Joe Wein covers Windows
7 versus Linux on netbooks. "Does it really
matter to Microsoft shareholders and employees if the
21 million or so netbooks expected to be sold this
year (and the even bigger numbers in 2010) will be
running some version of Windows or a version of Linux
(which is free), if previously those buyers would
have picked up a more powerful machine that netted
Microsoft $40-$100 per license?"
Don Marti offers his insights into
the Netbook and the Linux combination.
In the past, Microsoft has been able to push upgrades
into the market. Today, though, with hardware
vendors able to hold out the threat of going Linux,
the company has to continue to offer an old OS version
at a lower price.
Just the existence of desktop Linux—a second
source for the OS, as PC builders have a second
source for everything else—means a shift of
negotiating power. There's still a lot of network
value in a copy of Microsoft Windows because of all
the compatible products out there. But, thanks to
hard-working Linux driver writers, "driverless" USB
class-compliant devices, and the rise of web-based
applications to take the place of shrink-wrapped Win32
applications, the difference in network value is less
and less at the low end of the market. There's a
higher difference in Windows and Linux network
value when you move up from a basic web browsing,
word processing machine to either content creation
(where more of the leading applications aren't out
for Linux) or small business (where customers want
Windows-only vertical apps and Intuit QuickBooks.)
So today, the negotiating power that PC builders get
from the threat of desktop Linux is only at the low
end. Jim Zemlin at the Linux Foundation goes straight
to the source: a Microsoft earnings report. "Client
revenue declined 8% as a result of PC market
weakness and a continued shift to lower priced
netbooks." Even stuck at the low end, desktop
Linux is making Microsoft's product cheaper. Steven
J. Vaughan-Nichols writes, "Well, I think
Microsoft is offering some very sweet deals to the
OEMs to make sure that XP gets a lot of play."
Marc Fleury asks, Is
EEE killing the PC industry? "Neither Intel nor
Microsoft are structured to address the market of
$200 PC, or are they?"
But, since the PC builders have more negotiating
power at the low end, they'll be making more profit
there, while Microsoft's profits concentrate on the
high end. You can use a web site or watch a movie on
a netbook, but you can't build a web site or edit a
movie on a netbook. People who actually make things
on their computers will always buy machines at a
more profitable level of badassitude. Right now,
though, because of the supported OS list from Adobe
and Intuit, Linux for the home and SOHO market is
pretty much stuck on the less-profitable netbooks.
The main focus for Microsoft's director
of open source desktop strategy is going
to have to be something like "people who can
afford Camrys don't drive Corollas." Upsell
netbook users to "real" PCs. Here's one way. Jakob
Nielsen writes, "Big monitors are the easiest way
to increase white-collar productivity, and anyone who
makes at least $50,000 per year ought to have at least
1600x1200 screen resolution. A flat-panel display with
this resolution currently costs less than $500. So,
as long as the bigger display increases productivity
by at least 0.5%, you'll recover the investment in
less than a year." A low-end PC won't drive that big
display, so low-end PCs won't displace more profitable
machines for serious bean-counting or pixel-pushing.
Nobody's cash cow is in serious danger.
But if you think about it, this whole situation is
It's nice for Asus and other netbook vendors, but
other companies prepared the feast that the netbook
makers are eating. Sun spent millions acquiring
StarDivision, and millions more turning StarOffice
into OpenOffice. Novell, Red Hat, IBM, and HP have
invested in desktop Linux, too.
The result of all that work? A windfall for ASUS.
The overlap between netbook sellers and desktop Linux
funders is small. Intel and HP could use netbooks
to justify their Linux desktop investments, but Sun?
Red Hat? Novell?
The next question is: since PC manufacturers do
better on "low-end" machines where Linux is a threat,
and worse on "high-end" machines where the monopoly
is still the monopoly, how can those manufacturers
move the line so that the low end will satisfy more
users? They don't need to control the software that
moves the line, but as it moves, their earnings go
up. Yes, there are some obstacles. Harald Welte writes,
"...no single mainboard maker (probably apart
from Intel's mainboard division and some parts
of Dell) ever tries to boot a Linux Live-CD
on one of their boards before shipping it,
or bothers to get their ACPI tables correct."
And some component vendors still rely on bonghits.
(Yes, most vendor quotes make a lot more sense if you
replace "Intellectual Property" with "bonghits.")
But a PC manufacturer that got serious about it could
clear those obstacles pretty quickly, as Dell largely
has. So the big task is moving the line of control
up, which can only come with more functionality in
desktop Linux software.
Right now, though, desktop Linux gets better
because of developers doing peer production for
the fun of it and for the signaling value, desktop
spinoffs from companies doing development for
server and mobile Linux, the ad-supported Firefox
and friends of course, and Sun doing stuff for
whatever reasons Sun does stuff. Unfortunately,
that means potential line-moving software such as Ardour
falls through the cracks. How much more could a
PC vendor earn on a studio-capable tricked-out quiet
PC if the clerk at Guitar Center had heard of Linux?
Just waiting for treats to fall off the table is
bad business for the hardware vendors. Of course,
a company could join the Linux Foundation or hire Realistic
Linux Pilot Projects LLC (which may or may not
exist) to push desktop Linux, but we need something
Fortunately, thanks to Sarbanes-Oxley and the changing
ratio of software costs and investment transaction
costs, the old Silicon Valley VC model is falling
apart. It used to be a good bet to sign over your
software to investor control in exchange for lottery
tickets, I mean stock options. Today, the expected
value of that software to you is probably higher if
it's under a Free license, where it has signaling
value (Look, Joe can write code and works well with
others!) education value (hey, Joe, here's how to
make your program do something I need) and value as a
complement to your labor (Free software plus Joe hours
is a good deal even though Joe hours cost a lot.)
So netbook vendors need a way to move their
line of control upward, and software needs a new
Zak Greant has some ideas for Hacking
Business Models. Interesting ideas, but so far
they seem to depend on actual customers. In the
netbook market, hardware vendors and Windows XP users
benefit from the work of desktop Linux developers
they have no contact with.
Anyway, the netbook story seems like a
good example of where some kind of alternate tool
for connecting projects and markets might
be useful. Dominant Assurance Contracts? Feature
Futures? Give hardware vendors a chance to invest in
negotiating power directly, and Free Software authors
a way to earn money before there's a critical mass
of users asking for support.
Reproduced with kind permission of dmarti (Don Marti), original article here.