April 2003

People often speculate about Microsoft's bringing out a Linux version of Office, but everyone assumes that they would never try to Open Source their products--after all, Microsoft is the acme of proprietary software.

But they have begun to twirl the seven veils lately. While Microsoft's critics denounce Shared Source as a sham, at least it's a move away from binary-only, and although its rule is "look, don't touch" and limited to a privileged few, Shared Source is a concession to the power of Open Source in the current software industry. Someone at Microsoft must realize that Office will eventually be cloned (OpenOffice is a start), ruining their market; if IBM can speculate that someday AIX may be dropped because Linux has grown up, wouldn't it be better for Microsoft to enter the Open Source software industry and survive?

They wouldn't do it all at once. No one there will bet the grand cash cow Office, let alone the operating systems that are offered as secure because their source code is secret. They will pick an important product, one not in the Office suite but instead one used by many people in many offices. It might very well be Microsoft Project.


From what we see in the Open Source software market, we can expect five results:

1. The retail price drops.

It would be more bad publicity for Microsoft to follow the GNU GPL to the letter and give the source code away only on the binary-code CDs it sells. Anyway, someone would immediately put the source code on the Web, and Microsoft would have egg on its face as geeks jeered.

So Microsoft will put both binaries and source code on the Web so that anyone can download them. The sort of customer who prefers to buy a box with a disk and a manual will still buy the box, but the free alternative will make a lot of them think twice, and so the price will fall. To stimulate sales of the boxed product and to try to maintain its price, Microsoft will add proprietary features/plug-ins to increase its usefulness over the free product. Remember that Sun sells StarOffice in a box containing Adabase, which does not come free with OpenOffice.

2. Microsoft Project achieves greater market penetration.

Most people who need to use Project have it already, but this number does not include those who merely want it, or cannot afford it. Somewhat price-sensitive users will take advantage of the retail price drop in 1. above and adopt Microsoft Project, and the free downloadable binaries will convert even the most price-sensitive into Microsoft Project users. In addition many people will download the free Windows binaries, either to use casually or just to play with or to familiarize themselves with the software. This increased number of users will give MS Project greater market penetration, making it more of a standard. Competing products can expect their sales to drop.

3. Someone will fork it.

The fork project will start about twenty minutes after the source code hits the Web. It might just be exuberant geeks, but it might also be serious Project users who at last have a chance to fix what has been bothering them. But these will probably be just bug fixes. And because the fork will not initially have the expertise and experience of the Microsoft development/marketing team, the project's credibility will be low. The fork will succeed only if it offers something that users want and can't get from Microsoft, and this something also attracts additional developers. This something might be a cloned version of the proprietary features in 1. above, provided no patents apply. Remember that if the fork is really good, Microsoft can simply pick up the fork's code and put it into the Microsoft tree. In the case of accepting cloned proprietary features, Microsoft must then continue to innovate for the boxed version, or accept parity with the fork. If the boxed price is low enough, the fork is unlikely to clone the proprietary features. The most likely scenario is that Microsoft remains in charge of the Open Source version of Project; bug-fixers are more likely to send their patches to Microsoft than to the fork. Microsoft will learn to work cooperatively with the developer community and be responsive to its customers and users--or suffer falling revenues.

The competing project management software (2. above) will not benefit immediately from access to Project source code. If they adopt any of it, they must also put their products under the GPL. Microsoft will specifically choose the GNU GPL rather than the BSD license for this very reason. And before the competitors work up their nerve to open their source code in response to Microsoft, they may even have vanished (see 2. above).

4. Microsoft welcomes outside contributors.

Faced with lower product margins (see 1. above), Microsoft must leverage outside contributions to help cut development costs. This will be the hardest part of Open Source to implement. The contributions are more likely to be bug fixes rather than feature adds, and if the code is at all complex and especially if it is not modular, outside developers are unlikely to become involved. And it is probable that the source code will take a year to clean up before it can be posted for others to work on.

5. Microsoft Project will grow a services organization.

Microsoft must accept the lower price and lower margins mentioned in 1. above, and build an MS Project service organization. It might do installation and customization, and it will probably move into the on-line hosting of Project currently offered by third parties such as EPI (http://www.epidirect.com/MS/Project2002/SSum.htm) and MS Project Hosting .com (http://www.msprojecthosting.com/).

Although Microsoft is losing its proprietary advantage over competing firms, as a large company Microsoft will still be in a good position to deal with top companies for lucrative service/support contracts. Smaller service firms will emerge to deal with the lower end of the market, and any of these might eventually grow to a size to compete with Microsoft. In any case, competing service organizations will help keep the price of Microsoft's services lower than they would otherwise be.


All of the foregoing depends on two assumptions: that Microsoft sees that Open Source may offer a means of survival for some Microsoft products, and that the code of Microsoft Project is not so intertwined with Office or its operating systems that they cannot be separated. The five developments sketched above are merely the results of sensible Open Source planning (which will include the anticipated fork in 3. above).


Copyright © 2002 by Donald K. Rosenberg, Stromian Technologies (http://www.stromian.com)



Donald K. Rosenberg is president of Stromian Technologies, a marketing consulting firm, and author of Open Source: The Unauthorized White Papers, (Wiley), a book taking a business approach to Open Source software. Don has twenty years of marketing experience and has worked with companies large and small in the U.S. and Europe, both in Open Source and proprietary software licensing and marketing. Besides consulting on these issues, Don has given talks about them at USENIX, ALS, LinuxWorld (San Francisco, Frankfurt/M), Wizards of OS (Berlin), CeBIT (Istanbul),and Comdex (Las Vegas, Basel).


Return to Rosenberg's Corner -- Topics