Financial Daily from THE HINDU group of publications
Saturday, Apr 10, 2004
US army takes on Microsoft for sending software gifts
Pune , April 9
MICROSOFT is under fire... from the US army!
An advisory issued on February 13 by the Standards of Conduct Office (SOCO), Office of the General Counsel, Depart of Defence (DoD), under the section titled `Beware of Microsoft Software Computer gifts' states: "Recently, a number of personnel have received full versions of Microsoft Office Professional Edition 2003 and Microsoft Office OneNote 2003 through the mail from Microsoft Corporation. These gifts were preceded in the mail by a card announcing that the software would be arriving `in the coming weeks.'
The card noted that the software products were being sent `without obligation.' These items have been determined to be gifts from a prohibited source, and may not be accepted by DoD employees. Accordingly, we request that Ethics Counsellors alert their organisations to this situation, and advise military and civilian personnel that they are not permitted to accept these gifts. If received, the items should be returned to Microsoft... "
But why has the US army, which presumably has its hands full defending democracy in various parts of the world, drawn a bead on Microsoft?
The most likely answer is that it does not want any embarrassing comebacks on marketing gimmicks resorted to by a company, which is currently subject to oversight by the US Department of Justice as a part of its anti-trust settlement. And why has Microsoft, for its part, resorted to such aggressive hard-sell?
The answer, again in all probability, is that government agencies represent less than 10 per cent of its revenues. That is in the US. The figure is lower in other countries and steadily headed south with the governments of Britain, China, India, Korea, to name a few, strongly inclined to the Linux OS or some other open-source software.
Analysts say that Microsoft is pretty edgy about the possibility of businesses beginning to wonder whether they are missing something here and eventually moving away from the Windows OS and Office software too.
And so, it has started handing around thousands of free copies of its premier productivity software to people working in client organisations and the government, ostensibly so that they can learn about its features.
In the case of the government employees, Microsoft thoughtfully sends a note along with the freebie, stating: "Microsoft intends that this product be used in accordance with applicable laws and regulations for the evaluation, use and benefit of your government agency only. You may, at your discretion, return this product package to Microsoft at its expense."
The note has not worked because many government agencies have decided that they would rather not leave the return of the free software to the discretion of the employees.
It may be recalled in this context that Microsoft has recently decided to suspend till 2006 its earlier decision to taper off support for the older Windows versions, including Windows 98, Windows 98 (Second Edition) and Windows ME. This volte face, analysts say, is attributable to the company's fear that users of the older Windows versions reluctant to upgrade may be tempted to try out options like Linux if support was discontinued. With this move, Microsoft has, in effect, bought itself sufficient time to figure out how it can persuade people to stick with Windows while the company works out a strategy for dealing with customers who are perfectly happy with their old versions of Windows and see no reason why they should upgrade just because the software maker wants to make more money. It cannot afford to let these people be for the oldest of reasons: money. Microsoft earns over a quarter of its revenues (this segment is technically referred to unearned revenue balance) through licensing programmes under which one-time license holders pay a fee annually for access to updates.
As it happens, this balance has been dropping in the last two quarters. But the company also knows that if it pushes too hard, people will just walk away from its products.
Matters are not much different in the server segment either. Even though Windows 2000 and Windows Server 2003 have been around for quite some time now, Windows NT 4 Server continues to run in over a quarter of all Windows server installations. Microsoft is trying vigorously to persuade server customers to upgrade to Windows Server 2003 - it has announced that it is discontinuing paid support for NT4 at the end of the current calendar - but here again it faces the risk of driving customers away from Windows altogether.
IBM has already initiated a campaign to get Windows NT users to move to its Linux-based servers and expects more than two million servers to migrate to Linux-based machines.
While product cycle management will continue to be a tricky thing, some analysts are of the opinion that, as far as Linux is concerned, Microsoft may be starting at shadows.
They concede that the next several months will be crucial for Linux in consolidating itself on the desktop, given the resentment shared by many Windows users about being arm-twisted into upgrades. But, they say, Longhorn will be launched in 2006 and, going by what is known about this operating system now, it may prove very difficult for Linux to take on.
They further point out that the Linux threat is more a matter of perception than of reality. When a government thinks aloud about adopting Linux, a lot of people listen in. However, empirically, there is no evidence at hand to suggest that governments are going in for major information technology changes with a greater frequency or impact than business enterprises.
Other analysts demur. They argue that it is not a matter of perception alone that governments do favour open source, best value products - not necessarily Linux-based. Further, they tend to be much more demanding and tough in negotiations than businesses because of rigorous cost considerations. This is the reason why fierce debates continue to rage about the comparative costs involved in running Windows on the one hand and open source software on the other.
Microsoft has been sticking to its claim that open source products may be relatively cheaper (or even free) to acquire - but higher administration and support costs make them more expensive in the long haul. The company is supported in this by quite a few third-party studies, the most quoted being the one by the research outfit, IDC.
But advocates of open source software too make a pretty persuasive argument to substantiate their case that the cost advantages of Linux continue to accrue even after the installation stage.
Open source software has another advantage: When used in projects which require a high degree of localisation and integration of various products, the vendors are usually happy to work with local developers.
Finally, governments favour open source software because of the general perception that they provide freer access to data than proprietary software.
Microsoft is aware of this and is now moving to share the source code of its products with a few select customers.
The word is that Office, for instance, will be brought under the company's so-called Shared Source Initiative this year.
The company has further settled its differences with Sun Microsystems so that they can both concentrate on fighting Linux.
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