An obvious and powerful way for closed source shops to compete with open source software is to strategically open source. That is they can release bits of code and ask those people who are prepared to, to contribute code either to the software owners’ specs or as they wish.
That way they can try to get the best of both worlds. They can go on keeping most of hte code closed and so selling the software as closed source software, but their software will have various features that have been developed by open source communities. Not only this, but the software owner can pay those from whom it takes code – which many open source projects will have difficulty doing.
Lo and behold, Microsoft are now giving this strategy a whirl. As advised by Slashdot:
An anonymous reader writes “Microsoft has launched its first-ever
shared source programming contest. With several XBox 360’s and an HDTV
on the line, hackers will download 120-day trial versions of Windows CE
and associated tools, and create ‘cool, real-world’ apps using designated
shared source components. Judging criteria include originality,
real-world practicality, feature-extension of the Shared Source
components, project documentation, and a short video that demonstrates the successful operation of the project. The Grand Prize is a complete Xbox 360 dream setup consisting of the Xbox 360 console, a 34-inch HDTV, games, and accessories. Three other winners will be awarded Xbox 360 game consoles.”
Meanwhile, here’s something Microsoft isn’t looking forward to. The first prototype of the US $100 laptop.
It will be interesting to see how things pan out.
Nick
Wow, that’s a better looking machine than the ones we pay a couple of G for- and it only costs $100???
Can you explain to a non-geek how this “open source code” stuff is going to get that Microsoft monkey off my back every time I buy a computer? in other words will i be able to have a desk top that is easy to use, has all the features like word, excel, note books, email (non web based) etc.? In other words will all this stuff mean i will be able to download/or disk the software to use with as little trouble as possible.
“here’s something Microsoft isn’t looking forward to. The first prototype of the US $100 laptop”
Why should Gates fear this, though? All things being equal, if open sourcing doesn’t prove popular, gates’s software still has to be used in these machines so the effect could be that heavy tech just got cheaper and people have more to spend on the software. in this case Gates still makes off like a bandit. So the issue is this open source software needs to become easy and accessible to use, don’t you think, or am I wrong on this?
Opensource only makes sense at the point of commoditisation. Making a project/game with a webcam and recorder doesn’t fit that.
A better description where opensource has been leveraged to save project or lead-in time on a commercial system is Darwin and Safari in OSX.
The kernel and browser engine are commodities and can only compete with opensource production through a monopoly or a niche market.
JC, I think open source can work on your desktop, but it will take a while and things may have moved on by then. Some distributions of Linux and Open Office give you much of what you’re after already. There’s actually not that much difference. But MS Windows still has lots more drivers and ‘wizards’ and things to make things easier. It also has the network externalities. These two reasons are why I haven’t switched myself. But I do use firefox, and will switch to Open Office at some stage I expect. I haven’t bought Office software since MS Office 97.
I don’t think MS can compete on those little machines, but perhaps with a very low priced CE Windows. And Asian Governments are keen to develop Linux for obvious reasons of not wanting to hand over control of their computers to a foreign (near) monopoly.
But we shall see.
Cam, I guess you’re right – I hadn’t thought of that.
Nicholas, I used to think that smart companies could compete against opensource in a commodity market. But I have changed my mind.
The same dynamic that is driving outsourcing is driving opensource. Opensource projects work best when the requirements are static.
For instance a browser, everyone knows what it is supposed to do, developers and users. So it is immediately commodotised.
If requirements are that static, and can be condensed into a 20 page document, the project is either going to be done through social production, or outsourced to India.
I used to think it was Opera that bucked the trend, until I found out they made next to nothing from their desktop browser and most of their money came through the niche market of cell phone browsers.
don’t think MS can compete on those little machines, but perhaps with a very low priced CE Windows.
Yea I see your point. The people buying these things are unlikely to be able to hand over the bucks that Gates normally demands.
My humble opinion is this in terms of where things are heading.
Google is very dangerous to MicroSoft. If these guys were able to place a hybrid web based/hard disk based collection of word, excell and other goodies together gates has real problem. my bet is the google could do something like this and gates who is very weak on the web gets a real shallacking. Again i don’t know much about this stuff but if I were gates I would be looking over my shoulder at google and be worried, very worried.
a) Google are doing this, that is the whole point behind gmail’s 2GB+ storage – you get used to storing your files on their servers, which is a ‘baby-step’ to web services like office programs.
b) Microsoft must know this – but their Windows live mail (whilst as a mail program excellent) doesn’t really show me that they do.
c) Do you think Gates can see over the pile of cash? He’s more worried now about saving the world, more credit to him.
d) One day, g-office will have to be paid for – at which stage enter stage left Mr Gates, to whom the whole world has become used to handing over their hard-earned; who has millions of MS networks to slowly experiment with web-based MS Office; who can probably offer a better security and of course, N Gruen’s network externalities.
unless, of course, M Gates no longer cares by then!
G-office won’t have to be paid for any more than Firefox (OSS) or MS Internet Explorer (closed source) or watching free to air TV (subsidised from other activities) is paid for.
Ah, but I think it will. Certainly on corporate PCs it will – and that’s the biggest market by a fair way, I believe.
Well Open Office is free and fairly similar in quality to MS Office – as Firefox is similar in quality to IE.
Yes, but they aren’t Google’s games. And Firefox had to be, since as you have observed Explorer is.
Open Office is also distinctly not Google, it is ‘Open’ after all. Arguably only a ‘free’ competitor could compete with MS Office anyway, witness the obscurity of Lotus, StarOffice, etc. Even WP couldn’t survive.
Of course, it is possible that Google will offer something just like a web-based Open Office – but I’ll eat my hat.
They already pretty much do – I’ve been to some internet based word processor which I thought Google was involved in – and if it’s not it could buy it easily enough. But I still like rich clients and there are inevitable network externalities. There are some things that it’s ‘.doc’ files didn’t interoperate with MS Word very well, so why not just use Word 97?
As for Google charging little old customers like you and me, they don’t do it – seems odd to me as I would have thought they could make money out of a revamped ‘desktop search’ by giving it some more features – but they don’t. Very odd I reckon.
“they could make money out of a revamped ‘desktop search’ by giving it some more features – but they don’t. Very odd I reckon.”
What do you mean by the Nich?
Well desktop search is a bit of a cruddy product I think. I’d be very happy to be shown how wrong I am, but it doesn’t seem to me that I can search a particular folder with desktop search or search for a particular kind of file – say pdfs only. There are lots of ways one might want to carve up a search, but the Google desktop product is not very helpful at any of that. I’d happily part with $50 to get something better which runs as a rich client rather than as a web interface.
Wall street Journal Piece in today
thought it was intersting
Couldn’t link because it’s behind the fire wall
New Tech Alliances Signal
More Scrambling Ahead
By KEVIN J. DELANEY, MYLENE MANGALINDAN and ROBERT A. GUTH
May 26, 2006; Page B1
The land rush over the Internet entered a new phase yesterday as four tech titans — Yahoo Inc., eBay Inc., Google Inc. and Dell Inc. — announced alliances that signal more jockeying ahead over access to online consumers and the advertising they view on the Web. The high-profile deals also raise fresh questions about Microsoft Corp.’s efforts to keep step in the race.
Yahoo and eBay unveiled a broad partnership under which eBay will display ads brokered by Yahoo on its U.S. online auction site and marketplace. Yahoo will promote eBay’s PayPal electronic-payment system as a way for consumers to pay for Yahoo services.
Separately, Google and Dell confirmed an agreement to install Google software on Dell PCs before they are shipped to users. The deal, which Dell says could include as many as 20 million computers a year, will get Google’s search services and ads in front of more users.
The agreements are the result of behind-the-scenes efforts by tech companies big and small to form alliances that strengthen their efforts to own a bigger piece of the Web landscape. At stake are huge future profits from Internet users and advertisers, whose buying and spending habits are still in flux.
EBay’s decision to tie up with Yahoo appeared to be a tacit acknowledgement that it didn’t feel comfortable more closely aligning itself with long-time partner Google, which has begun efforts over the past year that some believe compete with eBay in areas such as payment services and listings. Meanwhile, Google’s Dell pact was driven partly by Google’s desire to keep a leg up on Microsoft, say people familiar with the matter.
The deals come amid growing ambitions of the Internet companies that increasingly have them encroaching on one another’s turf. Rivalries are building as Internet penetration in the U.S. has reached a mature, slower-growth phase. That augurs more battles over attracting and retaining current Internet users, who are increasing the time they spend online. At the same time, relationships among many Internet companies exist already, complicating rivalries and prospective alliances.
More scuffles for new alliances appear to already be underway. Google and Microsoft, for example, are competing to provide search technology and related advertising to News Corp.’s Fox Interactive Media division, which includes the popular MySpace social networking site, according to people familiar with the matter. A Fox Interactive spokeswoman declined to comment. EBay itself could be a further object of heated courting by rivals. The Yahoo-eBay ad agreement is exclusive to the U.S., leaving open the possibility of eBay doing an ad deal with Google or Microsoft in Europe and Asia.
Yahoo’s announcement with eBay caps years of partnership and discussions between the companies, including a near-merger that fell apart in 2000. In recent months, mounting concern about a competitive threat from Google has led eBay to intensify discussions with Yahoo and Microsoft, say people familiar with the matter. Under the agreement announced yesterday, visitors to the U.S. eBay site will see graphical ads with images brokered by Yahoo. They will also view text ads from Yahoo linked to phrases they enter when they search for specific goods.
Analysts say the linkup should increase the companies’ revenue and provide a critical boost to Yahoo’s search-related ad business, which is going through a major overhaul. The chief executives of eBay and Yahoo say the agreement, which centers around sharing revenue from ads and electronic payments, will have no material impact on their revenue in 2006.
EBay is grappling with slowing growth of its U.S. auction marketplace, and the deal is a bet that Yahoo — more than Google or Microsoft — can help increase revenue from existing Web users and drive new users to eBay. EBay Chief Executive Meg Whitman, in an interview, said she chose to ally with Yahoo because “there is no one who can help us with graphical as well as text search ads the way Yahoo can.” Google’s graphical-ad offerings are relatively fledgling.
Ms. Whitman declined to comment specifically on eBay’s talks with Google and Microsoft or on concerns about Google’s encroachment. Google CEO Eric Schmidt told investors at a Goldman Sachs Internet conference yesterday that the Yahoo agreement was “a very good deal for eBay,” and that Google’s “relationship with eBay will only get closer in the next year or two as we both do very well.”
Yahoo’s partnership will give it access to eBay’s tens of millions of users as well as to valuable data about consumers’ searches on eBay. Users perform about 345 million searches daily on eBay’s sites, rivaling total searches on the top Web-search sites. That information could help Yahoo refine its search technology to offer better ad-targeting capabilities.
One complication for eBay: it must make sure that Yahoo-provided ads don’t pull away too many buyers from eBay’s own auction listings. Under the agreement, which will begin with a testing phase over the next several months, Yahoo will provide search-related ads for “complementary products,” the companies said. The companies also said they will explore developing “click to call” advertising linked to eBay’s Skype and Yahoo Messenger Internet phone technology, which would allow consumers to directly call advertisers.
Google, under the roughly three-year pact announced yesterday, will pay Dell an unspecified amount to have its Web-browser-search toolbar and desktop-search software — which consumers can use to search the content of their hard drives and emails — installed on PCs. Dell shipped over 37 million PCs and servers globally in 2005, according to research group IDC.
Dell will also set its PCs so they “default” to Google’s search engine, automatically providing it in certain instances when consumers search using Microsoft’s Web browser.
The agreement should help mitigate some of Google’s concerns about Microsoft’s new Web browser, to be released this year. Google has complained that Microsoft is making it too difficult for users to change the default setting away from Microsoft’s search engine. The Justice Department earlier this month said that Google’s concerns were unfounded.
By expanding its placement on PCs, Google will instantly gain a spot in front of millions of consumers, who industry analysts say are far more likely to use software and access Internet services if they are pre-loaded on PCs. For Dell, the agreement is an opportunity to boost revenue from software shipped on new computers.
The new alliances pose serious questions for Microsoft, which in recent years has dramatically increased its focus on the Internet and online advertising — with mixed results. People familiar with the matter say the Redmond, Wash., company had at some stages been in the running for both the eBay and Dell agreements announced yesterday. Google late last year snatched away from Microsoft an agreement that included providing search advertising on AOL’s sites.
The eBay deal doesn’t preclude Microsoft from creating closer ties with Yahoo or eBay itself. All three see Google as a common threat and have spent the past year exploring a variety of ways to work together, say people familiar with the matter. A big concern among the three companies, though, was avoiding any appearance of teaming up against Google, especially given Microsoft’s past antitrust problems in the U.S. and Europe, these people say.
The Yahoo-eBay deal could pull Microsoft’s top management deeper into the problem of how to compete with Google and better capitalize on the growth of online advertising. Microsoft is now picking around the edges for partners that can direct traffic to its services and display Internet ads it brokers. Potential partners could include MySpace and FaceBook, a site used by millions of college students. Microsoft could also tighten an existing link with Amazon.com. “Clearly there are going to be a lot of partnerships and alliances in this area,” says Vivek Varma, a Microsoft spokesman.
The Dell-Google alliance potentially cuts into Microsoft’s most coveted and important partnership with a computer maker. By increasing the amount of its software in Dell PCs, Google squeezes onto a stage where Microsoft has long been the lead player. As the world’s largest PC maker by number of machines, Dell has been arguably Microsoft’s most important distribution channel for its most important software, the Windows operating system and Office business applications. Those two products are Microsoft’s largest source of profit and revenue.
Microsoft says it sees the Google and Dell deal as an expansion of options for PC users. “Customers are going to have choice,” Mr. Varma says, when asked if the deal threatens Microsoft’s position in PC software.