MESSAGE
| DATE | 2004-08-03 |
| FROM | From: "Ruben I Safir - Secretary NYLXS"
|
| SUBJECT | Subject: [hangout] Nasty Company
|
Business - Forbes.com
Forbes.com
This is War
Thu Jul 29, 6:35 PM ET
By Victoria Murphy
Microsoft executive Martin Taylor's schedule is packed with meetings like the
one in June when he met with representatives from French drugmaker Aventis in
his Redmond, Wash. office. Aventis has tied together groups of computers
running not Microsoft's operating system but the freely available Linux (news
- web sites). These high-performance clusters can analyze proteins at blazing
speeds. "That's great for Linux," Taylor said cheerily, at the time.
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That same week--by coincidence, the company says--Microsoft announced plans
for a new version of Windows software to handle exactly the kind of
high-performance computing Aventis had set up. Says Taylor now, "I'll knock on
their door in a few months so they can check out our stuff."
Taylor, 34, is Microsoft's top Linux strategist. He speaks regularly at
conferences for open-source programming, so called because anyone can examine
and make changes to the underlying source code. (The guts of Microsoft's
software, by contrast, have long been closely guarded.) He reads Linux-themed
Web newsgroups daily and often phones around to Silicon Valley investors who
are funding open-source software.
Entrepreneurs in the industry smile at the mention of his name because they
know, for one thing, that Taylor is a straight-up, nice guy, but also that his
real job is to better understand Linux so Microsoft can do a better job of
crushing it. In 2001 Microsoft Chief Steve Ballmer likened Linux to "cancer."
Now, says Taylor, "Linux is going to be around forever. We've got to
understand it."
Just as Microsoft has gone through a wrenching transformation from a combative
bully to a mature corporate citizen--the recent cash dividend of $32 billion,
the end of its stock options program, a settling of old scores with Sun
Microsystems, Apple Computer and dozens of federal and state trustbusters--it
is changing its approach to Linux.
Linux is a different kind of opponent. It's not a company to bash, but a
software movement with the backing of the entire tech industry. IBM invests
billions in open-source software and is backing the two leading Linux
distributors, Red Hat and Novell. (Yes, there is revenue in free software;
these companies get money supporting Linux.) Oracle has most of its developers
coding on Linux. Venture capital funds are spawning dozens of open-source
upstarts that threaten to chip away at Microsoft's new areas of growth, like
e-mail security and mobile software. IBM, Hewlett-Packard and Dell all now
sell boxes preloaded with Linux or Windows. Even Intel, which has been joined
to Microsoft's hip since the dawn of the PC era, supports Linux running on its
Pentium processors.
Microsoft has finally met its match against software that is largely
downloadable for free. Investors discount it into the stock price. In a
private meeting with executives in May, Ballmer griped that Microsoft's
profits have more than doubled in the past six years, but the stock, at $29,
is right where it was then. "Linux creates a cloud of uncertainty over
Microsoft. Every time Red Hat reports earnings, Microsoft seems to take a
hit," says Goldman Sachs software analyst Richard Sherlund.
The reality is a bit less dire. Microsoft's revenue climbed 14% this year to
$36.84 billion. What Linux is doing is taking away greater opportunities. Few
companies running Windows are switching to Linux; most of the converts come
from Unix (news - web sites) systems supplied by Sun, Hewlett-Packard and IBM.
But Linux is doing well in server software and threatens serious inroads in
Microsoft's desktop monopoly. In the next two years Linux server revenue will
grow $2.2 billion, while Microsoft's will grow $2.5 billion, according to
research firm Gartner. Linux at some point could be good enough to run home
PCs. It has just a 3% market share for desktop software, mostly in schools and
overseas (that's more than Apple's). Linux vendor Novell is now rolling out
Linux for its own employees' PCs and has 18 customers signed up for trial runs.
Taylor is fond of pointing out that the battle against Linux is an
increasingly familiar one. "Before, Linux was this cloud we didn't get, now it
is Red Hat, Novell, IBM. We know how to compete with companies. I was
high-fiving everyone I could find when Novell bought [German Linux
distributor] SuSe. We already won once against Novell."
Inside Microsoft Taylor is building a network of information and relationships
aimed at overpowering the rival operating system. His attack spans multiple
levels of the Redmond, Wash. empire: product development, marketing, sales and
even customer demonstrations. In a building where Microsoft hosts trial runs
of its software for customers, Taylor now has 50 servers out of 500 devoted to
Linux.
His big move so far is an information campaign. Twenty-nine operatives around
the world convey his anti-Linux message to Microsoft's sales force and relay
reactions from customers. "We're never going to get blindsided by the
technology. Now I know what deals we're winning or losing and why. Before, I
found out about this stuff when a reporter called," says Taylor.
In January Taylor poached one of IBM's former Linux technical leaders, William
Hilf, to test 20 versions of open-source software in Redmond. Hilf two years
ago was in front of audiences touting the cost effectiveness, reliability and
performance of open-source software. Nowadays he's working the Microsoft
spiel: "There's no set architecture in Linux. All roads lead to madness," and
"the devil is in the details. This stuff is not easy to run."
Microsoft has funded 13 studies over the past year comparing Linux with its
own products. Guess what: All of them come out in favor of Microsoft. The
studies are generously referenced in an advertising campaign dubbed "Get the
Facts." Can Linux really handle crucial areas such as security and e-mail? The
Microsoft people are ready with answers. Taylor records quarterly "drive-time
CDs," a quasi-inspiration tape for Microsoft resellers to listen to while
driving to visit customers. He has Microsoft's salesfolk taking exams to
qualify for certification as Linux experts.
"I just want the decision to be based on facts, not religion," says Taylor.
"People are saying, ‘It's not Microsoft, so it must be great.' Tell us what
Linux does that we can't do. Don't tell us you're deploying Linux just because
you can."
The strategy works for customers like BET, the black-entertainment subsidiary
of Viacom. Tech chief Navarrow Wright switched BET's Web site from a Sun
system to Microsoft's after trolling through the data. But some Microsoft
resellers don't bother with the surveys. "I'm not sure how relevant this stuff
is," says PCMS Datafit's Matt S. Scherocman. One Microsoft customer, ADC Chief
Information Officer Jamey S. Anderson, agrees: "You don't know who's paying
the bills. You can't trust the surveys."
Microsoft is actively sowing uncertainty and doubt among potential Linux
customers over who, if anyone, owns the intellectual property behind
open-source software. In May 2003 it paid $21 million for software licenses
from SCO, the tiny Utah company suing IBM for $1 billion for contributing code
to a Linux product that allegedly infringes on its Unix copyright. Linux
advocates saw it as a thinly veiled investment in the lawsuit.
At a recent gathering of venture capitalists Ballmer went so far as to suggest
Microsoft might own intellectual property in Linux and assured the audience
that Microsoft would pursue any violation of its own patents. Before he spoke,
a fire alarm went off. "It was eerily symbolic," says a venture capitalist in
attendance. "We all scattered." Microsoft denies this, and says it will not
litigate.
Windows group chief James Allchin accuses Linux of being a cheap knockoff:
"There's no innovation. Linux is still in the business of cloning existing
technology." Allchin points to new features in the version of Windows due in
2007 that will allow users to remotely turn PCs on or off, with programs still
running. Searches will extend across all data like e-mail, photos, Word.
"We're creating things," he says.
And, for the first time, offering discounts of up to 60% in the form of
rebates on server software and Office for businesses. "Microsoft is going out
with checkbook in hand," says Yankee Group's Laura DiDio. The company is
thinking about ways to sell software to price-sensitive markets, like offering
Office outside the U.S. as a prepaid Web service similar to MSN's deluxe
Hotmail. Previously, customers in a country like Thailand paid roughly the
same for PC software as customers in San Francisco. Now Microsoft is
experimenting with lower-price versions of Windows in Thailand. Microsoft
execs insist this is not a sign of increased pricing pressure. "We're just as
flexible as we've always been on price," says Kevin Johnson, head of worldwide
sales.
Taylor, who served for two years in a coveted spot as Ballmer's assistant, has
a high profile. He's been at Microsoft since college and rattles off techie
jargon like value proposition and customer sat (short for satisfaction) like
any seasoned Microsoftie. He claims to have shed a tear the first time he saw
Microsoft's most recent TV spots featuring kids dreaming of being future
astronauts and painters.
Taylor was handed a just-finished study that found Microsoft too emotionally
biased against open-source code and blind to customer distrust in its own
brand. "This was a real wake-up call for us. We just had to talk
competitively, which we hadn't done since the WordPerfect days. I knew we had
to deeply understand the technology," says Taylor.
Taylor thinks Novell poses the biggest threat to Microsoft. "They have the
best opportunity," he says. Through two acquisitions Novell has amassed a
hefty stack of Linux-based software that includes a server operating system,
desktop and management software. Novell gives resellers up to 15% commissions
on top of the usual commission on first-time Linux customer deals.
At Microsoft's partner conference in July Taylor spent four hours dining with
a dozen Novell resellers for what he dubs "deeper dialogue" on Linux. Several
are now signing up to sell Microsoft's server products, too. "In some number
of years my job shouldn't exist," says Taylor. "If it isn't Linux, it's
something else. But we'll be ready to take it on."
--
NYLXS - New Yorks Free Software Scene
____________________________
NYLXS: New Yorker Free Software Users Scene
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