poking sticks at those who see things with blinders are easy targets, but you should pick on those who are better grounded in facts.
Chips:
Microsoft is about money. Their product is good, if not better in many ways that open source. But they control access to their well and if you want water, they dictate when, how much, and the tolls. Open source is a growing alternative due to the very nature of the market MS still dominates. I think everyone realizes that change is coming.
Mr. Wilcox:
You never fail to make me smile. :-)
Posted by Oldphart | July 26, 2008 8:43 PM
@Marco;
"chips; the same 'issue' again , 'The attack of the shills' part 3 or 4, well you are an expert on these things and we could await more about"
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You know when you are getting to them when they decide they have nothing left but to be nasty. I used to be their main target, and after awhile they figured out that I just did not care what they had to say, or care about their love of money. I am not going away Softies, get used to it.
Douglas S. Taylor, alias Doctor Doug, you I would expect an more intelligent polite argument from. We both do the same type of work, and try to help people from all the Windows Malware out there. This Windows malware is only growing in numbers by leaps and bounds, so you and I have no reason to fear job lost. There will always be those like Neil, diehard windows users, who will never switch, and who will use Windows and need the services of people like us.
Windows is falling -- run for your lives!
http://weblog.infoworld.com/robertxcringely/archives/2008/04/windows_is_fall.html
Quotes from the link: "According to a presentation served up last week by two Gartner analysts, Windows is plummeting like a Herman Miller chair tossed off the C-Level balcony at One Microsoft Way. The reasons are obvious: Vista is a bloated mess. Corporate America doesn't want it. Even Microsoft's own mid-level managers couldn't hide their disgust at what their overly hyped OS simply can't do."
Posted by chips | July 26, 2008 10:31 PM
Oh, and I forgot another thing, you're an idiot Doctor Doug, you suck so there!
Posted by Chips | July 27, 2008 1:34 PM
The message:
" Chips :
Oh, and I forgot another thing, you're an idiot Doctor Doug, you suck so there!"
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Not mine, impersonation with a capital C. And without any class, I might add.
Posted by chips | July 27, 2008 5:59 PM
Sorry for my comments all. I am ready to admit i Love MS products!
Posted by Marco | July 27, 2008 6:24 PM
I win! ,I win!
Who is the King?
I am, I am.
I am Neil, TC, Taylor,all them
motherfockers Linux lovers
At the end I winnnnnnnnnn!!!!!!!!!!!!!!!!!!!!!!!!
Hahahaha, hahahaha, hahahaha.
Posted by Neil | July 27, 2008 9:29 PM
It's not switching out the Microsoft products that costs money. I can throw anything I've already bought in the trash and it costs me nothing. Whatever I've already put into the existing technology is simply a sunk cost, and taking that into account is a recipe for disaster - what we call "throwing good money after bad".
What costs money is switching in the open source stuff. All your people need to be retrained. Your core technical staff need to be supplemented; open source technologies don't provide support tickets on demand the way Microsoft will. The gap between what you need on the average day and what you need on a bad day widens dramatically.
And most importantly - the kind of people who are best at running open source technologies are not, never have been, and never will be the kind of people who are good at operating in a business environment. They want to come in when they want, leave when they want, dress how they want, blow off meetings, and say shocking things to their co-workers. They don't like marketing, they don't like sales, and they don't like management. What they DO like is Monty Python, Star Trek, and Joss Whedon, which - while they are wonderful things - are not exactly business-critical subjects for most companies.
A significant number of open source experts are even overtly anti-capitalism. This is rather an embarrassment when you have something like an investor or a partner over to the office and some hairy smelly guy in a T-shirt is ranting in the corner about the economic tyranny of payroll. If I were a large enough company, I could hide this guy and all his friends in the basement... but I don't have a basement, and the expense of getting one where I can put these freaks is prohibitive. Not to mention that hairy smelly guy is the best damn sysadmin in twelve states, and costs rather more than the Microsoft product licenses - especially since he comes to me twice a year with a better offer from another company that I have to match.
It's not losing Microsoft that costs so much money. It's adding the open source people. The savings they report for open source really ARE fraudulent; they claim you'll save money, and then when you don't, they say "UR DOIN IT WRONG" and leave you to figure out how, exactly, anyone could do it right. And the way other people do it "right" is by building their company from the very beginning on the assumption that everyone there will be an open source person, and all the clients will be open source people - and it doesn't matter whether they're profitable.
But if you have to hire the people that are available, and work for the people that want to hire you, and write everyone a paycheck every week... that's not a good way to run a company. I should know; I did it for four years. Now we're a Microsoft partner, and I'm much, much happier.
Posted by Caliban Darklock | July 31, 2008 1:24 PM