Dell Breaks Rank
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Dell's decision to ship Ubuntu Linux on some PCs, at first glance, looks like a radical break from longstanding partner Microsoft. But typically staid Dell has broken rank before, when business needs or customers demand it. |
Dell and Microsoft would seem like two peas in a pod or two sides to a coin, for which destinies are intertwined. Even when other OEMs openly and actively courted non-Windows operating systems, Dell loyally stayed with Windows.
But Dell's loyalty was more about shrewd business maneuvering than any love for Microsoft. True to its sell-direct philosophy, Dell's first love—perhaps other than shareholders—is the customer. Microsoft rewarded Dell's loyalty with pricing and discounts the OEM passed onto customers and also used to competitive advantage.
Before its 2001 antitrust settlement, Microsoft played favorites. OEMs negotiated separate deals for software. Big volume customers and those selling only Windows got the best pricing or co-marketing discounts. Some of those benefits and commitments extended to other products. In 1999, I ordered a high-end refurbished workstation through Dell's outlet store that shipped with Microsoft Works. Works, on a PC design for CAD and graphic design? Near as I could tell, Dell had some commitment to ship Microsoft productivity software on all computers. That's unconfirmed, by the way, but likely the arrangement.
Microsoft's U.S. antitrust settlement partially put an end to the sweatheart deals. Microsoft agreed to licensing software to the major OEMs on equal terms. But some PC manufacturers are more equal than others. While OEMs are contractually obligated to keep silent on Microsoft licensing terms, occasional leaks and 2001 U.S. court hearings revealed some terms. Microsoft makes the same volume discounts available to all partners, but, naturally, those OEMs shipping more PCs are front of the line for deeper discounts. Additionally, Microsoft can offer incentives, such as co-marketing discounts for shipping only Windows, as long as the terms are the same for all OEMs.
So, following the antitrust settlement, Dell continued to reap pricing benefits from Microsoft, which it could pass onto customers and continue to use against competitors.
By 2004, however, the rewards for Dell's loyalty started to look less rewarding. HP's merger with Compaq had started to pay off on multiple fronts, included stronger Microsoft relationships. Compaq had been Microsoft's strongest large OEM partner and main development partner on many new products. Those benefits passed on to HP.
Dell's logistical, direct advantage had greatly eroded, too. Another complication: Increasingly, PC sales growth shifted to emerging markets, where Dell had weaker presence and where strong channels somewhat thwarted direct sales efforts. Piracy rates in those same markets created additional complications for Dell and Microsoft and some other OEMs.
Then there was the Windows problem. No new version was in sight by end of 2004. By mid 2005, Chairman Michael Dell said that his company would license Mac OS X if Apple would make it available. Dell wanted alternatives on the desktop.
A Rebellious History
Before leaping forward to Ubuntu, a different telling of the same history is warranted.
As staid, corporate and even dull as Dell might appear, the company is a rebel with a cause. Dell's first big breaking rank came in the mid-1990s, with the exit from retail for direct sales. Just about nobody sold direct back then. The channel was king (long live the channel) and the means by which PCs were sold and serviced. My reaction, like that of many Dell watchers, was dismay. Consumers or businesses had to touch and feel the computers—see them on store shelves—to buy them.
But Dell proved the naysayers wrong. Direct worked for Dell, and its approach to supply-chain logistics was as artful as scientific. Dell continued the rank breaking, by extending its direct logistics to traditional channel products, like workstations and servers.
Dell also broke rank with Microsoft, with the big one being the June 2000 announcement that Linux would be available to customers. Dell later shipped Linux on workstations and servers.
For all Dell's apparent loyalty, the company repeatedly pushed back against Microsoft. When other vendors shipped Windows XP Media Center Edition, Dell refused. Instead, in an apparent affront to Microsoft, Dell released in autumn 2003 its own Media Center-like user interface for standard Windows XP. The stickler: Media Center required TV tuner cards, which Dell's research showed consumers didn't want. Dell later offered Media Center, but only after Microsoft removed the TV tuner requirement.
Even so, Dell resisted Windows XP Tablet PC Edition—the only major OEM to not ship a tablet PC. Why? Dell's research showed that it wasn't a volume product. Customers weren't enough interested to justify the investment.
Last month, Dell broke rank again—and in a very big way—by bringing back Windows XP. Apparently there is customer demand for the older operating system. Maybe, but Microsoft is pushing Vista.
Now, Dell is shipping Ubuntu, which isn't going to win many friends up in Redmond for the boys down in Round Rock.
Where the Round Rock Falls
There's meaning, maybe or not intentional, in Dell choosing Ubuntu Linux. The traditional meaning of the word Ubuntu in English is along the lines of loyalty, unity or harmony. But Dell's Linux offering, from Microsoft's perspective, has to be a disloyal act. Looked at differently, the Ubuntu offering is an act of loyalty to Dell customers.
Dell chose to offer desktop Linux because of customer interest. In February, following Michael Dell's return as CEO and ouster of his long-time buddy Kevin Rollins, Dell launched the Idea Storm Web site. Top choice to date: Preinstalled Linux on the desktop.
For all Dell's seeming coziness with Microsoft, the company's big mantra is choice. It's the backbone of the build-to-order model: Customers configure PCs the way they want. To Dell, the operating system is just another component, like a hard drive or microprocessor. Ubuntu will be another component customers can choose.
But there are other considerations. If customers are Dell's first love, shareholders are second love. Dell has an obligation to them, if it is to prosper. So, there is mutual interest. Ubuntu offers some interesting benefits to Dell and its shareholders:
- Dell isn't feeling the love it used to get from Microsoft. Ubuntu may irk Microsoft, but Dell also is a huge seller of Windows. The bargaining isn't as free as before the antitrust settlement, but Dell could still wriggle something out of Microsoft because of desktop Linux. They say money can't buy love, which may be true for people but not for business. There's a new suitor in Ubuntu, and Microsoft is sure to take Dell a little less for granted.
- Ubuntu is going to cost Dell less than Windows, which is a potential pricing advantage. Consumers may not latch onto Ubuntu, but there are some small businesses, enthusiasts and enterprises that will take to the alternative.
- Emerging markets and even Europe are other considerations. Linux receptiveness is greater there, and Ubuntu could mean cheaper Dell PCs going into those markets.
Microsoft probably won't see things the same way. The company is obsessed with piracy, in part because the geographic regions with greatest PC sales growth tend to be areas with highest piracy rates. Microsoft executives call PCs shipping without Windows as "naked." A naked PC is one without an operating system or with Linux. Microsoft presumes that there is about equal chance pirated Windows will end up on PCs with no OS or with Linux. Dell already ships some computers without an operating system. Ubuntu isn't much worse.
Microsoft's great fear is that Linux will some day gain traction on the desktop. The last thing Microsoft would want is any major OEM, particularly the No. 1 or No. 2 PC manufacturer, to ship Linux on the desktop. HP would be much worse for Microsoft than Dell because of its broader global reach, strong channel presence and services business. But Dell is bad enough.
Dell's CEO isn't my idea of a geek, and he uses Ubuntu. If him, then who else could?
Related:
- What Dell's Desktop Linux Means, DesktopLinux.com, May 1, 2007
- Dell to Preload Ubuntu Linux on Some Consumer Machines, eWeek, May 1, 2007
- Dell Confront Problems, Focuses on New Direction, eWeek, April 30, 2007
- Dell to Choose Ubuntu, DesktopLinux.com, April 30, 2007
- Michael Dell's Linux Choice? Ubuntu, DesktopLinux.com, April 18, 2007
Comments (15)
Maybe this is why Microsoft is working very closely with HP on some projects (Home Server, that business solutions thing, deployment of Vista, HP Touchscreen, etc.).
Posted by Albert | May 1, 2007 7:20 PM
Is this Dell's way of telling us that Vista is just not all that appealing...even to -them-? Kinda think so...
Dell was smart to pick Ubuntu. It's a really good Linux distro. I'm using it on one machine.
Dell is also smart to offer XP.
These two operating system alternatives will help Dell sell computers to those who are nervous about Vista's shortcomings. That's what Dell wants to do, of course...sell computers.
Ubuntu is a good Linux OS. I've got experience with ver 6.06 and the newest ver 7.04. Both are similar and work equally well on my Thinkpad R51 with 1 gig of ram and a 1.6 gig (or so) chip. The "look and feel" of Ubuntu make a Windows user feel comfy right away.
Both Ubuntu distros I installed required over 100 updates and patches, so make sure you have a high speed connection. The updates & patches installed seamlessly and pretty much automatically.
Bootup and shutdown (when the os is installed on the hard drive) is very fast. Cold start takes about 30 seconds.
The user community members population on the Ubuntu site is very responsive and very smart. You will be amazed at how many people are using Linux around the planet. The help files that come with the distro are pretty bad. But the online community is top rate.
Windows users going to Ubuntu will have a bit of a learning curve in some areas, but the OS will have office apps and other programs ready to run.
The SUDO (super user do) scripts are scary at first but soon they will become comfortable for certain tasks.
If you want to keep playing your DVD movies and other video files (like .AVI) stick with XP, since Ubuntu doesn't seem to be able to do that very easily yet.
The continued demand for XP is sending a message to Microsoft, "You tell us resistance to Vista may be futile, but we say rebellion against Vista is inevitable"
Posted by mgo | May 1, 2007 7:22 PM
Remains to be seen how the prices will compare between two identical hardware configurations, one with Linux and one with Dimdows. It might be too much to hope for the Linux configuration to cost less.
Sure, Dimdows is an extra cost. But all the extra crapware that PC vendors get paid to include helps to offset that cost: such crapware isn't (yet) available for Linux.
Posted by Lawrence D'Oliveiro | May 1, 2007 7:55 PM
Michael Dell isn't a Geek? I guess you haven't watched Titans of Silicon Valley. That guy is a geek on both software and hardware level, hardware in particular. I guess you don't remember the beginnings of the company either when Dell himself built the PC's, this was in the 80's btw, not like todays puzzle piece PCs where grand ma can build her own system blind folded. Dell, dropped out of college just because of his love for building PCs. He may not be at a deep level like he use to be, but hey so isn't Gates. Get the facts straight Joe. Just because he's not wearing the bifocals any more doesn't mean he isn't a Geek.
I have heard him confuse hardware definitions though, but I'll cut him some slack. ;)
As Microsoft points out, I am concerned about the naked PC factors, smart consumers can see this as an opportunity to purchase a system without the Microsoft tax (Windows) and load a pirated copy just to save that $100 to $200.
Posted by Andre Da Costa | May 1, 2007 9:37 PM
Andre;
Good to see you still defending the downtroden rich people of MS again. Bill Gates and Steve Ballmer sure have it ruff. They really need your help to stamp out Linux.
Of course, it also could be an excuse to load a real copy of Windows that someone can legally use on another computer. I do believe that if you read the eula on some of the older Windows full versions, that this is within the licence requirements.
Did notice that Dell plans to put Ubuntu Linux on only one Laptop, and this one will sell for at least $899. Now, I think most of the folks who use Linux, will be using low end computers, for the simple reason that Linux works just fine on them. So most linux users are going to skip Dell's laptop and buy something on sale for $500 or less. But I do hope it helps Dell.
Posted by chips b malroy | May 1, 2007 9:51 PM
The Dell move risks being merely Windows dressing, pun intended. Dell's alternate offerings in my experience have tended to be more press release than purchase order in my experience.
If it follows the story arc of Dell's claim to be often get Dell consumer and business offers by mail and email, and have seen XP offered to date only on expensive systems that don't need XP to run well. I saw a good deal on a Dell 1501 I think it was, but my heart sank when I saw it came only with Vista Home Useless Edition.
Dell needs to decide if it wants to be serious about offering XP and Linux on LOW-PRICED MACHINES where the efficiency of these operating systems can pay meaningful respect to low-end buyers like me who keep the PC industry humming.
PC sales ain't hummin' right now because cost-efficient PCs ain't bein' seriously offered to we common folk that make up so much of the PC market. We ain't Mac users and don't want to pay Mac prices for Windows dressing.
Make up your mind Dell, are you guys serious or not? Do you want to be in business a year from now?
Posted by PolarUpgrade | May 2, 2007 1:50 AM
Choosing Linux desktop over Windows Vista does not reflect DELL is smarter or Windows Vista is doomed .
DELL has been losing market share . They just try to sell as cheap as they could. Linux is free , which will in turn lower tehe price of an entry DELL desktop.
I bet that the higher configuration of DELL desktop will not bundle with Linux
Posted by Thomas | May 2, 2007 10:42 AM
Dell is customer-focused? Dell is about choice? Puhlease. The Idea Storm site and related is all a result of DELL being neither for too long and alienating - and losing - its customer base.
Posted by Paul | May 2, 2007 11:01 AM
If Dell thinks Linux is going to lead them to salvation, they better think twice. It's not the first time a declining company holds onto Linux to stop their falling... and no one has really succeeded. I doubt this time it will be different.
Posted by Gordon banks | May 3, 2007 9:38 AM
Chips
"Of course, it also could be an excuse to load a real copy of Windows that someone can legally use on another computer. I do believe that if you read the eula on some of the older Windows full versions, that this is within the licence requirements"
While this is true of Office and some other applications as far as I have seen no versions of Windows have allowed for install on a second computer. Beyond then the majority of Windows licenses are OEM licenses. OEM Licenses are always married to the hardware they were preinstalled with and can not be moved to a new system.
There is definantly a piracy risk here, OEM windows costs far less then Retail Windows. If customers think they are going to get a better deal by buying the System and the Windows seperatly they will either be Pirating to get the better deal, or they will be in for a suprise when the see the price of a Retail Windows.
Posted by Jake | May 3, 2007 11:14 AM
Jake;
They do allow you to move your full version to another computer. While you are correct in the 2 licenses statement, most people are only going to run on the newer one. Therefore, it is legal, with the full standalone version, to do this. Its really the only reason to buy the full standalone version anyway. And the upgrade version applies as well, only the OEM versions do not. This is why these versions cost more.
Posted by chips b malroyc | May 3, 2007 4:56 PM
For MS to say that a "naked" PC is at risk of piracy is like Texaco saying I will go around syphoning petrol from other people because I don't use their fuel in my new car.
What you cannot comprehend chips is that not everyone wants to use Windows. I certainly wouldn't buy Vista because I think its ****, but then equally I am not going to pirate it for the same reason. Once XP has finally expired then I guess I will be moving to Linux. Why should I pay what appears to be an OS tax on a new computer because MS is worried about piracy.
Also, a UK citizen managed to get a refund from Dell because he refused the EULA on Windows and demanded a refund from Dell - (To which he entitled to - as specified in the EULA itself!)
So it already appears you have a choice if you accept windows or not. This is just Dell actually giving you that choice before you demand a refund.
http://news.bbc.co.uk/1/hi/technology/6144782.stm
Posted by William | May 3, 2007 5:28 PM
William;
Actually, I quite agree with you about MS in general and not wanting Vista at all. Linux is more useful for me, and most, not all, things seem to just work better. My point concerned why not having a no OS or Linux PC was was actually in some ways hurting some of the boxes sales of Vista.
As far as accepting Vista on a Dell, in the USA, I think the folks in the UK are way ahead of us here in reguards to getting that refund for the windows they don't want. The government in many ways, here in the USA, is sleeping with MS.
Posted by chips b malroy | May 3, 2007 6:11 PM
There has been a number a class action suites against MS in this country, based on its monopoly power. In the requard that it is almost universally pre-installed on most laptops in the discount stores like Best Buy, one would think that MS could be sued for not having a policy in effect to refund custermers that (1) do not want to use MS products (2) those who already have a MS windows product that can be legally used (transferred) to the new computer.
Now I know that MS have an "army" of lawyers. But there is a reason for that, they need them. MS is a big fat target for lawsuits, dosn't matter if you like them or not, they have 29 billion dollars in the bank. Lawyers know if they want to make money, you have to sue those who have money.
Posted by chips b malroy | May 3, 2007 7:07 PM
"There is defiantly a piracy risk here, OEM windows costs far less then Retail Windows. If customers think they are going to get a better deal by buying the System and the Windows seperatly they will either be Pirating to get the better deal, or they will be in for a suprise when the see the price of a Retail Windows."
That is one way of looking at this
If you look at it in a nother way you see that the majority of linux users have paid for a copy of windows that they don't want and don't need, its called a "windows tax"
Naked PCs stands for about 5% of the totally sold number of new PC according to this article from April last year i don't know of the numbers on this worldwide, http://news.zdnet.co.uk/software/0,1000000121,39261437,00.htm
these numbers are for the UK but I think that the numbers are almost the same in other countries to
The main reason people have, to buy a naked PC is to run Linux on it, If they wanted windows they would pay for it but they don't want it, not yesterday, not today and not tomorrow, so why should they pay for something that they don't want and don't need
I havn't been using windows at home for at least five years. I I've been using P at work though.
Linux provides eweryting I need, games, photoediting internetbrowsing media players word processors, DTP programs and much more and I'm currently awaiting the day when i can buy a Linux based laptop from Dell
I know of a lot of other people here in Sweden that also are waiting for this day to come.
When Microsoft says that naked PC's is an excuse to use pirated copies of windows its totally clear to me that they are infact scared of any competition on the desktop market.
Intact they don't want any competition at all because then they are forced to make operatingsystems that actually works and don't bluscreen now and then witch may be difficult with the patchwork that is windows, they also has to lower there prices to compete and they don't like that either.
They may have to start from scratch and base there new OS on a BSD or other Unix like kernel if they want to make a completely stable and secure OS and that may be difficult if they want it to remain�n backward compatible with older versions like P and Vista. Its not likely to happen soon.
Posted by pcfixaren | May 27, 2007 11:59 AM