Subject: Re: FW: Why would I pay for Ximian software?
From: "Karsten M. Self" <kmself@ix.netcom.com>
Date: Fri, 4 Jan 2002 13:56:00 -0800
Fri, 4 Jan 2002 13:56:00 -0800
on Fri, Jan 04, 2002 at 07:49:53AM -0500, Gerald P. Dwyer, Jr. (gdwyer@dwyerecon.com)
wrote:
> At 07:29 PM 1/3/02 -0800, Karsten M. Self wrote:
> >on Wed, Jan 02, 2002 at 08:48:44PM -0800, Tom Lord (lord@regexps.com) wrote:

> > > FSBs sell things like boxed sets, custom development, and support
> > > contracts.  Those things have very limited value in isolation -- so
> > > FSBs have trouble collecting enough money to sustain the operations
> > > that should be going on behind those points of contact.

> > > Proprietary software companies sell the same items, but get to charge
> > > much more for them through licensing restrictions.
> >
> >Sometimes.
> >
> >Microsoft does OK on desktop operating systems.  But BeOS doesn't.
> >Neither did IBM or Novell with DR-DOS.
> >
> >Microsoft does OK on desktop office software.  But Lotus doesn't.
> >Neither did Corel, WordPerfect, or a fistful of other firms.
> >
> >On the desktop, there's Microsoft, and a bit of table-scraps for firms
> >like Symantec (fixing problems that shouldn't be there in the first
> >place), some high-end apps (Photoshop, PageMaker, Quicken (though MS
> >Money haunts it).  Actually, I've been asking friends (as I haven't used
> >MS software or platforms for years), and that's about the size of the
> >list.
> >
> >The story should be pretty clear:  there's Microsoft...and everyone
> >else.

> I think that Karsten gives Microsoft too little credit, leaving aside
> that losing a civil case doesn't make anyone a "criminal." There's a
> related issue raised by Karsten's figures for the future of
> proprietary software development.

> Why has MS taken over Windows software applications? MS earned much of
> its domination of the desktop by producing better products. Lotus 123
> didn't lose out to Excel because MS behaved badly. Lotus treated 123
> as a cash cow and didn't improve it. MS improved Excel in the ways
> that consumers wanted.  I think that the evidence on this is clear,
> which is personal memory backed up by Liebowitz's and Margolis's book.

Microsoft has used numerous tactics to secure its desktop OS and
software position.  Among them:

  - Access to hidden APIs (documented as DR-DOS "incompatibility" modes,
    preferred information sharing agreements, and various "Chinese Wall"
    issues).

  - Knowledge of future directions of OS development.  The OS/2 => WinNT
    shift of wind caught many companies off guard.  Microsoft was far
    better positioned to profit by it. 

  - Bundling.  IIRC, Microsoft was the first company to introduce the
    concept of a software office "suite" (again, I may be mistaken).
    Rival products were largely singletons:  Lotus 123 and Quattro,
    WordPerfect and AmiPro, FoxPro and dBaseIII.  Microsoft launched
    with MS Word, MS Excel, MS PowerPoint, MS Access, MS Outlook....  If
    you didn't need all of them it was still cheaper to buy the suite
    than any two programs separately.  Pre-bundling with the OS broadened
    this leverage.

  - Dogged determination.  I used MS Excel starting in about 1989 (Mac
    version), and watched it improve over the years.  As with other
    products (the MS Windows OS, MS Word, MSIE, MS Money), the company
    has shown an ability to just keep plugging away.  Early versions of
    software are often dismissed as a joke, generally deservedly.  But
    incremental improvements (bolstered by issues above) keep knocking
    away at the competition.  Microsoft's advantage over the competition
    is to control the arena, providing fallback insurance. 

Both MS and free software have the advantage that they can schedule
their fights.  Competing software,  on the MSFT platform , benefits
Microsoft (it inflates the value of the OS franchise).  Until MSFT is
prepared to take on the competition, the status quo is acceptable.  The
point is that Microsoft could apply a suite of strategies against
rivals, sometimes gaining ground, sometimes standing still, but rarely
if ever falling back.  Once the fight begins, it's a ratchet effect, and
Microsoft will be the winner if the arena involves the legacy MS Windows
OS or traditional proprietary software and marketplace economics.

In the case of free software, it's the fact that there's not a business
enterprise to sustain that's an advantage.  As the Halloween Documents
noted, free software is long-term credible.  FUD works by destabilizing
a company's financial underpinnings currently, with a credibility
death-spiral resulting:


    Loosely applied to the vernacular of the software industry, a
    product/process is long-term credible if FUD tactics can not be used
    to combat it.

    OSS is Long-Term Credible

    OSS systems are considered credible because the source code is
    available from potentially millions of places and individuals.

    The likelihood that Apache will cease to exist is orders of
    magnitudes lower than the likelihood that WordPerfect, for example,
    will disappear. The disappearance of Apache is not tied to the
    disappearance of binaries (which are affected by purchasing shifts,
    etc.) but rather to the disappearance of source code and the
    knowledge base.

    Inversely stated, customers know that Apache will be around 5 years
    from now -- provided there exists some minimal sustained interested
    from its user/development community.

    One Apache customer, in discussing his rationale for running his
    e-commerce site on OSS stated, "because it's open source, I can
    assign one or two developers to it and maintain it myself
    indefinitely. "


> For the future of proprietary software, the question is whether someone 
> else (not a producer of the OS) could write a better spreadsheet and 
> supplant Excel. The answer here is not so clear. It hasn't happened. It 
> strikes me personally as improbable that it'll happen on the Windows 
> platform in the foreseeable future, but I know of no evidence to contradict 
> the view that it might happen. Improvement is less likely when there's no 
> competition.

Look to discussions of "Microsoft strategies" in discussions of VC
funding strategies in the 1997-1999 period.  Briefly, several
commentators noted that presenting a consumer software proposal to
financiers at the time was a non-starter if you couldn't address "the
Microsoft problem" -- how you could keep Microsoft from stealing your
idea or outmaneuvering you by acquiring a rival.  Jerry Kaplan's
 Startup  documents this story with Go!.  The DoJ trial brought out the
issues with Netscape and Java.  The current iterations are MS Money and
Great Plains vs. Quicken, and MS Media Player vs. Real Networks.

> The future of proprietary application software is not obviously rosy.
> Producers of Windows software applications that are superior have
> fallen by the wayside with zero residual value. The firm that owned PC
> Magazine's top-rated personal information manager for Windows simply
> stopped development and found no takers to buy it and continue
> development. (I can't recall the name or find it easily at the moment,
> although I can get it.) MS-DOS and Windows succeeded because they
> attracted application developers. Now they're not.

Right.  This is the "eat your seed grain" argument against an ultimate
legacy MS Windows success against the free software side.  Microsoft
used to be able to attract developers with prospects of either a healthy
market for product, or prospects for a buyout at the endgame.  If it's
cheaper for Microsoft to build around you, or beat you into the dust and
buy the remnants for a pittance, the prospects for legacy MS Windows
development dim.

Of course, making a mint with free software doesn't seem too likely
either.  But it does seem that people can make an honest living at it.

> Given this, it becomes even more interesting to ask: What's a
> profitable business model that would sustain a free software
> application used almost entirely by non-programmers? Will what we
> think of as applications, such as a word processor or spreadsheet, be
> tied to the producer of an OS for the foreseeable future?

Well, as T.A. Edison would have said, from the past three years, we know
a bunch of things that  don't  work (and possibly a few that would have
in slightly less unrealistic circumstances).  The Nautilus approach
doesn't seem to work.  AbiWord has done a nice job, Ximian, Mozilla, and
StarOffice, are currently viable.  It appears to me that the free
software business is largely similar to the proprietary software
business:  find yourself a niche in which you can provide highly
specialized services (free-software foundations should offer increased
credibility to the small business here), or attach yourself to a company
that has significant resources and sees your product or services as
enhancing the value of its other business offerings.

I still say that the FSB model should look rather more like a public
library than a Microsoft.

Peace.

-- 
Karsten M. Self <kmself@ix.netcom.com>        http://kmself.home.netcom.com/
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