A Posteriori

Microsoft has recently made the headlines by making allegations against various open source projects of patent violation:

This patent attack is not motivated by rational thinking. It is motivated by fear.

Fear is forcing Microsoft into abandoning rational decision making processes. Fear is forcing Microsoft to intimidate its own clients who maintain anything less than a pure Microsoft IT environment.

Microsoft’s recent behaviour is analogous to that of a wounded animal. Feeling threatened, it lashes out against anyone and anything it perceives can do it further harm, keenly aware that it has very little to lose.

So what exactly is Microsoft so afraid of? What has them clawing in all directions?

According to Roughly Drafted, Microsoft has three core business that allow it make money:

These are:

1) Windows (retail and corporate users)
2) Office
3) Server products (Windows Server, Exchange, Sharepoint, etc)

1) flows through Microsoft’s monopoly in PC operating systems (OS). It achieves this by strong-arming computer retailers such as Dell and HP to install Windows by default on all PC’s they sell, to the explicit exclusion of all other OS’s.

2) flows through Microsoft’s near-monopoly in desktop Office software, including Word, Excel, PowerPoint, Outlook and Access. This near-monopoly was achieved by using Windows’ monopoly profits to cross-subsidize early versions of office. Microsoft sold early versions of office for the cut-rate price of USD$40, effectively starving competitors like Lotus and Borland, who couldn’t afford to take a loss on their products. The result is that MS Office is the de-facto standard for Office programs. Their file formats are secret and proprietary, raising the cost of switching to competing office products like OpenOffice.

3) was achieved with the help of 1) and 2). Microsoft developed the Exchange email and calendering product partly by tightly integrating it with Windows and Office. Competitors have thus far failed failed to come up with competing products, despite the rise of Linux in the server market.

For several years, Microsoft has been losing money attempting to get a foothold in new businesses such as internet (MSN), gaming consoles (XBox), and mobile computing, as well as continuing anti-trust lawsuits.

So long as their three core businesses of Windows, Office and server products bring in billions in revenues, Microsoft can afford to subsidize its infant money-losing ventures.

A few weeks ago, a major development occurred that threatened to substantially reduce the profitability of market 1).

Now that Dell has promised to sell desktop computers with Linux pre-installed, Microsoft is in danger of losing its monopoly on PC desktop operating systems. The only thing holding back Linux on the desktop has been issues with running that OS on certain kinds of PC hardware, and that OS not coming pre-installed on new PCs. Now that Dell has promised to pre-install Linux on some of its PCs and laptops, those two problems have been eliminated.

Dell is the first major PC retailer to sell Linux PCs. It most assuredly will not be the last.

Couple this with the very tepid uptake of Vista, the latest version of Windows, and Microsoft is in serious trouble. Microsoft CEO Steve Ballmer has even resorted to an ad hominem attack, effectively blaming the slow sales on pirates:

To add insult to injury, Vista has only sold a couple hundred copies in China:

Somehow, Microsoft was ill-prepared for these two developments, either having not seen them coming or refusing to accept them. Now, Redmond is in full panic mode. Sensing a dramatic reduction in profitability, Microsoft is compelled to so something anything to stem the tide.

Microsoft feels fear. It feels the kind of fear it hasn’t felt in at least a decade, when Java was first released. After so many years of inciting fear, Microsoft is finally getting a taste of its own medicine.