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Microsoft cannot withstand Linux pyramid: philosopher Girardet

Back in the mid 1980s, it would have been hard to imagine anyone breaking the IT market dominance of the mighty IBM. Big Blue was seven times as big as the number two player. Then along came Microsoft, changed the rules of the game and usurped the throne. Now along comes Google and the open source movement and the rules have changed again. In an era of open source, web services, wireless connnectivity and converged communications, can Microsoft maintain its market grip going forward?

The obvious trend is that growth is slowing for the software giant.

The financial comparison with Google is interesting to say the least. For its fiscal year 2005, Google generated just under US$6.14 billion revenue, almost exclusively through advertising, representing growth of 93% on 2004. Net income of more than US$1.465 billion, represented growth of 267% on the previous year. It is true that both revenue and earnings growth are also slowing at Google. Revenue growth in 2004 was 118% and earnings growth was 277% on the previous year. However, the figures speak for themselves. Google is a high growth company; Microsoft is a mature company with slowing single digit revenue growth.

In order to reinvigorate itself, Microsoft needs to bring new product to market and, indeed, this is exactly what it intends to do in early 2007 with its new Vista operating system and Office 2007 office productivity suite. However, the question remains whether the market will be particularly interested in paying the money to upgrade to the new products. Obviously, Vista will be an easier sell for Microsoft. It will no doubt stitch up deals with all of the major notebook and desktop vendors to sell most of their products with Vista pre-installed. Office 2007, however, is going to be a much tougher challenge and that's a major problem for Microsoft because Office generates about one third of the company's revenues.

The fact is most people no longer want to pay for Office and they no longer have to. An open source version called Open Office.org, which runs on Windows and is virtually interchangeable with Microsoft Office can be downloaded for free. Microsoft can claim that their current product is more advanced and that their new product will be even more advanced again but, for the ordinary office or home user, that will mean nothing if they can have something that does the same job in essentially the same way for free.

As for the operating system, Microsoft can breathe a little easier for the moment because, despite the best efforts of the open source community, with Novell leading the charge, Linux for the desktop is not quite there yet. Novell believes that by the end of June its Suse Linux Enterprise Desktop (SLED) will be ready to make the long awaited breakthrough. However, a cursory look at the beta version shows that, although SLED looks like it is going to be a great operating system there is still much work to be done before migration from Windows becomes a painless task for most ordinary users.

That said, however, there is still 8 months for the open source community to help make the SLED project a success. Already, Microsoft can kiss much of the second and third world countries goodbye - they would prefer not to pay for software if they don't have to. That includes the emerging giants China and India by the way. In addition, the government, education and corporate sector will be taking a long hard look at migrating to Vista and doing their sums in comparison to an open source migration.

Meanwhile, Google is powering along at a great rate of knots unconcerned with matters related to operating systems. It doesn't really care whether the operating system is Windows, Linux, Mac OSX or Solaris. It delivers its advertising funded services via web browsers. It has cornered the search market, making Microsoft an also ran. It is rapidly overtaking Microsoft's share of the webmail space. It has now commenced an attack on Microsoft's heartland, the desktop, with its new Google Calendar service a direct challenger to Outlook. Last month, it bought the browser-based wordprocessing tool Writely. Google has no problem raising the cash to make further purchases that will eat into Microsoft's market and will no doubt do so