Subject: Re: "I've got more programmers than you"
From: "Karsten M. Self" <kmself@ix.netcom.com>
Date: Wed, 3 Oct 2001 18:19:20 -0700
Wed, 3 Oct 2001 18:19:20 -0700
on Wed, Oct 03, 2001 at 08:45:40PM -0400, Geoff Crawshaw (gcrawshaw@openair.com) wrote:
> Stephen J. Turnbull - Thu, Oct 04, 2001 at 07:15:50AM +0900
> > >>>>> "Geoff" == Geoff Crawshaw <gcrawshaw@openair.com> writes:
> > 
> >     Geoff> I see no reason that over time the RDBM market does not
> >     Geoff> start to look like the OS market with the Linux/MS split.
> > 
> > I suspect Oracle could live with that.  As long as the OSS DBs don't
> > take more than a small share of Oracle's target market, which may or
> > may not include your company.
> > 
> > My point is not that FSBs can't do well.  Not even that they can't
> > develop world-beating technology.  It's that they have inherent
> > financial weaknesses that tend to restrict them to the "commodity
> > infrastructure" end of the market, and thus are going to suffer from
> > low margins---unless they target their market segment accurately.

<...>

Please use postfix quoting format:  your reply goes below the material
cited.  Trim your quotes appropriately and ensure your attributions are
accurate.

Thank you.

> Stephen,
> 
> Doesn't the existence of a strong FSB offering in a market segment
> tend to erode the economic value of the non-FSB participants in that
> segment? A couple of examples that may or may not illustrate this
> point.
> 
> 1. Oracle is pushing really hard into the application business, they
> are basically trying to move up a layer. This would seem like a good
> hedge against weakening profits from FSB competition. 

Yes.

> 2. Is one reason for IBM's big push on Linux is to reduce the total
> dollar value of the OS business and weaken one of the cash flow
> pillars of Microsoft?

Yes.

A couple of other significant rationales:

  - Microsoft can't steal GNU/Linux from IBM the way they could the PC
    marketspace.
   
  - GNU/Linux heads Microsoft off at the pass in the standards
    de-commoditization process, at least so long as IBM doesn't piss on
    its own shoes as with the Canadian DMCA

        http://z.iwethey.org/forums/render/content/show?contentid=11352

> Another observation is that while FSB's weaken the internal economic
> value of a segment they seem to create an enabling platform for
> another generation of proprietary technology. Again a couple of
> examples.
> 
> 1. Dedicated appliances like fire-walls, VPN's, storage devices,
> wireless control hubs etc. are a fast growing, value-able (one measure
> of this is that you can still get VC funding for them) market.  Most
> new products in this space use Linux and other open-source software as
> the enabling platform.

...and *very* low margin.  Look at the current TV-Replay market for an
idea where this is headed.  There's an initial cash influx from either
(a) hardware sales or (more likely) (b) VC infusions.  Then you play the
hunker-down-and-wait game of beating your competition's service and/or
marketing model.  Look for the IDS / vulnerability detection systems
market to shake out very much like the current anti-virus market.  Once
you get past the hardware, you're left with persistent monitoring
services and updating the detectors as new vulnerabilities develop.

Look for a few large players, and a larger number of small specialty
and boutique shops, likely looking at vertical markets or local service.

> 2. Web business (ISP's, Web applications, ASP's etc.) tend to build on
> one of three platforms, Sun/Bea/Oracle, Microsoft(IIS/SQL Server/ASP)
> or Open source (Apache/Perl/MySQL or Postgres). 

This is a non-starter:  companies don't give up their critical,
day-to-day data.  Not except to the blueest of the blue-bloods.  And
everyone *still* hates EDS and its doomsday contracts.

I'm not saying that FS doesn't have its benefits.  It's that you end up
with an insanely competitive market, with pretty good interoperability
(e.g.:  low lock-in)....which *is* a good thing for the 
consumer.

Peace.

-- 
Karsten M. Self <kmself@ix.netcom.com>        http://kmself.home.netcom.com/
 What part of "Gestalt" don't you understand?              Home of the brave
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