Munich, Germany: Microsoft's lost battle. - Tilted Forum Project Discussion Community

Cynthetiq · 07-16-2003, 05:32 AM

USA Today

Linux took on Microsoft, and won big in Munich
By Byron Acohido, USA TODAY
On the brink of losing a pivotal account to an ascending rival, Microsoft last March dispatched CEO Steve Ballmer to the rescue.
The German city of Munich was balking at a $36.6 million proposal from Microsoft to upgrade 14,000 desktop PCs to the latest versions of Windows and Office.

Instead, Munich — Germany's third-largest city and a technology hub for Central Europe — was leaning toward a switch to Linux, the upstart computer operating system whose open-source code is continually improved by volunteer programmers worldwide.

A Linux victory in Munich would be a stunning blow. So Ballmer visited Mayor Christian Ude to assure him Microsoft would do what it takes to keep the city's business. Documents obtained by USA TODAY show Microsoft subsequently lowered its pricing to $31.9 million and then to $23.7 million — an overall 35% price cut. The discounts were for naught.

On May 28, the city council approved a more expensive proposal — $35.7 million — from German Linux distributor SuSE and IBM, a big Linux backer.

The vote wasn't just another win for Linux, as it continues to gobble chunks of the computer server software market — a market Microsoft does not dominate. Munich is about to become the largest tech user to deploy Linux for everyday use on desktop PCs, the wellspring of Microsoft's profits.

USA TODAY obtained government and corporate documents that provide a rare insider's look at Microsoft's efforts to keep from losing a key customer. Among other things, it:

•Agreed to let Munich go as long as six years, instead of the more normal three or four, without another expensive upgrade, a concession that runs against its bread-and-butter software upgrade strategy.

•Offered to let the city buy only Microsoft Word for some PCs and strip off other applications. Such unbundling cuts against Microsoft's practice of selling PCs loaded with software.

•Offered millions of dollars worth of training and support services free.

The result in Munich shows that the world's largest software company is again under attack from a powerful outside force. But this time the encroacher isn't government antitrust lawyers or a rival tech giant.

Instead, Microsoft is defending itself against the open-source-code movement. In the past two years, dozens of government agencies and schools across Asia, Europe, Australia and the Americas, along with financial institutions and moviemakers, have helped establish open-source software on beefy computer servers that display Web pages and crunch numbers. Now they have begun embracing open-source software running on ordinary desktop computers.

"What's striking about the Munich deal is the use of Linux on the desktop," says Paul DeGroot, tech industry analyst at research firm Directions on Microsoft. "It's a threat to Microsoft's real source of strength, the desktop, where it has no competition and is used to winning all sorts of battles."

Should its desktop software sales stagnate or, worse, decline, Microsoft's profit could plummet, and it could find itself with a diminished ability to bankroll promising, but costly, new ventures, such as tablet PCs, smart phones and online video games.

Anchored by the Linux operating system, open-source software is the antithesis of Microsoft's proprietary codes. It includes a growing number of freely distributed applications, such as OpenOffice, a Microsoft Office clone, and Mozilla, a Web browser that can perform basic workplace tasks. Created and honed by volunteer programmers worldwide, open-source alternatives are generally cheaper to acquire and easier to customize, and cost nothing to upgrade.

Though Microsoft underbid IBM and SuSE by $11.9 million in Munich, city officials were concerned about the unpredictable long-run cost of Microsoft upgrades, says Munich council member Christine Strobl, who championed the switch to Linux. And the more Microsoft discounted, the more it underscored the notion that as a sole supplier, Microsoft could — and has been — naming its own price, she says.

"Microsoft's philosophy is to change our software every five years," Strobl says. "With open-source, it is possible for us to make our own decision as to when to change our software."

Munich must still prove that Linux is ready for prime time on the desktop. Research firm Gartner cautions it won't be until 2005 before it is known how well it works in Munich.

Whether other big tech buyers follow Munich's lead remains to be seen. Analysts say Microsoft has the will and resources to vigorously defend its turf. Windows and Office run on more than 90% of the world's desktop computers and command gross profit margins of up to 80%. The company has $46 billion in cash and will spend $5.2 billion this year, up 20% from last year, on research to improve its offerings.

"Product-wise and installed-base-wise, they're very well positioned," says Gartner analyst Mike Silver.

Microsoft issues call to arms

Open-source advocates counter that Munich proves tech buyers are beginning to demand price cuts from Microsoft while giving Linux a serious look.

"What the Berlin Wall was to politics, Munich is to technology," says SuSE CEO Richard Seibt. "I believe we are now witnessing that dramatic break to freedom of choice."

Ballmer declined interview requests. A week after Microsoft lost in Munich, however, he issued a call to arms. In a June 4 companywide memo, Ballmer cast open-source software as having "no center of gravity" and suggested IBM adds "an illusion of support and accountability" to Linux. But he also warns that Linux "requires our concentrated focus and attention."

In a recent interview, Microsoft Chairman Bill Gates said Linux is just the latest in a long line of competitors, adding that the company has no plans to allow its products to run on Linux.

Munich "reinforces for us that we operate in a very competitive marketplace," says Maggie Wilderotter, Microsoft senior vice president of business strategy.

What happened in Munich also shows how profoundly tech buyers' mindsets have changed. Five years ago, as Linux was just starting to appear on the tech landscape, companies routinely snapped up expensive technology with minimal due diligence. Today, they have become assiduously frugal. And Microsoft, analysts say, has forced the issue by eliminating discounts for upgrades, cutting off support for older versions of its products still in wide use, and steering customers to a controversial 2-year-old software licensing plan under which corporate and government customers pay upfront for software and upgrades.

"Microsoft's biggest enemy is themselves," says Gartner's Silver. "They do things that make people very upset and engenders a lot of resentment."

Comparing Microsoft, Linux

The opening salvo for the battle of Munich was fired from Microsoft's Redmond, Wash., headquarters. Last October, the company announced it would no longer support Windows NT server software, which is used by businesses to network groups of desktop PCs

read more...

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I find it quite interesting to watch a new competitor rise...after watching all the other operating systems DRDOS, IBMDOS, OS/2, all have there short spurts...I just didn't realize that the statistics of conversion were so gretat. The actual USAToday paper shows the world and how many large and small companies are actively using Linux.

mtsgsd · 07-16-2003, 05:50 AM

This gives me a nice warm fuzzy feeling.

Still, unless software companies support the OS by porting over their popular applications and writing new ones, it will be a niche product at best. Look at OS2, a much superior OS but no one was willing to support it to the extent it required because OS1 was such a painfull experience for them.

More examples can be seen in MS's anti-competitive practices that somehow got glossed over in the trial. When a real competitor shows up, Windows gets "upgraded" and the rival suddenly doesn't work because they weren't notified of the change. After awhile you get tired of the software breaking and just buy MS. I think you have to have been around awhile to have seen this as there just isn't the same level of competition anymore, but one big example is windows 3.11 a minor change that made it incompatible with OS2 when MS left its' partnership with IBM.

Gortexfogg · 07-16-2003, 06:54 AM

It's good to see Microsoft shake in it's pants every now and then. Some real competition could bring down Windows and Office prices, force Microsoft to be even more innovative, and be all around good for the industry.

yakimushi · 07-16-2003, 02:30 PM

Good! I hate the Microsoft imposed "tax" on all new PC's.

I bought a laptop from Dell and had a perfectly legal copy of windows I wanted to use on it, and I still had to pay $100 for a shitty copy of XP Home that I don't use. Its a fuckin' ripoff if you ask me, and I don't see how its even legal.

07-16-2003, 05:32 AM	#1 (permalink)
Cynthetiq Tilted Cat Head Administrator Location: Manhattan, NY	Munich, Germany: Microsoft's lost battle. USA Today Linux took on Microsoft, and won big in Munich By Byron Acohido, USA TODAY On the brink of losing a pivotal account to an ascending rival, Microsoft last March dispatched CEO Steve Ballmer to the rescue. The German city of Munich was balking at a $36.6 million proposal from Microsoft to upgrade 14,000 desktop PCs to the latest versions of Windows and Office. Instead, Munich — Germany's third-largest city and a technology hub for Central Europe — was leaning toward a switch to Linux, the upstart computer operating system whose open-source code is continually improved by volunteer programmers worldwide. A Linux victory in Munich would be a stunning blow. So Ballmer visited Mayor Christian Ude to assure him Microsoft would do what it takes to keep the city's business. Documents obtained by USA TODAY show Microsoft subsequently lowered its pricing to $31.9 million and then to $23.7 million — an overall 35% price cut. The discounts were for naught. On May 28, the city council approved a more expensive proposal — $35.7 million — from German Linux distributor SuSE and IBM, a big Linux backer. The vote wasn't just another win for Linux, as it continues to gobble chunks of the computer server software market — a market Microsoft does not dominate. Munich is about to become the largest tech user to deploy Linux for everyday use on desktop PCs, the wellspring of Microsoft's profits. USA TODAY obtained government and corporate documents that provide a rare insider's look at Microsoft's efforts to keep from losing a key customer. Among other things, it: •Agreed to let Munich go as long as six years, instead of the more normal three or four, without another expensive upgrade, a concession that runs against its bread-and-butter software upgrade strategy. •Offered to let the city buy only Microsoft Word for some PCs and strip off other applications. Such unbundling cuts against Microsoft's practice of selling PCs loaded with software. •Offered millions of dollars worth of training and support services free. The result in Munich shows that the world's largest software company is again under attack from a powerful outside force. But this time the encroacher isn't government antitrust lawyers or a rival tech giant. Instead, Microsoft is defending itself against the open-source-code movement. In the past two years, dozens of government agencies and schools across Asia, Europe, Australia and the Americas, along with financial institutions and moviemakers, have helped establish open-source software on beefy computer servers that display Web pages and crunch numbers. Now they have begun embracing open-source software running on ordinary desktop computers. "What's striking about the Munich deal is the use of Linux on the desktop," says Paul DeGroot, tech industry analyst at research firm Directions on Microsoft. "It's a threat to Microsoft's real source of strength, the desktop, where it has no competition and is used to winning all sorts of battles." Should its desktop software sales stagnate or, worse, decline, Microsoft's profit could plummet, and it could find itself with a diminished ability to bankroll promising, but costly, new ventures, such as tablet PCs, smart phones and online video games. Anchored by the Linux operating system, open-source software is the antithesis of Microsoft's proprietary codes. It includes a growing number of freely distributed applications, such as OpenOffice, a Microsoft Office clone, and Mozilla, a Web browser that can perform basic workplace tasks. Created and honed by volunteer programmers worldwide, open-source alternatives are generally cheaper to acquire and easier to customize, and cost nothing to upgrade. Though Microsoft underbid IBM and SuSE by $11.9 million in Munich, city officials were concerned about the unpredictable long-run cost of Microsoft upgrades, says Munich council member Christine Strobl, who championed the switch to Linux. And the more Microsoft discounted, the more it underscored the notion that as a sole supplier, Microsoft could — and has been — naming its own price, she says. "Microsoft's philosophy is to change our software every five years," Strobl says. "With open-source, it is possible for us to make our own decision as to when to change our software." Munich must still prove that Linux is ready for prime time on the desktop. Research firm Gartner cautions it won't be until 2005 before it is known how well it works in Munich. Whether other big tech buyers follow Munich's lead remains to be seen. Analysts say Microsoft has the will and resources to vigorously defend its turf. Windows and Office run on more than 90% of the world's desktop computers and command gross profit margins of up to 80%. The company has $46 billion in cash and will spend $5.2 billion this year, up 20% from last year, on research to improve its offerings. "Product-wise and installed-base-wise, they're very well positioned," says Gartner analyst Mike Silver. Microsoft issues call to arms Open-source advocates counter that Munich proves tech buyers are beginning to demand price cuts from Microsoft while giving Linux a serious look. "What the Berlin Wall was to politics, Munich is to technology," says SuSE CEO Richard Seibt. "I believe we are now witnessing that dramatic break to freedom of choice." Ballmer declined interview requests. A week after Microsoft lost in Munich, however, he issued a call to arms. In a June 4 companywide memo, Ballmer cast open-source software as having "no center of gravity" and suggested IBM adds "an illusion of support and accountability" to Linux. But he also warns that Linux "requires our concentrated focus and attention." In a recent interview, Microsoft Chairman Bill Gates said Linux is just the latest in a long line of competitors, adding that the company has no plans to allow its products to run on Linux. Munich "reinforces for us that we operate in a very competitive marketplace," says Maggie Wilderotter, Microsoft senior vice president of business strategy. What happened in Munich also shows how profoundly tech buyers' mindsets have changed. Five years ago, as Linux was just starting to appear on the tech landscape, companies routinely snapped up expensive technology with minimal due diligence. Today, they have become assiduously frugal. And Microsoft, analysts say, has forced the issue by eliminating discounts for upgrades, cutting off support for older versions of its products still in wide use, and steering customers to a controversial 2-year-old software licensing plan under which corporate and government customers pay upfront for software and upgrades. "Microsoft's biggest enemy is themselves," says Gartner's Silver. "They do things that make people very upset and engenders a lot of resentment." Comparing Microsoft, Linux The opening salvo for the battle of Munich was fired from Microsoft's Redmond, Wash., headquarters. Last October, the company announced it would no longer support Windows NT server software, which is used by businesses to network groups of desktop PCs read more... ---------------- I find it quite interesting to watch a new competitor rise...after watching all the other operating systems DRDOS, IBMDOS, OS/2, all have there short spurts...I just didn't realize that the statistics of conversion were so gretat. The actual USAToday paper shows the world and how many large and small companies are actively using Linux. __________________ I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not. What's the best nation in the world? DO-NATION! Last edited by Cynthetiq; 07-16-2003 at 05:35 AM..

07-16-2003, 05:50 AM	#2 (permalink)
mtsgsd Addict Location: Wisconsin, USA	This gives me a nice warm fuzzy feeling. Still, unless software companies support the OS by porting over their popular applications and writing new ones, it will be a niche product at best. Look at OS2, a much superior OS but no one was willing to support it to the extent it required because OS1 was such a painfull experience for them. More examples can be seen in MS's anti-competitive practices that somehow got glossed over in the trial. When a real competitor shows up, Windows gets "upgraded" and the rival suddenly doesn't work because they weren't notified of the change. After awhile you get tired of the software breaking and just buy MS. I think you have to have been around awhile to have seen this as there just isn't the same level of competition anymore, but one big example is windows 3.11 a minor change that made it incompatible with OS2 when MS left its' partnership with IBM.

07-16-2003, 06:54 AM	#3 (permalink)
Gortexfogg I and I Location: Stillwater, OK	It's good to see Microsoft shake in it's pants every now and then. Some real competition could bring down Windows and Office prices, force Microsoft to be even more innovative, and be all around good for the industry.

07-16-2003, 02:30 PM	#4 (permalink)
yakimushi Addict	Good! I hate the Microsoft imposed "tax" on all new PC's. I bought a laptop from Dell and had a perfectly legal copy of windows I wanted to use on it, and I still had to pay $100 for a shitty copy of XP Home that I don't use. Its a fuckin' ripoff if you ask me, and I don't see how its even legal.