OSBC: Footnote with Brad Smith

You have to hand it to Brad Smith, general counsel for Microsoft. Last night he delivered the “footnote” address at the Open Source Business Conference 2008. Not only was the general counsel for Microsoft going to have a tough crowd, but he agreed to talk for 30 minutes, then get questioned by a panel [Mark Shuttleworth (Ubuntu), James Bottomley (CTO, SteelEye and Linux kernel maintainer), Andrew Updegrove (standards lawyer extraordinaire), and Stephen O'Grady (Redmonk co-founder)] for 30 minutes and then get questioned by the audience for 30 minutes. As you can imagine some of the questions from the audience were less than constructive, but overall I think things went well.

Some of the highlights (as I remember them).

* Brad stated definitively that in his opinion the general Open Source community does respect IP. This is the first time I have heard someone from Microsoft say this in such a pointed way.
* He admitted that Microsoft had some messaging problems around Linux and Open Source in the past (a cancer, for instance). In his opinion Microsoft has legitimately changed its opinion on the topic, fueled by customer demand.
* Microsoft is generally interested in wider interoperability with the Open Source community, but admits there are issues around both patents and other items. Also remarked that while Microsoft did not initially lead this effort, market leaders typically do not.
* When asked more specifically about the patent issue by James (and then an audience member), his answer was that “there’s no easy answer to this problem.” He did add that he and Microsoft were more than willing to continue a dialog, but that compromise would be needed on both sides. It was pointed out that on some of the issues the Open Source methodology will not allow compromise, which kind of left things up in the air.

I think it’s clear that some parts of Microsoft really are opening up to the idea of change. I still remain skeptical that real change is possible while Ballmer remains in charge, but I do think the beginning of the foundation can start to be formed. Whether this will go somewhere substantial or whether it’s just lip service remains to be seen, but time will make that quite clear.

–jeremy

Microsoft Makes Strategic Changes in Technology and Business Practices to Expand Interoperability

A little late on this, but better late than never. By now, you’ve probably heard about the Microsoft press release regarding “New interoperability principles and actions”:

Microsoft Corp. today announced a set of broad-reaching changes to its technology and business practices to increase the openness of its products and drive greater interoperability, opportunity and choice for developers, partners, customers and competitors.

Specifically, Microsoft is implementing four new interoperability principles and corresponding actions across its high-volume business products: (1) ensuring open connections; (2) promoting data portability; (3) enhancing support for industry standards; and (4) fostering more open engagement with customers and the industry, including open source communities.

“These steps represent an important step and significant change in how we share information about our products and technologies,” said Microsoft chief executive officer Steve Ballmer. “For the past 33 years, we have shared a lot of information with hundreds of thousands of partners around the world and helped build the industry, but today’s announcement represents a significant expansion toward even greater transparency. Our goal is to promote greater interoperability, opportunity and choice for customers and developers throughout the industry by making our products more open and by sharing even more information about our technologies.”

As you may have guessed, the blogosphere was abuzz with activity shortly after the announcement. First, let’s start with the basics. The products covered in this announcement are: Windows Vista (including the .NET Framework), Windows Server 2008, SQL Server 2008, Office 2007, Exchange Server 2007, and Office SharePoint Server 2007, and future versions of all these products. The key promises are: “Ensuring open connections to Microsoft’s high-volume products”, “Documenting how Microsoft supports industry standards and extensions”, “Enhancing Office 2007 to provide greater flexibility of document formats”, “Launching the Open Source Interoperability Initiative” and “Expanding industry outreach and dialogue”. While I see the word Open Source being used quite a bit in conjunction with this release, I see very little reason why. This is about API and protocol access for the most part. This will certainly help Open Source developers, but it isn’t Microsoft actually opening any code (or even changing their stance on Open Source from what I can tell).

Let me say that this could be the beginning of a fairly major shift for Microsoft, a change that most feel is long overdue. As usual though, the devil is in the details. Is this announcement fluff or substance? The first major hole I see is that the “covenant not to sue open source developers”, along with some other pieces, only pertain to “non-commercial” distribution/implementation. This makes room for a lot of gray area on how you define commercial use. Also, from what I can tell, the patent provision terms discussed in the announcement are not compatible with most Open Source licenses. That being said, it’s also a far cry from Microsoft calling Linux a cancer, so it’s certainly a step in the right direction. The real driver here, however, is almost certainly customer demand and a landscape that is shifting underneath the feet of Microsoft. I think the 451 group puts it well:

“Nudged by the European Union’s Court of First Instance, but more likely the result of a hard look at market dynamics and the competition, Microsoft has opened up its APIs and pledged to work more openly with the rest of the industry, including the open source community, on interoperability and standards issues. It’s an acknowledgment that in today’s world, many more flowers bloom when platform companies make their APIs completely open for developers to write to, a la Google and MSFT’s recent investee, Facebook. This is yet another thing Google has taught the largest software company in the world. It appears on the face of it that Microsoft now intends to live by the merit of its products, rather than rely on lock-in.

“As a result, developers should gain the potential to tie applications more closely into Microsoft’s Windows, SQL Server, Office and Exchange Server products with greater flexibility and innovation, perhaps through self-sustaining developer communities. SharePoint could also benefit from a platform approach, becoming a de facto central application for large segments of the market. And Microsoft is aiming to make open source applications run as well on Windows as they do on Linux, enabling it to continue competing against Linux while at the same time accepting and working to support open source projects.”

As it stands, whether this is a major announcement or a marketing fluff piece will become apparent in the coming months (and years). As real news comes forth, I’ll certainly be following it and will post updates. In the meantime, here is some additional reading:

Mary Jo Foley
Response from Red Hat
Groklaw
Bill Hilf
Andy Updegrove

One final note. I think one thing is absolutely clear. If this is to be the beginning of real change for MSFT, Ballmer has to go. I’ve said that before and I stand by it. It will not be possible for them to change with him in charge. Don’t think so? During all the talk of openness from Microsoft during this announcement, I leave you with his words from the press conference:

BRAD SMITH: With respect to other (commercial) distributors, and users, the clear message is that patent licenses will be freely available.

STEVE BALLMER: Patents will be, not freely, will be available.

BRAD SMITH: Readily available.

STEVE BALLMER: Readily available for the right fee.

–jeremy

Time To Change Microsoft – Yahoo (MSFT/YHOO), Here's a Better Deal

A quick update on the Microsoft – Yahoo deal. Now that people have had a chance to digest the deal a bit, I notice the sentiment is turning negative. Microsoft shareholders are walking and employees of both companies seem unhappy. The value of the offer has shrunk over $2/share already. It also seem clear that Jerry does not want the deal to happen. The only winners so far seem to be short- and mid-term YHOO shareholders. While it’s unclear if another suitor will jump in or make Microsoft up the bid, it seems unlikely. It’s still possible Yahoo could outsource its search to Google, but it’s clear that doing nothing is not an option. Since I think the deal would be bad for Open Source in a lot of ways, I was glad to see a reasonable proposal posted recently. It’s clear that Microsoft just does not do the web very well. Despite piles of money and a lot of motivation, they continue to fail miserably. The fact that they had to make this offer shows just how little faith they have in getting things done on their own. Forcing Yahoo to become part of Microsoft would almost certainly be a disaster. How this is going to play out is still up in the air, but I’ll be watching closely.

As a side note, I’ve seen a couple posts made that indicate this deal could be the beginning of the end for Microsoft. I think that’s a bit dramatic, but I will say that the fact that Ballmer is still CEO does surprise me a bit.

–jeremy

Microsoft offers to buy Yahoo in $44.6 billion deal

It’s been rumored on and off for years now, but Microsoft just made an unsolicited $44.6 billion bid for Yahoo. The bid, which would consist of cash and Microsoft stock, values Yahoo shares at $31 a share, a 62% premium on Thursdays closing price. More analysis here. Yahoo has rebuffed Microsoft in the past, but this time the offer might be one they can’t refuse. The price of YHOO stock after the announcement indicates the market thinks there is a high probability of a deal. This deal is clearly about Microsoft not being able to compete with Google, and not being too happy about that. Ironically, I don’t think this deal will help them compete any better. On the other hand, Yahoo has been a huge friend to Open Source. In addition to things like YUI (which we use at LQ) and Hadoop, they acquired a great company in Zimbra. To me, Zimbra is one of the only real long term threats to Exchange. Unfortunately, I’m not quite as optimistic as Matt about the future of some of these Open Source initiatives if Microsoft were to take over. I’m not sure companies like Flickr, del.icio.us, MyBlogLog, Zimbra and others would have sold to Microsoft… and for good reason. The cultures at Yahoo! and Microsoft are just entirely different. Concerns like that sometimes go out the windows when $44B is on the table though. Long term, I think Yahoo could probably offer more shareholder value alone than as part of Microsoft. The market doesn’t really think long term anymore, however, and in the short term Yahoo is hurting.

–jeremy

Bill Gates Issues Call For Kinder Capitalism

I almost didn’t post this, but… does anyone find it ironic that one of the richest people in the world, one who amassed his fortune through crushing competition (often using obviously illegal tactics), leveraging monopolies and being quite often just generally anti competition and flat out predatory is now calling for kinder capitalism. Don’t get me wrong, I am whole heartily for helping others. If you’re doing well for yourself, I highly recommend you visit 10over100. I’m a huge proponent of Kiva and other local organizations. This world clearly needs change. This, however, just seems a bit hypocritical. We’re talking about someone who derided CEO’s for having “finite greed”. To quote Adam Smith, who argued against monopolies, is almost comical.

As Bill ages, I’d guess he’s reflecting on his life and the impact he’s had on the world. What he’s done and how he’s done it. He’s worried about his legacy, his spot in history. This seems quite common, if you think about it, but at least the robber barons of yesteryear (think Carnegie, Rockefeller, etc.) poured their ill gotten gains into infrastructure that could make a long lasting difference. The hospitals, research centers, universities, libraries and other centers they built are still paying huge dividends to mankind today. Hopefully what Mr. Gates does will do the same, but it doesn’t seem like it’s infrastructure he’s interested in.

In the end, on one hand I certainly commend him. He looks to have the best interest of human kind at heart. Regardless of how he obtained the money, that’s a great thing. Hopefully the investments he makes will benefit the world for lifetimes to come. Tying aid to the use of Windows, which Microsoft recently did, most certainly does not qualify. When the history books of tomorrow are written, how will we look back on William Gates? That remains to be seen.

I should note that I consider commercial Open Source a sort of “kinder capitalism”. It almost inherently protects against monopolies and therefore should provide a more even distribution of wealth, it avoids lock-in, provides better value for the consumer and by nature almost guarantees that a company focus on what the client wants and not how to artificially inflate the value of 0′s and 1′s. Proprietary software has its place and will have a place for a long time to come, but Open Source is surely kinder and gentler. Of course, I may be a bit bias ;)

–jeremy

Red Hat: BofA Downgrades; Cites Troubles With JBoss

(via Matt) Following news that Novell may be building momentum comes news that Bank of America has downgraded RHT. As is often the case with stock analysts, more are piling on the downgrade now. From Barrons:

Red Hat (RHT) shares are lower today after Bank of America analyst Kirk Materne cut his rating on the stock to Neutral from Buy. His price target goes to $21 from $23.

Materne says the company’s fiscal third quarter ended November should be “solid,” but that its JBoss application server software “continues to have trouble gaining momentum.” He adds that there are “few catalysts on the horizon” that could add to current billings and cash flow growth estimates for the fiscal year ending in February 2008, or for that matter, FY 2009.

Meanwhile, Trip Chowdhry, of Global Equities Research, also downgraded the stock today, moving to Equal Weight. Chowdhry contends that the company’s business fundamentals are “deteriorating,” and that the JBos acquisition “is a complete failure.”

Chowdrhy also asserts that Red Hat Linux “is gradually being relegated to a position of non-criticality.” He also says Red Hat is losing momentum in the BRIC countries – Brazil, Russia, India and China – to Microsoft (MSFT) and Oracle (ORCL). And he says hardware vendors IBM and Hewlett-Packard are providing support and bug fixes for Red Hat Linux since “vendors feel Red Hat support is not enterprise class.”

Not least, he says that developer momentum is shifting away from the Open Source LAMP software stack – Linux, Apache, My SQL, PHP – and toward Microsoft’s .Net platform.

It’s true that Red Hat is having a little more difficulty than it anticipated integrating JBoss. When you acquire an Open Source company, much of what you are acquiring is the people. Many of the top JBoss people have left. The cultures were different, the sales models were different and I’d guess given the information Red Hat has now, they’d have done things a little bit differently. Hindsight is always 20/20 and I think the long term benefits for Red Hat and JBoss are still there.

Moving on to the Global Equities Research comments, I have no idea where Trip is getting his information. All other leading indicators I’ve seen indicate that Linux and Open Source are doing quite well in BRIC and other emerging markets (and in many of those markets Microsoft is either having difficulty gaining traction or is gaining traction by discounting heavily). Additionally, more and more companies are clearly choosing Linux for absolute mission critical applications. The NYSE is a recent example of this. Finally, LAMP adoption in general has been seeing very strong growth and MySQL AB still seems headed toward its IPO, despite the weakening US economy. It just goes to show that an “analyst” can say just about anything they want, typically with little to no justification or real repercussions.

–jeremy

Not much SMB dollars today for open-source vendors, the 451 Group finds

Matt points to a report by The 451 Group indicating that Open Source has not had much penetration in the SMB market.

It’s not surprising to see The 451 Group’s findings that the small-to-medium-sized business market doesn’t promise untold riches to open-source vendors. The SMB market is difficult to crack regardless of one’s licensing and marketing approach. Several of open source’s primary benefits – and particularly the ability to modify code to suit one’s requirements – fit large companies well and SMBs almost not at all.

Some key findings from the report, which surveyed 50+ open-source vendors:

* 73.8% of open-source vendors surveyed believe that SMB revenue will account for <50% of total revenue, with wide disparity in how much the surveyed vendors feel will come from the SMB market;

* Open-source vendors are split on whether SMB will account for a significant increase in business in the future, 47.5% saying that it will and 34.4% saying it won't.

* The overwhelming majority of open-source vendors (72.1%) are taking a direct approach to selling into the SMB market, despite citing "Lack of expertise" (36.1%) and "Lack of awareness of open source options" (24.6%) as the key inhibitors to SMB adoption.

Chart

The brand recognition and integrated solutions offered by Microsoft are very entrenched in the SMB market. The smaller a company, the less likely they are to have a dedicated IT staff that is able to understand Open Source. That means either the person who “knows the most about computers” or a 3rd party handles most IT related issues. In most cases, that’s going to lead to a Microsoft install. Add to this the fact that many of the current commercial Open Source companies are selling products that are squarely aimed at the Enterprise market, and the report really is no surprise. There is good news here though. The SMB market is clearly a great place for potential future growth, in time.

–jeremy

Torvalds on where Linux is headed in 2008

A key benefit of Linux, and Open Source in general, is flexibility. Linus underscores this in a recent interview:

In your opinion, where does Linux shine versus Windows? Reliability? Virtualisation?

I think the real strength of Linux is not in any particular area, but in the flexibility. For example, you mention virtualisation, and in some ways that’s a really excellent example, because it’s not only an example of something where Linux is a fairly strong player, but more tellingly, it’s an example where there are actually many different approaches, and there is no one-size-fits-all “One True Virtualisation” model.

There are many different levels of virtualisation, and many different trade-offs in efficiency, management, separation, running legacy applications and system software, etc. And different people simply care about different parts of it, which is why the buzz-word “virtualisation” shows up in so many places.

And not only do we tend to support many different models of virtualisation, but one telling detail may be that I am personally so totally uninterested in it, that I am really happy that I have almost nothing to do with any of them.

And I mention that as a strong point of open source! Why? Because it actually is a great example of what open source results in: one person’s (or company’s) particular interests don’t end up being dominant. The fact that I personally think that virtualisation isn’t all that exciting means next to nothing.

This is actually the biggest strength of Linux. When you buy an OS from Microsoft, not only you can’t fix it, but it has had years of being skewed by one single entity’s sense of the market. It doesn’t matter how competent Microsoft — or any individual company — is, it’s going to reflect that fact. In contrast, look at where Linux is used. Everything from cellphones and other small embedded computers that people wouldn’t even think of as computers, to the bulk of the biggest machines on the supercomputer Top-500 list. That is flexibility. And it stems directly from the fact that anybody who is interested can participate in the development, and no single entity ends up being in control of where it all goes.

And what does that then lead to? Linux ends up being very good at a lot of different things, and rather well-rounded in general. It’s also very adept at taking up any new niche, because regardless of where you want to put it, not only has somebody else probably looked at something related before but you don’t have to go through license hassles to get permission to do a pilot project.

You’ll see Linux in more places than almost any other OS. Open Source is the reason for this. As Linus mentions, anyone can jump in and makes Linux do whatever it is they need to do. From a DVR to a watch to a storage deice to a super computer – Linux is not only there, it’s doing well. I’ve also always liked how Linus frames Microsoft:

I simply don’t use Microsoft products, not because I hate them, but because they aren’t interesting to me.

He doesn’t bash and doesn’t instigate – a bit refreshing really.

–jeremy

Top ten terrible tech products – Vista makes the list

By most accounts, Vista has not been the success Microsoft was looking for. While I’ve never used it myself, I was surprised to see it make a “Top ten terrible tech products” list on cnet:

Windows Vista
Any operating system that provokes a campaign for its predecessor’s reintroduction deserves to be classed as terrible technology. Any operating system that quietly has a downgrade-to- previous-edition option introduced for PC makers deserves to be classed as terrible technology. Any operating system that takes six years of development but is instantly hated by hordes of PC professionals and enthusiasts deserves to be classed as terrible technology.

Windows Vista conforms to all of the above. Its incompatibility with hardware, its obsessive requirement of human interaction to clear security dialogue box warnings and its abusive use of hated DRM, not to mention its general pointlessness as an upgrade, are just some examples of why this expensive operating system earns the final place in our terrible tech list.

For its part, Apple is pouncing on this in their most recent commercial. With early reports that Vista SP1 isn’t the solution people were looking for, it will be interesting to see where Microsoft goes from here. Seems like a great opportunity for someone to grab market share, but I don’t think that someone is going to be Linux quite yet (although the eeePC and the $200 Walmart PC could be beginning to change that).

–jeremy

Patent Firm Acacia Loses Case Against Microsoft; More To Come?

It looks like Acacia, who recent filed a suit against Red Hat and Novell, just lost its first court battle. From a paidContent article:

The notorious patent holding company Acacia Research, which first came to light in the digital media industry for claiming broad patents in the streaming media field, has lost first of its many lawsuits to reach as far as a jury trial. In a federal court in Lufkin, Texas, the jury found that Microsoft (NSDQ: MSFT) did not infringe on an Acacia patent related to technology used to quickly power up computer, reports Marketwatch. Filed in 2006, the lawsuit sought as much as $900 million in damages from Microsoft, based on sales of its Windows XP OS. The news sent Acacia’s shares down nearly 35 percent in late Nasdaq trading.

As the story says, Acacia has distinguished itself as a particularly aggressive patent holding company, and has embraced the public spotlight that comes alongside suing high-profile companies. Earlier in the week, it announced a patent settlement with AT&T.

Let’s hope this is the first of the many cases they are trolling that end up with a loss. With the stock already plunging 35% on this one loss, a couple losses strung in a row could put significant pressure on the company to get a new revenue model. If patent trolls didn’t make money there would be significantly fewer of them.

–jeremy

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