Why Microsoft fears Open Source more than other proprietary vendors do

It does seem as if Microsoft fears Open Source more than companies that are just as proprietary as Microsoft is. Matt has a potential explanation:

Now look at Oracle, SAP, IBM, etc. You won’t find a single other company making a concerted effort to fight open source. Not a one. Larry Ellison (Oracle) says open source is not something to be feared, but rather something “to be explained.” They clearly see open source as something to work with, and sometimes something to work through, but not something to destroy.

Sure, these and other proprietary-software companies occasionally dip into mudslinging against open source, but they don’t regularly buy analysts, set up anti-open source sites, rattle patent sabres, and generally insist on making a fetish out of open source’s demise.

Just Microsoft. Why?

I think it has a lot to do with how Microsoft chooses to make money. Microsoft, more than any other vendor listed (and many others that could be, like Autodesk, HP, Sybase, Salesforce.com, etc.), sells packaged software.

It relies, more than most companies, on a big, upfront license fee. At most vendors, such license fees barely pay for the cost of selling the product, causing them to rely on ongoing maintenance fees for their profits. So, whereas Oracle’s revenue stream looks not hugely dissimilar from an open-source revenue stream, Microsoft’s looks vastly different.

In short, Microsoft’s business and revenue model is threatened by open source much more than most proprietary software businesses.

When you look at current industry trends, both Open Source and closed source companies are relying more and more on maintenance and subscription revenues and less on pure licensing revenue. This means you have to provide continual value to your clients, or revenue starts to disappear. To me, that seems like how it should be. Matt continues:

Microsoft’s “house” is built on sand. The very factors that drove its success – easy-to-use, low-cost, integration between components – are the same things driving open source into the enterprise. Except that instead of lower cost, open source is free. Instead of integration of various components within the Microsoft-only ecosystem, open source’s open standards and open source code makes integration between disparate components – owned by different companies and communities – much easier than in the traditional proprietary world. And new open-source applications, operating systems, and middleware are heavily focused on customer value – including ease-of-use – which is challenging Microsoft on that front, as well.

Microsoft showed the way to beat the incumbent proprietary vendors, and its strategies are now being used against it by the open-source world. Except that this time, there’s one more huge value that Microsoft can never provide:

Freedom. Freedom from lock-in. Freedom to integrate and tweak and fiddle to make software work for the customer, because the vendors are no longer selling software. They’re selling service to make that software sing for the customer.

It’s very true, and somewhat ironic, that some of the strategies used by Microsoft are now being used against it. It shouldn’t be a surprise though – Microsoft does some things very well. The additional freedom from lock-in (and freedom in general) is the part that is going to turn the industry on its head though. For too long people in IT have been shackled. They’re getting a taste of freedom now and once you get that taste it’s painful to go back.

–jeremy

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