Kuwait Linux User Group

Linux is Pushing Microsoft Pricing Down
Date: Sunday, July 11, 2004 @ 09:22:52 EDT
Topic: security

The latest news to emerge in the Linux v Windows battle is that Microsoft has cut its prices (rumour suggests by more than half) in an effort to dissuade the city of Paris from moving to Linux on the desktop. Paris is in upgrade mode and intends to spend nearly $200 million with IT suppliers in the next three years, a significant proportion of which could go to Microsoft.

News emerged over a year ago that Microsoft had a fund set aside for competitive discounts in an attempt to address the Linux threat, and it is presumably drawing on this in an attempt to maintain Paris as a customer. The problem with this approach is that it can only be a holding strategy. The more it becomes apparent that Microsoft will cut prices to head off a Linux challenge, the more customers are going to consider Linux at least as a means of getting otherwise unattainable discounts from Microsoft. The probable outcome, if such a strategy becomes common, is that Microsoft will be forced to cut prices anyway. If differential pricing becomes too common it becomes unsustainable.

It is interesting to note in all of this that the Linux battle has become political in a major way. National and local governments across the world (the list is long and includes China, Japan, Brazil and much of Europe) have got the Linux bug, for three reasons. The first is that they think that they are paying too much for software, particularly desktop software. The second is that they believe that Open Source will do more to stimulate the local software industry than the purchase of proprietary software from a US provider. The third is that Windows poor security record has cost Microsoft a good deal of credibility. Microsoft can say what it likes about the fact that Linux suffers security breaches too, but the fact is that the expensive worms are the Windows worms.

Paris has yet to make a decision, but the simple fact that it is contemplating the Linux desktop indicates the inroads that Linux on the desktop is now making. The Linux momentum is growing and the Linux market share will inevitably grow with it. This is all a self-feeding phenomenon. The more success it has, the more that Novell, Red Hat and the rest will invest in improving usability and the greater the number of vendors that will see Linux as the platform of opportunity.

Microsoft ought to understand this. It is the same phenomenon that delivered it its monopoly position on the desktop, when IBM was the PC power of the day. It is tempting to conclude that the Linux desktop will not be stopped, because the IT industry has chosen to move in the direction of change.

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