Monday, September 11, 2006

Microsoft vs. Open Source: Who Will Win? — HBS Working Knowledge

Microsoft vs. Open Source: Who Will Win? — HBS Working Knowledge
Our paper introduces a dynamic mixed duopoly model in which a profit-maximizing competitor (Microsoft) interacts with a competitor that prices at zero (Linux), with the installed base affecting their relative values over time. We use a formal model to ask what conditions are needed for Linux to take over Windows. The questions that we address are: Is Linux's superior demand-side learning sufficient to win out? What is the effect of forced procurement by governments and some large corporations on the long-run equilibrium? How do cost asymmetries play out? Can Microsoft use piracy strategically to improve its market position?

Harvard analysis of market forces between OSS and Microsoft. It seems that they believe that Linux and other OSS cannot be pushed out of the market but they do have some strategies that Microsoft can use against Linux.

Lot's of editorial liberty, but a quick summary of effective strategies that Microsoft can (and has) used against Linux:

  • Act more like open source projects:  Increase customer feedback loops and be quicker to market these changes.

  • Use network effects to Microsoft's advantage.

    • Give OS and software away to schools and universities so that people build file libraries on Microsoft Word not Open Office

  • Allow governments access to source code and give away binaries to people who would otherwise use Linux, but keep the price for people not easily swayed.

    • Find the right mixture of piracy to purchases.  Piracy may actually help sell more Microsoft products in the future.

  • Reduce costs.  Always helpful but not really practical when competing with volunteers.

  • Make it more difficult for people to contribute/ participate in open source development (Trusted Computing)

  • Make sure that Windows applications are not able to be run on Linux platforms

  • FUD (Fear, Uncertainty, Doubt) campaigns Create new metrics to evaluate software (Total Cost of Ownership - TCO)

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