Subject: Re: HBS WK: Who will win Microsoft or Linux?
From: Bernard Lang <Bernard.Lang@inria.fr>
Date: Thu, 27 Oct 2005 19:31:59 +0200

Hi,

If I did not miss the point ...  I did miss some of the messages.



There seems to be another, slightly different point, that can apply in
developed countries ... where many people cannot afford to pay the
software ... or will not.


If you let a competitor enter the non-paying segment of the market,
they can use it to demonstrate their product and then reach up to
higher segments that are more profitable.

Indeed, that is what MS has been doing to Unix.

Markets are often eaten up from the bottom ...  I remember the cheap
watches (or other ... I do not remember) from Japan when I was a kid
(a long time ago).  Japanese products started at the bottom of the
market ladder, and so did Korean products ... or Chinese.  Then they
climb up the market.

Now, software having no marginal cost, it must be free if the market
is competitive.  Free-libre software being competition, that is
precisely what is happening.  But as usual, the market is segmented
according to its elasticity (is that the right English word ?).
Microsoft has the same product , say MS office, with prices ranging
from $60 to $600 (more or less) depending on the number of buttons and
useless washing programs.

People buy what they can afford that meets their understanding of
their need ...

And since the marginal cost is zero, there has to be a market segment
with price zero.  This cannot very well fit with the official
ideology, nor would be well understood by paying customers in other
segments.  So this segment is covered by piracy (sorry for the term,
its use in this sense is 200 years old).  This well explain why MS is
so tolerant of software piracy ... according to BSA, 70% of
engineering student in France use pirated versions of MS office
... and none has ever been sued, that I know of.

see also :
http://pauillac.inria.fr/~lang/libre/reperes/citations.html#segmentation

Bernard

PS  which of their papers do you refer to ?

* jean_camp <jean_camp@harvard.edu>, le 24-10-05, a écrit:
> Carlos Osorio did a dynamic analysis of this - he called it MS 
> leveraged local expertise in marketing. It is on the MIT open source 
> literature page.  In particular it is difficult to enter a new market 
> that is expected to grow when your company has no history or expertise 
> in the culture/market/region.
> 
> There was a very good analysis of how embedded base of apps can help a 
> closed company compete with an open product by Nicholas Economides - 
> excellent as always in the clarity of definitions and a great work to 
> build upon - at TPRC this year (www.tprc.org).  You may recall his name 
> from some of the work he did in building the foundations of network 
> economics. I don't always agree with him but I always learn from him.
> 
> thanks,
> Jean
> 
> On Jun 6, 2005, at 9:08 PM, Stephen J. Turnbull wrote:
> 
> >
> >>How does it benefit Microsoft to have a lot of poor people using it's
> >>systems? They make the argument that it does, but I just don't get 
> >>that
> >>one.
> >>I do get how piracy could be helpful to Microsoft IF people then
> >>BOUGHT
> >>other MS products, or bought an MS OS upgrade, but just having Windows
> >>on a lot of boxes of people who won't pay for software... that doesn't
> >>do Microsoft any good at all.
> >
> >Think of a developing country where the vast majority of people with
> >computers would have to spend a year's wages to buy a legitimate copy
> >of Windows, but where the economy is expected to grow and people are
> >expected to get richer.
> >
> >Once the country becomes richer, all the people who run Linux and have
> >experience using Linux become part of the market for Linux-based
> >applications and tools.  All the people who run pirated copies of
> >Windows and have experience using Windows become part of the market
> >for Windows-based applications and tools, *and furthermore*, they (or
> >their employers) have enough money that Microsoft can start enforcing
> >their copyrights.
> >
> >
> >
> >-- 
> >School of Systems and Information Engineering 
> >http://turnbull.sk.tsukuba.ac.jp
> >University of Tsukuba                    Tennodai 1-1-1 Tsukuba 
> >305-8573 JAPAN
> >               Ask not how you can "do" free software business;
> >              ask what your business can "do for" free software.
> >

-- 
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