pages tagged cybersourceonlyjobhttp://raid6.com.au/~onlyjob/tags/cybersource/onlyjobikiwiki2012-03-16T06:04:16ZVictoria Education Kowtows to Microsoft. Yet Again.http://raid6.com.au/~onlyjob/posts/cybersource-Victoria_Education_Kowtows_to_Microsoft_Yet_Again/2012-03-16T06:04:16Z2007-10-24T14:00:00Z
<p align="right"><small>Here published with kind permission by <a href="http://cyber.com.au">Cybersource Pty. Ltd.</a></small></p>
<h2>Victoria Education Kowtows to Microsoft. Yet Again.</h2>
<p>25th October, 2007</p>
<p>While the rest of the world increasingly looks to Linux and open source
software as the optimal choice for computing in schools, the Victorian
Department of Education is heading in the wrong direction by adopting
Windows Vista. In the process, the Department is killing platform
competition, shunning local software suppliers and depriving school
children of a wealth of fantastic educational software.</p>
<p>The Victorian Department of Education has again neglected the market,
side-stepped competition by open tender and signed yet another deal<sup>1</sup>
with Microsoft - excluding all other platform vendors, to deploy Windows
Vista - an operating system shunned by the rest of IT industry.</p>
<p>"This disregard for alternatives has gone on for long enough and has to
be stopped," said Cybersource CEO Con Zymaris, a long-time proponent of
Linux and open source software, the primary competitor to Microsoft. "We
call on the Department of Education to ensure that its tenders for
computer platform, office productivity and related desktop software are
truly open to the market, to give vendors besides Microsoft the
opportunity to submit bids."</p>
<p>"Amazingly, while the rest of the world is rejecting Vista, our
education departments are bending over backwards to adopt the
problematic platform," continued Zymaris. "Journalist after journalist,
industry analyst after analyst has seen fit to warn consumers and
business off Vista. In but one example, the influential Dutch Consumers’
Counsel has warned its constituents to avoid Vista, after receiving over
5000 complaints about Vista in only a single month. Vista is a quagmire
for most users, but Education Victoria are happy to be Microsoft's patsy
and waste Victorian taxpayer money in the process."</p>
<p>Rather than look to Vista, school districts across North America,
Europe, East Asia, India, South America and Africa, are moving away from
Windows to Linux. The Russian government is moving all schools across to
Linux in 2009<sup>2</sup>. There are hundreds of thousands of educational Linux
systems in Spain<sup>3</sup>.</p>
<p>"Linux and open source delivers a broader range of technologies to
schools and pupils, because one of the great advantages of Linux and
open source software is that schools can now afford all forms of
technical, graphical, educational and business apps - it's all free
software after all. This in turn leads to better educational outcomes.
Open source software also leads to positives for those local ICT
industries, as billions of dollars aren't sucked out of the coffers of
school districts, to pay for Microsoft licence fees," Zymaris said.</p>
<p>"The funny thing is, Microsoft would probably pay handsomely to ensure
that school children learn Microsoft products and not alternatives like
Linux and open source. Instead of using this fact to demand that
Microsoft covers the costs involved in deploying Microsoft's wares, the
Victorian Department of Education is actually paying $23 million in
Microsoft licence fees alone," continued Zymaris.</p>
<p>"By subverting the power of competitive markets, the Department of
Education is hurting local platform vendors. By keeping innovative
technology off school desks and by adopting Vista, they're wasting
taxpayer money. And by stubbornly refusing to seriously consider
alternative technologies such as Linux and open source, they are
shackling themselves to the Microsoft upgrade treadmill in perpetuity,"
concluded Zymaris.</p>
<p>References:<br />
1. <a href="http://www.computerworld.com.au/index.php/id;1582266183;fp;16;fpid;1">http://www.computerworld.com.au/index.php/id;1582266183;fp;16;fpid;1</a><br />
2. <a href="http://news.bbc.co.uk/1/hi/technology/7034828.stm">http://news.bbc.co.uk/1/hi/technology/7034828.stm</a><br />
3. <a href="http://news.zdnet.co.uk/software/0,1000000121,39118695,00.htm">http://news.zdnet.co.uk/software/0,1000000121,39118695,00.htm</a>
</p>
Why the Unbundling Windows Sceptics are Wronghttp://raid6.com.au/~onlyjob/posts/cybersource-Why_the_Unbundling_Windows_Sceptics_are_Wrong/2012-03-16T06:04:16Z2007-10-09T14:00:00Z
<p align="right"><small>Here published with kind permission by <a href="http://cyber.com.au">Cybersource Pty. Ltd.</a></small></p>
<h2>Why the Unbundling Windows Sceptics are Wrong</h2>
<p>By: Con Zymaris <<a href="mailto:conz@cybersource.com.au">conz@cybersource.com.au</a>></p>
<p>Updated: 2007-10-10</p>
<p>Numerous industry
observers have long-called for the adoption of policies by
competition regulators which will spur competition in the personal
computer operating system platform market - a market which has had a
Microsoft choke-hold, gained through legally dubious business
practices, over the past 20 years.</p>
<p>Now aligned with
this group is an influential free-market think-tank, which has called
on the European Union (EU) to make good on its promise to foster
greater competition in personal computer platforms, in the aftermath
of the recent court ruling which yet again found Microsoft abusing
its monopoly power to diminish market forces. The think-tank, the
Globalisation Institute, has <a href="http://www.globalisation.eu/publications/unbundlingmicrosoftwindows.pdf">called
upon</a> the EU to demand that PC vendors stop the practice of
automatically bundling Microsoft operating systems with personal
computers.</p>
<p>In doing so, the
Globalisation Institute draws a distinction between open, free
markets, which exist for computer hardware and demonstrate phenomenal
innovation and price performance, and <i>laissez-faire</i> markets,
dominated by the corporate equivalent of Somali warlords –
specifically, operating system platforms.</p>
<p>In response,
others have replied with reasons they believe would prevent such an
approach from succeeding.</p>
<p>The following are
the key arguments they introduce against the unbundling of Microsoft
Windows from consumer PCs, along with an explanation as to why these
arguments from the 'unbundling sceptics' are invalid:</p>
<h3>Firstly, why should competition regulators even bother pursuing this?</h3>
<p>A few years ago, I ran through a
<a href="http://raid6.com.au/~onlyjob/tags/cybersource/../../posts/cybersource-The_Cost_of_Software_Monopoly:_How_Australian_Consumers_Lose/">couple of scenarios</a></p>
<p>which showed that the reduced competition in the PC
platform software space cost consumers over <b>$10 billion per year</b>.
More recently, a <a href="http://www.heise.de/english/newsticker/news/96581">court-case
in Europe</a> showed <b>an incredible 52%</b> of the price of a new
Acer laptop was constituted by the forced-bundling of Microsoft and
other Windows platform software. It is also obvious that none of this
additional expense for software would be necessary if Acer shipped
Linux instead, because all the functionality delivered by the bundled
software is available on Linux, at no cost. When you find that the
price of Microsoft's software tax is more than the price of the
computer hardware, you know it's time to act.</p>
<p>If nothing else seems to convince you that the personal computer
market needs a competition boost, then all you need to consider is
that one company, Microsoft, has had a 90-95% market share position
for perhaps 20 years. What other large, <i>hugely </i>lucrative and
business-critical markets do you know where one incumbent has that
size of market share for that length of time? It is the surest
indication that the free market has been waylaid and needs
assistance. It's time to set the wheels in motion to stop this
egregious aberration.</p>
<h3>Why should Windows users support this proposal?</h3>
<p>The mechanism for ensuring an open and free market for PC operating
systems outlined in this document will have far reaching benefits for
Windows users as well as the obvious benefits for Linux users. A
cursory review of the history of the computer industry shows that
consumers benefit most when there is strong competition in each
market segment. Windows users will benefit because:</p>
<ul>
<li>
Microsoft will become less complacent, due to increased Linux
competition.
</li>
<li>
Microsoft will become more responsive to customer needs, due to
increased Linux competition.
</li>
<li>
Microsoft will build better software, to compete with Linux.
</li>
<li>
Microsoft will build more secure software, to compete with Linux.
</li>
<li>
Microsoft will have to price its software to compete with Linux,
meaning lower prices for Windows users.
</li>
</ul>
<p>It should be an obvious truism to anyone, that the only way to keep
any vendor honest is for there to be another vendor breathing down
their necks, vying for their customers. To Microsoft, Linux is that
other vendor, and by letting it compete on a fair and level playing
field, Windows users will benefit substantially.</p>
<h3>You can go and buy an un-bundled PC today. Why</h3>
<p>should competition regulators push for all PCs to ship without
Windows by default?</p>
<p>Most, if not all
of the PCs you can buy without a pre-installed Microsoft operating
system, are from what are known as 'white-box' or no-name brand PC
makers. Generally, these are perfectly acceptable computers, but many
consumers, certainly most businesses, will shy away from buying them.
This then gives Microsoft a huge competitive boost in the market, as
pretty much most of the computers that consumers or businesses will
buy, they can only buy with a bundled Microsoft operating system
platform.</p>
<p>Secondly, by
limiting consumers who prefer not to run Windows to only those
computers which ship without an operating system, you are limiting
those consumers to a fraction of the potential range of computer
hardware otherwise available. This is less than fair. Most systems,
most options, most hardware innovations, are therefore not made
available to consumers who want unbundled PCs.</p>
<p>Yes, these
consumers <i>could</i> buy a PC with Windows and then wipe Windows,
but then that means they are paying, as we note above in the Acer
case, possibly hundreds of dollars/Euros, needlessly. And all this
does is benefit Microsoft, essentially establishing a 'tax' on a
product category - a category which sells over 100 million units
globally every year. This is a vast distortion of the principles of
an open marketplace.</p>
<h3>What about the Apple Mac? Shouldn't that also</h3>
<p>have the OS X operating system unbundled?</p>
<p>No, for two
reasons. Firstly, the Apple Mac is a product with hardware and
software from a single vendor. If Microsoft wanted to sell a Windows
PC that it itself made, then this also wouldn't be a problem. It
would substantially tick off Microsoft's hardware OEM partners, but
wouldn't be a problem from a competitiveness perspective. In fact, if
that happened, there would be a substantial acceleration of hardware
partners adopting alternative platforms, like Linux.</p>
<p>Secondly and more
crucially, the Apple Mac doesn't have 95% market share, and the
immense leverage that such market share delivers unto Microsoft. If
Microsoft Windows only had 5% of the market, then there would be no
pressure to unbundle it from consumer PCs. We wouldn't be having this
discussion in the first place.</p>
<h3>But Walt Mossberg said that desktop Linux still</h3>
<p>isn't ready for the average user.</p>
<p>The usability and
technology world doesn't revolve around Walt Mossberg. Mossberg may
have indicated that desktop Linux isn't for the average user, but
it's also possible to find <i>many</i> pundits who will say that
desktop Windows isn't for the average user either; that doesn't stop
most PC makers from bundling Windows with their PCs.</p>
<p>In the end, it's
all about what you're used to. Mossberg is used to Windows, so it
seems more 'normal' to him. In time, people will, due to the
increased uptake of Linux brought about by a liberated market, also
find that it too is 'normal'.</p>
<h3>But Dell (and others) aren't selling as many</h3>
<p>Linux boxes as they're selling Windows boxes. Doesn't that mean that
there's less market for desktop Linux?</p>
<p>Yes, for now. But
the market for alternatives to Windows will never be given a chance
unless competition regulators force that market to be open and free
to competition. The best and fastest way to do this is through
unbundling Windows from PCs. If consumers still want Windows, they'll
be free to elect to acquire it at the time they purchase their PC,
but this should be through conscious decision-making, not through
forced bundling.</p>
<h3>But Windows only constitutes a mere 10% of the</h3>
<p>price of a PC, right?</p>
<p>Incorrect. In
markets for lower-priced hardware, the cost of even the OEM (<i>ie</i>,
cheaper) version Windows has reached 35% of the price of a new
computer. What's more, each year, this percentage increases. 10 years
ago, the operating system
<a href="http://raid6.com.au/~onlyjob/tags/cybersource/../../posts/cybersource-The_Cost_of_Software_Monopoly:_How_Australian_Consumers_Lose/">was only 5% of the price</a></p>
<p>of the PC. When additional software, in fact
the bare essentials for running a functional desktop, are shipped
with Windows, this figure for bundled software reaches to over 50% of
the total cost of a new PC, as evidenced by the Acer court case.</p>
<p>More importantly,
the existence of a bundled copy of Windows on each PC affords the
owner of the platform, <i>ie,</i> Microsoft, an incredible leverage
not permitted any other software competitor. In fact, it gives
Microsoft a beachhead through which it can sell office suites,
server-based products which hook into that desktop operating system
through proprietary means and dozens of other add-ons, in a manner
which amounts to an unfair advantage over those competitors.</p>
<p>Ensuring that
Windows is no longer the default operating system platform on all new
PCs, will help those who compete against Microsoft by providing a
market space opening to an alternative operating system platform, one
that Microsoft doesn't or can't own. This means that unbundling
Windows from PCs wont just open up the platform market, but all
application market segments that Microsoft now dominates as well.</p>
<h3>But there wont be any uptake of Linux unless</h3>
<p>there's a huge marketing effort</p>
<p>Incorrect. Linux
grows in much the same way as the Internet grew, through word of
mouth and general meme-transfer. The Internet, a technology developed
by the same army of geeks who are now making consumer Linux a
reality, has over 1 billion mainstream users. It gained those users
without a marketing department, without sales people or corporate
bosses. In time, Linux will do the same. Here's how.</p>
<p>If all PCs in
Europe are now offered to consumers with the option of a free Linux
desktop, then that will translate into a jump in desktop Linux
adoption. If even 10% of these consumers take up the Linux option,
that would translate into a doubling of desktop Linux users, in
effect, hastening the onset of an inflection point.</p>
<p>In turn, this
increase in users will spur more word of mouth, familiarity and
comfort. It's likely that in successive buying cycles, a higher and
higher percentage of new PC buys will opt for the cheaper Linux
option - a positive feedback loop in platform migration.</p>
<p>Obviously, these
consumers will be free to opt out of Linux, at any time, if they
decide to return to Windows. All they need to do is pay the OEM
licence fee to Microsoft. We'll cover how this works soon.</p>
<h3>Removing bundled Windows will make PCs cost more</h3>
<p>as hardware vendors wont get volume/OEM discounts</p>
<p>Incorrect. By
offering consumers a bootable copy of OEM Windows, manufacturers can
continue to make available the lower cost (<i>ie</i>, OEM) versions
of Windows. But consumers must still make that decision to pay for
using this add-on.</p>
<p>If you think this
puts Windows at a disadvantage, consider the following: Microsoft's
operating system competitors have had to do this for decades while
Microsoft stitched up deals with hardware vendors specifically
designed to exclude them from the market. The old approach was
unfair, this new approach puts every competitor on an equal footing.</p>
<h3>Wont unbundling add complexity?</h3>
<p>This notion can
be encapsulated with what <a href="http://www.informationweek.com/blog/main/archives/2007/09/no_bundled_wind.html">one
pundit wrote</a> :</p>
<p>It would also add complexity for end users, counter to The
Institute's claims. People buy operating systems pre-installed with
bunch of different applications beyond what comes with the operating
system. Office productivity apps, security apps, you name it. An
uninstalled OS would force users to find and download or buy those
apps. That's an added and inconvenient step that would cost hours.</p>
<p>Obviously this
person has never seriously used Windows, or for that matter, Linux.</p>
<p>Unlike Linux,
Windows ships with an absolute paucity of high-function applications;
from word processing, through accounting software, from graphics
through drawing and technical tools, Linux beats Windows hands down
in every area of pre-installed application functionality. If PC
vendors shipped Linux on their PCs as a default OS that would be a
huge <i>reduction</i> in complexity for consumers, as they would have
access to thousands of high quality applications, either
pre-installed or a few package-installation clicks away.</p>
<h3>Consumers will not necessarily opt for the</h3>
<p>cheaper, ie Linux, desktop option.</p>
<p>Indeed. However,
unless there is a space opened in the market for competitors to try
and sell into, how will we ever find out? And yes, while more people
know Windows, there are tens of millions now who also know Linux.
Linux is fast approaching that first inflection-point. A move by
regulators to ensure that there is a breathing-space for competition
will likely see that inflection-point come sooner than later.</p>
<h3>But if we don't ship PCs with pre-installed</h3>
<p>Windows, wont there be rampant piracy?</p>
<p>Microsoft has
introduced a number of measures in recent versions of Windows which
are designed to stop piracy of Windows. In effect, they have provided
their own answer to this question.</p>
<h3>But the market has spoken and the market said</h3>
<p>'Windows desktops'. Why push this whole unbundling idea?</p>
<p>The market was
severely distorted due to the fact that for the better part of a
decade, Microsoft made deals with PC hardware vendors, specifically
designed to exclude competing operating systems. Such deals were
later shown to be illegal by the United States Federal Trade
Commission in the aftermath of its 1995 antitrust investigation of
Microsoft. This distortion was never rectified however, and
governments who value free and open markets must now act through
their competition regulators to bring about the kind of competition
which will benefit their constituent consumers in the medium-to-long
term.</p>
<h3>But there's no one to support Linux</h3>
<p>This is not
correct. There are thousands of large and small organisations
worldwide which provide support to Linux and free and open source
software. More importantly, if the consumer who buys the new PC
believes that there is no one who can support him in his purchase,
then that consumer is <i>more than free</i> to opt to install
Windows, acquire the Windows licence key from Microsoft and just use
Windows.</p>
<h3>How is it possible to provide for both consumers</h3>
<p>who demand Windows and also ensure a fair and open marketplace for
competing platforms?</p>
<p>That's the $64
billion question, isn't it? Here's how it can be done.</p>
<p>All hardware
manufacturers should ship personal computers with no pre-installed
operating system. They should include within the packaging of the
computer a media copy of the then current Microsoft Windows recovery
CD. They should also include a copy of one of the main Linux
distributions which are freely-redistributable at no charge.</p>
<p>Upon unpacking
the computer, the consumer must then make a choice of either:</p>
<ol type="a">
<li>loading
Windows from the Windows recovery media, then using the brochure
included with the recovery media to contact Microsoft and through
some form of financial transaction, acquire a licence to use
Windows, or
</li>
<li>load the
Linux operating system from the CD/DVD included, and use it as their
computer operating system.
</li>
</ol>
<p>Both the Windows
recovery and the Linux installation media must be shipped with the
new personal computer with a minimum of additional expense to the
consumer. Specifically, it is of critical importance that the
consumer receives the cost reduction advantages introduced by
removing the licence fee for the bundled OEM Windows.</p>
<p>In order for this
approach to work, Microsoft must agree to the free re-distribution of
the Windows recovery media by hardware vendors. If it does not, then
this will result in consumers only being given the 'out-of-the-box'
option of installing Linux. It is therefore in Microsoft's <i>absolute</i>
best interest to ensure that the Windows recovery media can be
re-distributed and that the loading of Windows on the new PC is as
fast and painless as possible. It otherwise risks more users
defecting to Linux. As the Windows recovery media will also need a
legitimate Windows licence obtained from Microsoft in order to
actually function, there should be no additional piracy risks for
Microsoft if they allow free re-distribution of the Windows recover
media.</p>
<h3>What about variations to this deployment method?</h3>
<p>I've provided
what I believe to be the <i>least disruptive</i> method of ensuring
an open and competitive platform market, but other options are
possible. Here are some:</p>
<ol>
<li>pre-installing
both operating systems, or
</li>
<li>including no
software media, but requiring the consumer to buy an operating
system at the point of purchase, or
</li>
<li>pay a
service fee to the retail vendor and have them perform the operating
system platform installation on request, or
</li>
<li>requiring
that the PC hardware vendor ship differently-installed computers,
using different Stock Keeping Unit (SKU) codes, allowing the
consumer to select whichever they prefer at purchase time.
</li>
</ol>
<p>Sure, these can
be considered. However, the method I outline above, that of including
two separate media packs and allowing the consumer to decide which
one to insert into the PC at initial boot time, has certain
implementation advantages. Specifically, these are that the consumer
buys the PC they want to buy, without the added confusion of having
to select a separate boxed product – everything they need will be
shipped with the PC they've just purchased. Additionally, the
retailers, resellers and e-tailers will not have to track or handle a
multitude of additional PC vendor product codes and SKUs – they
will merely have to know the one for each PC product, as they do
presently.</p>
<p>The onus
therefore falls on the PC vendors themselves to include media packs
for the version of Windows they would otherwise have installed/imaged
onto the PC product in question, <i>and</i>
a media pack for a quality Linux distribution, commensurate with the
market they're trying to sell into – one which has sufficient
driver support to allow most of the core components of the computer
(ie, video, audio, drives, network) to function correctly.
Furthermore, the hardware vendor need undertake this Linux
confirmation process once per product lifecycle, therefore, not a
particularly onerous or expensive task for them to undertake. Once
again, the main decision criteria for the distribution process
outlined in this proposal is that it would cause the smallest
additional overhead for the industry <i>and</i> the consumer.</p>
<h3>But there are so many Linux distributions!</h3>
<p>Yes, choice can be hard sometimes, but choice and competition is also
what drives both free markets and innovation. Each PC hardware vendor
must make a business decision as to which Linux distribution they are
happy to work with and just provide support for that distribution.
Obviously, they are most likely to include a distribution which a
majority of their target market will find useful and appealing, else
risk losing some market share to their competitors which would be
doing exactly that. Competition is good for Linux distributions too,
with the added bonus that open source code allows each distribution
to share in the gains made by its 'co-opetitive' brethren.</p>
<h3>But consumers are not tech savvy – they will</h3>
<p>not want to install an operating system</p>
<p>Correct. Which is
why it is up to both the Linux industry and Microsoft to develop
<i>maximally simple</i> installation processes for their respective
operating systems. In fact, there should be open and strong
competition between the two to create the simplest installation
process possible.</p>
<p>The end user
should be able to pop the installation/recovery media into the
optical drive, reboot the new PC and maybe 10-20 minutes later, once
the OS has been installed/imaged onto the PC's hard disk and the
media disk has been ejected, they can reboot the PC into their
selected operating system. Whichever of Microsoft or the Linux
distributors can build the simplest installation/disk-imaging
process, so will they have an advantage over the other for acquiring
(or keeping) users.</p>
<h3>But doesn't Linux lack in terms of driver</h3>
<p>support?</p>
<p>Depends on how
you measure this. It can be demonstrated that Linux has broader
driver support for older, more esoteric or legacy hardware than
Windows XP. Linux certainly has broader driver support than Windows
Vista. In general, Linux will support most/all of the major video,
sound, disk and network devices and many of the wireless cards and
web-cams. But yes, there are various consumer and business devices
for which Linux driver support is lacking.</p>
<p>This may mean
that <i>not every function</i> on <i>every PC</i> which ships with
the software installation packs noted above, will function completely
under Linux. It is therefore incumbent on the consumer to decide <i>if</i>
they want that specific function, say a wireless card, or inbuilt
web-cam, for their needs. And if they do, they can then opt to
install Windows and acquire the Windows licence key from Microsoft.
If, however, they decide that they <i>don't</i> need a functional
wireless card or web-cam for which a Linux driver is lacking, then
they can opt <i>not</i> to acquire Windows.</p>
<p>The
beauty of this approach is that by opening the market and making it
possible for consumers to <i>make a choice</i> about the operating
system they will use, we are likely to see a jump in Linux usage. We
are certainly not going to see a decrease from the monopoly market we
have now. This, in turn, will spur Linux driver support from those
recalcitrant component vendors. Which in turn will mean that in each
successive buying cycle, there will be less reason for consumers to
bypass Linux due to lacking driving support. Another virtuous cycle
indeed.</p>
<h3>Yes, great, but consumers still want Windows!</h3>
<p>Fine. They can then opt to install Windows and acquire the Windows
licence key from Microsoft. All they've lost is the maybe 10-20
minutes to install/image Windows onto the new PC's hard disk. In the
grand scheme of things, when you incorporate the time needed to
unpack the PC and cable it up, this isn't a big deal.</p>
<h3>Why operating systems must be unbundled from PCs</h3>
<p>Regardless of the
final mechanism used, competition regulators worldwide <i>must</i>
now take steps to increase the real competition for the consumer PC
market. Microsoft has not become the biggest monopoly in history
through competing on a level playing field. Only governments and
national competition regulators now have the power to redress this
gross imbalance. If governments <i>don't</i> do this now, then
perhaps <i>even they</i> wont have the means to do this later.</p>
<p><small><i>Permission is
granted to make and distribute verbatim copies of this document,
provided this permission notice is preserved on all copies.</i></small></p>
Governments Must Reject Gates' $3 Bid to Addict Next Billion PC Usershttp://raid6.com.au/~onlyjob/posts/cybersource-Governments_Must_Reject_Gates_Bid_to_Addict_Next_Billion_PC_Users/2012-03-16T06:04:16Z2007-04-29T14:00:00Z
<p align="right"><small>Here published with kind permission by <a href="http://cyber.com.au">Cybersource Pty. Ltd.</a></small></p>
<p>30th April, 2007</p>
<p>On April 19th, Bill Gates, Chairman of Microsoft Corp., unveiled a plan
which seeks to enlist the help of developing nations in a
barely-concealed attempt to get the next billion PC users hooked onto
Microsoft software. Under the guise of trying to bridge the digital
divide, Microsoft will instead aim to extend its desktop monopoly by
using the same technique it's used for years through software piracy:
platform addiction. An addiction it will milk in future decades. An
addiction that governments should reject in favour of free and open
source software - the only way to truly bridge the digital divide.</p>
<p>"Microsoft's strategy of getting developing nations hooked on its
software was clearly outlined by Bill Gates almost a decade ago," said
Con Zymaris, CEO of long-standing open source firm Cybersource.</p>
<p>Specifically, Bill Gates, citing China as an example, said:</p>
<blockquote>
"Although about 3 million computers get sold every year in China, but
people don't pay for the software," he said. "Someday they will, though.
As long as they are going to steal it, we want them to steal ours.
They'll get sort of addicted, and then we'll somehow figure out how to
collect sometime in the next decade."<sup>1</sup>
</blockquote>
<p>"From this, we analyse the following strategy. Microsoft would allow
users in developing countries to use pirated software, which in turn
would lock those users into Microsoft's proprietary data formats,
proprietary protocols and proprietary Application Programming Interfaces
(APIs). Once so tithed to Microsoft, these users would find it almost
impossible to move to alternatives, thus providing a captive future
revenue stream," explained Zymaris. "And this new strategy is even more
insidious, as Microsoft is expecting governments to pay for the
hardware, thus paving the way for Microsoft to snare its next billion
addicts in a friction-free manner."</p>
<p>"What is equally apparent is that Microsoft would prefer to lose money
initially, to prevent competitors from capturing mindshare. Today, Linux
and open source software are Microsoft's biggest competitor. And Linux
and open source software are capturing huge mindshare in developing
nations, thus Microsoft's knee-jerk reaction in offering its
$3-meal-deal," Zymaris said. "Instead of accepting the Microsoft deal,
governments should push open source software, guaranteeing freedom
from vendor lock-in and future price hikes."</p>
<p>And where Microsoft offers a handful of cut-down applications in its
$3-meal-deal, open source supplies thousands of complete applications,
for no cost at all. Highly functional applications such as Scribus
(desktop publishing), Gimp, (photo editing), Blender3D (animation),
Inkscape (vector drawing), MySQL (database), Python (programming
environment), will help students in their creative endevours. Other
landmark applications such as Linux, OpenOffice.org (office suite) and
Firefox (web browser) will help all users.</p>
<p>"By helping to make users aware of open source alternatives, by
disseminating that software through CD give-aways and via subsidised,
low-cost PCs, governments will be reducing their reliance on proprietary
vendors and improve access to 21st century technology. It's the
only way to ensure that their citizens will be free to use quality
software, without constraints, in perpetuity," concluded Zymaris.</p>
<p>References:<br />
1. <a href="http://news.com.com/2100-1023-212942.html">http://news.com.com/2100-1023-212942.html</a>
</p>
Government Inaction on Competitive Software Tendering Wastes Millionshttp://raid6.com.au/~onlyjob/posts/cybersource-Government_Inaction_on_Competitive_Software_Tendering_Wastes_Millions/2012-03-16T06:04:16Z2007-04-19T14:00:00Z
<p align="right"><small>Here published with kind permission by <a href="http://cyber.com.au">Cybersource Pty. Ltd.</a></small></p>
<h2>Government Inaction on Competitive Software Tendering Wastes Millions.</h2>
<p>Australia -- 20th April, 2007</p>
<p>It's time for all Australian state and federal agencies to bring
real, open and competitive tendering back into their software
acquisitions. Their lack of willingness to ensure competition in
the marketplace costs Australian taxpayers tens of millions of
dollars every year - a bad practice that must be halted.</p>
<p>"At present, almost no government agencies in Australia permit
open and competitive tendering for software platforms and
productivity applications," observed Con Zymaris, CEO of
long-standing ICT industry company Cybersource Pty. Ltd. "Instead,
these agencies hand the business, worth around a billion dollars
each refresh cycle, to Microsoft - no competitors are allowed to
make bids."</p>
<p>"We are astounded that government agencies, which have a fiduciary
responsibility to Australian taxpayers, should follow this
strategy," continued Zymaris. "We are even more amazed that no
voices have raised this issue in Parliament. It is an obviously
short-sighted strategy which merely serves to lock Australia's
public sector further into a Microsoft-only monetary sinkhole."</p>
<p>A recent example of this kind of 'no competition allowed'
deal-making was the Queensland Government's decision<sup>1</sup> to abort
any potential for competitive bids from alternative software
suppliers in its refresh of 100,000 PCs - no vendor besides
Microsoft was allowed to enter the bidding arena. This left many
other multinational vendors, like Sun, Novell and Red Hat, along
with numerous innovative Australian Linux companies, such as
Cybersource, with no chance of competing.</p>
<p>"By subverting the power of competitive markets, federal and state
agencies are hurting the local ICT industry. By keeping innovative
technology off government desks and by always returning to the
souring teat of Microsoft, they're hurting their own productivity.
And by stubbornly refusing to seriously consider alternative
technologies such as Linux and open source, they are shackling
themselves to the Microsoft upgrade treadmill in perpetuity, with
the cost meter set to spiral," concluded Zymaris.</p>
<p>
References:<br />
1. <a href="http://www.computerworld.com.au/index.php/id;504512889;fp;16;fpid;2">http://www.computerworld.com.au/index.php/id;504512889;fp;16;fpid;2</a>
</p>
Microsoft Acts Against Foreign Country's Best Interests, Yet Againhttp://raid6.com.au/~onlyjob/posts/cybersource-Microsoft_Acts_Against_Foreign_Countrys_Best_Interests_Yet_Again/2012-03-16T06:04:16Z2005-09-06T14:00:00Z
<p align="right"><small>Here published with kind permission by <a href="http://cyber.com.au">Cybersource Pty. Ltd.</a></small></p>
<p>7th September, 2005</p>
<p>In a recent move which is both patronising and yet another instance of
acting against the best interests of a foreign country, Microsoft is
backing a proxy war against Linux and open source software adoption in
China.</p>
<p>"By using arguments that even the most ignorant IT professional would
recognise are bogus, the Microsoft-backed China Software Industry
Association (CSIA) is doing little more than insult the intelligence of
China's IT decision-makers<sup>1</sup>. This gaggle of tired anti-Linux falsities
were discredited years ago, yet are still trotted out as the only weapon
against Linux they have," said Con Zymaris, CEO of Cybersource, a
Linux business with fifteen years experience. "This attack is little
more than an incompetently executed anti-Linux hatchet job."</p>
<p>The reason for this sudden scaremongering? A projected 64% compound
annual growth rate<sup>2</sup> for Linux over the next 5 years - making it the
fastest-growing computer platform in China. Which is in turn, the
fastest growing computer market and thus, a dead serious threat to
Microsoft.</p>
<p>Against CSIA's message of Fear, Uncertainty and Doubt (FUD), here are
the facts Microsoft don't want you to know:</p>
<ol>
<li>Yes, you can build profitable businesses around Linux, there are many
thousands of these around the world, ranging from giants like IBM to
sole-proprietor micro-businesses.</li>
<li>Most open source developers have not 'died', as the CSIA has stated,
nor have they moved on to other things. Most of the developers are
healthy, happy and still coding on open source projects. In fact,
there are over a million open source developers world-wide.</li>
<li>Linux and open source software are not 'locked in lawsuits over
copyright infringements' any more than Microsoft's proprietary
software - in fact, less so. The only major instance of a lawsuit
against Linux, the SCO vs. IBM case, withered when SCO could produce
not a single line of copyright infringement as evidence to the judge.</li>
<li>Software patents are not merely problems for Linux and open source,
but for all software. While Linux developers are yet to pay a single
dollar for patent infringement, Microsoft have paid out billions to
Eolas, Alacritech, IBM, Gateway, Novel, Sun and others just in the
last few years.</li>
<li>More importantly, U.S. software patents do not even apply in China,
making this a baseless FUD tactic.</li>
</ol>
<p>"The key question is why would the China Software Industry Association
choose now as the time to launch a major offensive against Linux? We
suggest the fact that Microsoft recently joined this organisation offers
an answer. It is obvious that Linux's huge success in China coupled with
the likelihood of massive growth for the coming decade, are seriously
threatening vested interests," continued Zymaris.</p>
<p>"In simple terms, Linux and open source software are the best means by
which countries like China can avoid sending billions of dollars
overseas to pay for software licences. It's the best way for the average
Chinese citizen to afford high-quality software, legally. It's the best
way for China to reduce copyright-infringement of proprietary software,
which causes it embarrassment. It's the best approach towards fostering
an indigenous software industry. Finally, it's the only way the Chinese
government can be certain that it controls its own software destiny and
security," continued Zymaris.</p>
<p>"We see that once again, as in Europe and South America, areas which
have similarly seen extraordinary Linux growth, Microsoft is meddling
against the best interests of foreign countries. Our suggestion to these
countries is simple: in almost all circumstances, Microsoft's best
interests are not your best interests. Every dollar Microsoft makes is a
dollar you lose. Your best option is Linux and open source software.
Make the right decision for your country," concluded Zymaris.</p>
<p>References:</p>
<ol>
<li><p><a href="http://www.chinadaily.com.cn/english/doc/2005-08/29/content_472979.htm">Anti-Linux FUD hatchet job</a></p></li>
<li><p><a href="http://www.itfacts.biz/linux-revenues-to-grow-at-64-a-year-in-china/4465">Linux revenues to grow at 64% a year in China</a></p></li>
<li><p><a href="http://english1.people.com.cn/200206/17/eng20020617_97986.shtml">Microsoft Joins China Software Industry Association</a></p></li>
</ol>
Cybersource to Microsoft: Get Real on Joint Research Effortshttp://raid6.com.au/~onlyjob/posts/cybersource-Cybersource_to_Microsoft--Get_Real_on_Joint_Research_Efforts/2012-03-16T06:04:16Z2005-08-25T14:00:00Z
<p align="right"><small>Here published with kind permission by <a href="http://cyber.com.au">Cybersource Pty. Ltd.</a></small></p>
<h3>Cybersource to Microsoft: Get Real on Joint Research Efforts</h3>
<p>Australia -- 26th August, 2005</p>
<p>Microsoft recently approached Open Source Development Labs, the home of
Linux, with an offer of co-operation on research. Unfortunately, the
kind of joint research that Microsoft proposed, namely more paid-for
analyst comparisons, is designed to extend the Linux vs. Windows war-of
-words, not help users of either platform. Cybersource has an alternate
suggestion: it's time for Microsoft to actually do what's best for its
own customers and the industry in general, by working towards making
Linux and Windows work better together.</p>
<p>"Most businesses will end up running a combination of proprietary and
open source software," said Cybersource CEO Con Zymaris. "By joining
with the open source industry and working towards reducing the
interoperability headaches between the two, Microsoft can help its own
customers as well as make it easier for users to select and move to the
platform best suited to them."</p>
<p>To date, most of the effort towards improving interoperability between
Linux & open source and Microsoft platforms, has been shouldered by
the open source community.</p>
<p>"Apache, PHP, MySQL, Perl, Sendmail, BIND, Python, Zope, PostgreSQL,
Firefox, Thunderbird, OpenOffice.org, FirebirdSQL and several thousand
other open source technologies have been ported to run on Windows. In
comparison, Microsoft has not made any effort to bring any of its major
technologies, such as Exchange, Office, Outlook, Internet Explorer, IIS,
SQL Server, to Linux," continued Zymaris.</p>
<p>"When it comes to sharing data on disk or on a network, Linux's Network
File System (NFS), EXT2 and ReiserFS filesystems are open and documented
for interoperability, as are the Kerberos and OpenLDAP authentication
protocols. This is in sharp contrast to Microsoft's NTFS, SMB/CIFS and
Active Directory, which are encumbered through lack of technical
interoperation documentation or by legal firewalls."</p>
<p>"Just as importantly, open source developers provide full, unfettered
access to protocols, document standards and XML schemas. In return,
Microsoft keeps the information required to work with Word, Excel,
Access, Outlook and Exchange, secret. Even when Microsoft makes claims
towards interoperability, as with the recent Word XML schemas, they
nobble that effort by releasing information under a licence which
prevents implementation in common open source forms," continued Zymaris.</p>
<p>Cybersource suggests the following as actually useful joint-research
that Microsoft can co-operate with the open source community on:</p>
<ol>
<li>Publish (in an un-encumbered form) the information necessary for
third-party software to interoperate fully with Microsoft Office,
Exchange, Windows Media codecs etc.
</li>
<li>Stop the 'intellectual property' land-grab on XML schemas,
communication protocols and document formats. Interoperability
information should never be legally encumbered: that defeats the
purpose.
</li>
</ol>
<p>"In order for Linux and Windows to properly interoperate, we need to
establish a common 'language', with agreed syntax, forms and rules -
this is what schemas, protocols and document formats do. Microsoft has
thus-far done its best to subvert that common language with either
technical or legal obstructions, causing problems for users. It's time
to change tack and assist both Windows and Linux users by working
towards interoperability," Zymaris concluded.</p>
The Cost of Software Monopoly: How Australian Consumers Losehttp://raid6.com.au/~onlyjob/posts/cybersource-The_Cost_of_Software_Monopoly:_How_Australian_Consumers_Lose/2012-03-16T06:04:16Z2005-06-26T13:34:00Z
<p align="right"><small>Here published with kind permission by <a href="http://cyber.com.au">Cybersource Pty. Ltd.</a></small></p>
<h3>A Whitepaper on the Negative Impact of Microsoft Desktop Monopoly on Australian Consumers</h3>
<p>Over the past decade, the
personal computer industry has seen a major reduction in competition
in the operating system platform market. A computer operating system
platform is the software which computer users learn to operate their
computer with, the software that independent software vendors develop
applications for and the software that third-party computer hardware
developers create compliant hardware for.</p>
<p>Competition in the desktop computer
operating system space is practically non-existent, with one platform
from a single supplier commanding a very high proportion (over 95%)
of the Australian market. This single platform from a sole vendor is
Microsoft Windows.</p>
<p>Cybersource believes that a sizeable
portion of this market share is due to the
fact that over many years, most consumers were never given the option
to acquire alternative operating system platforms. Instead, Microsoft
Windows was always bundled with most vendors' computer products,
whether consumers wanted that bundled product on not.</p>
<p>We have seen that the Australian
Competition & Consumer Commission (ACCC) has acted in the
best interests of consumers to increase competition in such areas as
telecommunications. Cybersource wants to see similar actions
introduced in the computer operating system platform space.</p>
<p>In the software market, as in the telecommunications market, a
single, powerful and well-leveraged vendor can cause the reduction of
real competition and the corralling of almost all consumers into a
single monopolistic platform situation.
This causes significant reduction in choice, price competitiveness
and innovation. Cybersource calls upon the ACCC to rectify this
situation for the benefit of the local Information Technology
industry and of all Australian IT consumers.</p>
<h2>The Cost of Software Monopoly: How Australian Consumers Lose</h2>
<p><strong>Created:</strong> Steven D'Aprano, Arik Gershoni, Con Zymaris<br />
<strong>Contact:</strong> Con Zymaris<br />
<strong>Phone:</strong> +61 3 9621 2377<br />
<strong>Email:</strong> conz@cybersource.com.au<br />
Last updated: 2005-07-26<br />
<small>Reference Number: 203</small></p>
<p><em>Copyright notice: Cybersource grants you the following rights on this document:<br />
1. You are free to re-distribute it as widely as you wish, as long as it remains intact.<br />
2. You are also free to use within your works, small segments of the document under a fair-use
clause.</em></p>
<h3>Disclaimer</h3>
<p>Cybersource is not a legal service nor does it proclaim legal expertise. We are producing the
following documentation as a statement of position and opinion on the topic in question.</p>
<p><strong>The information contained herein represents Cybersource's initial commentary and analysis
and has been obtained from sources believed to be reliable. Positions taken are subject to
change as more information becomes available and further analysis is undertaken.
Cybersource disclaims all warranties as to the accuracy, completeness or adequacy of the
information. Cybersource shall have no liability for errors, omissions or inadequacies in the
information contained herein or for interpretations thereof.</strong></p>
<h3>Legalese</h3>
<p>All trademarks are the property of their respective owners and are duly acknowledged.</p>
<h3>Executive Summary</h3>
<p>Over the past decade, the personal computer industry has seen a major reduction in competition in
the operating system platform market. A computer operating system platform is the software which
computer users learn to operate their computer with, the software that independent software vendors
develop applications for and the software that third-party computer hardware developers create
compliant hardware for.</p>
<p>Competition in the desktop computer operating system space is practically non-existent, with one
platform from a single supplier commanding a very high proportion (over 95%) of the Australian
market. This single platform from a sole vendor is Microsoft Windows.</p>
<p>Cybersource believes that a sizeable portion of this market share is due to the fact that over many
years, most consumers were never given the option to acquire alternative operating system
platforms. Instead, Microsoft Windows was always bundled with most vendors' computer products,
whether consumers wanted that bundled product on not.</p>
<p>We have seen that the Australian Competition & Consumer Commission (ACCC) has acted in the
best interests of consumers to increase competition in such areas as telecommunications.
Cybersource wants to see similar actions introduced in the computer operating system platform
space.</p>
<p>In the software market, as in the telecommunications market, a single, powerful and well-leveraged
vendor can cause the reduction of real competition and the corralling of almost all consumers into a
single monopolistic platform situation. This causes significant reduction in choice, price
competitiveness and innovation. Cybersource calls upon the ACCC to rectify this situation for the
benefit of the local Information Technology industry and of all Australian IT consumers.</p>
<h4>Key Points</h4>
<ol>
<li><p>It is impossible or extremely difficult for consumers to
purchase a desktop PC or laptop from a tier-1 or tier-2 computer
manufacturer without also having to purchase an OEM copy of
Microsoft Windows operating system platform.</p></li>
<li><p>Cybersource believes that this greatly reduces choice for
consumers and competition for the industry. Such a reduction in
choice, and consequent reduction in competition, costs the
Australian economy hundreds of millions of dollars annually, through
paying one vendor needlessly high prices for monopolistic products.</p></li>
<li><p>The computer market is many ways similar to the
telecommunications market. When one vendor has over 95% of the
market, that vendor should be bound by a universal service
obligation to ensure that all consumers can access the content,
documents and data which reside on that vendor's platform.
Neglecting such an obligation hinders all consumers and third-party
developers not using that vendor's platform, further increasing
anti-competitive pressures.</p></li>
<li><p>Cybersource believes that such anti-competitive practices
should be stopped as soon as possible, through remedies introduced
by the ACCC, to secure both a broader competitive base and increased
options for consumers.
</p></li>
<li><p>The first remedy that Cybersource seeks from the ACCC is that
all tier-1 and tier-2 vendors should be required to offer their
desktop and laptop products without an operating system
pre-installed, that this choice be presented to consumers as broadly
as the products themselves are, and that the price difference
between the <i>with</i> and <i>without </i>operating
system options should also be clearly and broadly presented
at retail outlets, on vendor marketing literature and vendor
websites.</p></li>
<li><p>The second remedy that Cybersource seeks from the ACCC is
that Microsoft should be required to offer unfettered and
unencumbered access to all major content, document, data and
applications formats which could enable interchange and
interoperability between users of its platform and users of other
alternative platforms.</p></li>
</ol>
<h2>Background</h2>
<h3>1. Commodity Hardware: How Competitive Markets Work</h3>
<p>
The industry segment for personal desktop computers, small-to-medium scale servers and laptops is
one which sees extreme levels of competition. This is because there are thousands of component
manufacturers (makers of hard disks, CD-ROMs, memory, CPUs and various computer chips) and
hundreds of vendors (who compile complete computers from the various components), all vying for
the same market space.
</p>
<p>
During the past decade, computer hardware has seen performance and capacity improvements of
between 100-1000% and corresponding price reductions of 90%<sup>1</sup>
</p>
<p>
In 1994, the price of hardware for an average business desktop computer was around AU$4,000<sup>2</sup>. A
similarly positioned average business desktop computer priced today retails for around $800 or less.
</p>
<h3>2. How Monopoly Software Works: No Competition, Minimal Price and Feature
Improvements</h3>
<p>
In contrast, Microsoft's Windows and Office software franchises, which have around 95% of the
market for desktop operating systems and desktop office productivity suites in Australia<sup>3</sup>, have not
exhibited any serious functional feature improvement for most consumers. Most consumers use their
desktops, word processors and spreadsheets in much the same way now as they 10 years ago. Yet,
over the past decade, the retail price of Microsoft Windows, coupled with the price of Microsoft
Office, has doubled.<sup>4</sup> We therefore have a doubling in price for software and a eight-fold reduction in
price for hardware. One obviously faces stiff competition whilst the other does not. We can see this
even more clearly if we contrast the two scenarios as ratios:
</p>
<ul>
<li>In 1994, the computer hardware constituted 85% of the cost of the whole system. The
operating system (Microsoft DOS + Microsoft Windows) and desktop productivity
(Microsoft Office) software suite, in turn, constituted a mere 15%.
</li>
<li>
In 2004, the price of hardware for an average business desktop computer constituted 35% of
the cost of the whole system. The operating system (Microsoft Windows) and desktop
productivity suite (Microsoft Office) now constitute the great bulk of the cost, at 65%.
</li>
</ul>
<p>
Most importantly, in 1994 the actual cost of physical production of the Microsoft Windows and
Microsoft Office products was considerably higher than the corresponding products in 2004. In the
earlier versions, the product included dozens of floppy disks containing the software for installation
and thousands of pages of printed manuals. The current versions include almost no printed manuals
and only one or two disks, therefore costing considerably less to produce and ship and thus resulting
in even higher margins for Microsoft.
</p>
<p>
During the same period that has seen the price of the monopoly software double, the cost of
supplying that software has fallen considerably. This is yet another sign of an non-competitive
market.
</p>
<hr align="left" style="width:22%;" />
<ol><small>
</small><li value="1">Source for PC pricing. Source: Dell advertisement. Australian Personal Computer Magazine. October 1993.</li>
<li value="2">Source for Software Pricing. Source: Harris Computer Superstore advertisement. Australian Personal Computer
Magazine. October 1993.</li>
<li value="3"><a href="http://replay.web.archive.org/20050829192512/http://www.procompetition.org/litigation/oracle.html">http://www.procompetition.org/litigation/oracle.html</a></li>
<li value="4">Source for 2004 prices Source: Harris Technology advertisement. Australian Personal Computer Magazine.
November 2004.</li>
</ol>
<h3>3. Users Forced to buy Microsoft Windows</h3>
<p>
In Australia, the personal computer hardware market is broken down into two main segments. The
white-box market, is essentially for low-cost, no-brand-name product, constitutes a minority of the
market. The remainder, by far the largest segment of the market, is contested by first- and second-
tier brand-name vendors such as IBM, HP/Compaq, Dell, Toshiba, Sony, Acer, NEC, Fujitsu and
several others.
</p>
<p>
Almost all these brand-vendors vendors for almost all of their desktop personal computer and laptop
models, give the consumer no choice when purchasing as to whether that consumer also wants to
purchase Microsoft's Windows operating system. If the consumer wants the hardware, the consumer
must also pay for the software. There is no way for consumers to acquire the personal computer
hardware they need without also acquiring a copy of Microsoft Windows, which has an associated
Original Equipment Manufacturer licence cost.
</p>
<h3>4. Much Like Telstra, Microsoft Has Universal Service Obligations</h3>
<p>
In the telecommunication space, Telstra has certain obligations with respect to providing inter-
operability with competitors and universal service coverage. This helps both the consumer directly
by ensuring that all Australians have access to telephone systems with which they can communicate.
It also helps consumers indirectly, by ensuring that Telstra doesn't use its market position and
platform leverage to squeeze out competitors and overcharge the consumer.
</p>
<p>
The computer platform in many ways is similar to the telecommunications platform. When one
vendor has over 95% of the market, that vendor has enormous leverage and control over all other
vendors and over all consumers. It is therefore important that, as with the telecommunications space,
if one vendor has such a large percentage of the market, that vendor must be held to certain crucial
responsibilities with respect to the obligation of universal service coverage.
</p>
<p>
In much the same way that Optus and Vodaphone customers require the ability to receive phone calls
from Telstra customers without being forced to purchase a Telstra-specific phone, minority software
users need to have the ability to exchange documents and data with Microsoft users without being
forced to purchase Microsoft software.
</p>
<p>
Failure to enforce that universal service obligation severely inconveniences minority software users,
stifles competition, and tilts the playing field even further towards the monopoly platform.
</p>
<h3>5. The Cost to Australian Consumers</h3>
<p>
The process of hardware commoditisation has been relentless and greatly benefits Microsoft at the
expense of all the hardware vendors. Microsoft's platform and application software now costs many
times more than the hardware it runs on, leaving Microsoft the monopoly to enjoy its huge financial
and platform leverage advantages alone. As an example, Microsoft makes between 79% and 84%
gross margins on its major monopoly franchises of Windows and Office<sup>5</sup>. By comparison, vendors
like HP, IBM and Dell make margins of between 4% and 10 % on their main personal computer
product lines. Several large vendors run their PC business at a loss, or like IBM, have given up
completely in trying to make profit from it.
</p>
<p>
If we use these figures as an indication of what happens when one industry segment (i.e. platform
and productivity software) does encounter insufficient competition, we can estimate what the
increased cost is to Australian consumers. According to several sources, Microsoft generates $1
billion in sales within Australia every year. A very large part of this would come from its two most
lucrative products, Windows and Office; however, for sake of argument, we will suggest that only
half of that revenue comes from these two flagship products.
</p>
<p>
If Microsoft's products faced stiff competition, as happens in the PC hardware space, then its margins
(about 80%) would not be sustainable. It would instead be seeing average margins closer to the 10%
seen by commodity hardware vendors. If we subtract this variation in margins, we would find that
Microsoft's revenues, from Australian consumers, reduced by $200 million dollars every year.<sup>6
</sup></p>
<p>
At least $200 million is therefore the yearly cost of the Microsoft software monopoly to Australian
consumers, and equates to the amount of money returned to Australia each and every year if we were
able to introduce strong competition into the operating system platform and office productivity suite
markets.
</p>
<h3>6. Excuses the Vendors Raise and Why They Are Invalid</h3>
<p>
The computer hardware vendors in question, may raise the following objections as to why they
would not be able to unbundle the operating system from their computer personal computer desktop
and laptop products.
</p>
<p>
Reason #1: The vendors may claim that by not shipping these products with an operating system, it
will make it very difficult to offer users support.
Cybersource's response: Almost all of these vendors ship computer server hardware with no pre-
installed operating system at all, yet they have no problems offering support to users for those lines
of products.
</p>
<p>
Reason #2: Local representatives from the vendors in question, may claim that the decision to
bundle the Microsoft Windows operating system has been made from headquarters overseas, and
that as mere local functionaries, they cannot renege on such a decision.
</p>
<p>
Cybersource's response: Why should the consumer care where the decision has been made? If such a
decision can be shown to be detrimental to Australian consumers and reduces competition in the
Australian marketplace or contravenes Australia's competition laws, the ACCC should act.
</p>
<p>
Reason #3: Vendors may claim that by not forcing the bundling of Microsoft Windows with each
and every desktop personal computer or laptop they ship, they will be encouraging piracy, as their
customers will simply procure illegal copies of that operating system from elsewhere, to install on
the unbundled PCs.
</p>
<p>
Cybersource's response: Pre-supposing what consumers will do with the computer hardware and
forcing them to buy Microsoft Windows is anti-competitive in the extreme. We counter by way of a
simple analogy. Should we discourage supermarkets from selling plain bread, because shoppers
might steal butter from elsewhere? To discourage vendors from selling PCs with no operating system
because of the hypothetical loss of revenue to Microsoft goes against the spirit of the free market. It's
up to Microsoft to find better anti-piracy methods: it's not the role of the market to force every
consumer to purchase Microsoft products that they may not want, in order to protect Microsoft's
commercial interests.
</p>
<p>
Reason #4: The vendors may claim that they bundle Microsoft's Windows with each and every
desktop PC or laptop they ship because that is what the market wants.
Cybersource's response: Let's have these vendor offer software-unbundled versions of each and
every PC in the space, and we'll see exactly what the market wants. If the consumers wants to
purchase Microsoft Windows with a PC, they will be totally free to do so, at the same cost as before.
However, if some consumers want to acquire computers without Microsoft's Windows, they should
now, for the first time, be able to do so.
</p>
<p>
Reason #5: Microsoft may claim that it invests heavily in Research & Development (R &D), and so
has earned such immense.
</p>
<p>
Cybersource's response: Microsoft's R & D investments have nothing to do with the high pricing that
the firm can set. That's due to lack of competition. Additionally, if Microsoft really had made
considerable breakthrough's in its software technology, then perhaps it could have manufactured an
increase in performance and functional capacity which matched that made evident by the hardware
vendors – vendors who face severe competition every day of business.
</p>
<p>
Only strong competition provides the necessary driver which pushes the envelope for new features,
improved performance and enhanced facilities for consumers. In a free and fair market, vendors
spend on R&D in order to gain a competitive edge. Microsoft obviously needs do no such thing.
</p>
<hr align="left" style="width:22%;" />
<ol><small>
</small><li value="5">Source for Microsoft product percentages: <a href="http://replay.web.archive.org/20060822202945/http://www.microsoft.com/msft/download/FY02/Q02_4_financials.xls">http://www.microsoft.com/msft/download/FY02/Q02_4_financials.xls</a>
</li>
<li value="6">See Appendix for calculations.
</li>
</ol>
<h2>Recommendations</h2>
<p>
To level this tilted playing field, Cybersource seeks the following from the ACCC.
</p>
<h3>1. Unbundling of Microsoft Windows</h3>
<p>
Primarily, we request that all tier-1 and tier-2 PC vendors must offer to consumers the option of
purchasing each of their PC (desktop & laptop) products without any operating system.
Additionally, that the price for the operating system-less version of the product is correspondingly
reduced by the cost of that operating system. This last point is important. In order for this remedy to
be effective, PC prices must be reduced by the equivalent cost of the OEM copy of Microsoft
Windows. Additionally, the computer vendors must be required to advertise this option along with
the price difference in their marketing and sales literature, through resellers or direct sales. Providing
an option of a non-Windows install will not be effective unless the vendors widely publicise this
option.</p>
<h3>2. Enforcing Universal Service Obligations</h3>
<p>
Secondarily, Microsoft, owing to its monopoly status, must be understood to have increased
responsibilities to consumers. The ACCC should require that Microsoft make available on a
reasonable, non-discriminatory and unencumbered basis, all the core communication protocols,
data/document formats and application program interfaces necessary for third parties to create inter-
operable applications on alternate platforms.
</p>
<h2>#</h2>
<h2>About Cybersource</h2>
<p>
Cybersource is Australia's leading Linux and open source solutions company. In successful
continuous operation since May 1991, it is also one of the world's longest running specialists in this
realm.</p>
<h2>Appendix: Calculations</h2>
<p>
Microsoft admits to $1 billion revenue in Australia each year, and approximately an 80% profit
margin on the two flagship products, Windows and Office.</p>
<p>
We wish to calculate the cost saving to Australian consumers if the monopoly margins of these
products were reduced to levels more typical in the IT industry, 4% to 10%. For the sake of the
exercise, we assume Microsoft is able to sustain profit margins at the upper end of the range, namely
10%.</p>
<h3>Scenario 1:</h3>
<p>
We assume that <b>all</b> of Microsoft's Australia revenue is from the flagship products and their
monopoly pricing.
</p>
<p>
Microsoft's sales revenue is “costs plus 80% margin”:<br />
cost x 1.8 = <i>$1000 million</i>
</p>
<p>
If the profit margin is reduced from 80% to 10%, the predicted sales revenue (all else being equal)
will be:<br />
cost x 1.1 = $1000/1.8 x 1.1 million
= <i>$600 million</i> (in round figures)
</p>
<p>
Giving yearly cost savings to Australian consumers of <i>$400 million</i>.
</p>
<h3>Scenario 2:</h3>
<p>
We assume that only <b>half</b> of Microsoft's Australia revenue is from the flagship products and their
monopoly pricing.</p>
<p>Microsoft's sales revenue for these products is “costs plus 80% margin”:<br />
cost x 1.8 = <i>$500 million</i>
</p>
<p>
The other $500 million in revenue is assumed to be unchanged.
</p>
<p>
All else being equal, if the profit margin on these products is reduced from 80% to 10%, the
predicted sales revenue will be:<br />
cost x 1.1 = $500/1.8 x 1.1 million
= <i>$300 million</i> (in round figures)
</p>
<p>
Giving yearly cost savings to Australian consumers of <b>$200 million</b>.
</p>
<p>
Taking a broader perspective, we understand that Australia constitutes approximately 2% of the
global (and probably Microsoft's) marketplace. The yearly cost of Microsoft's monopoly is therefore
at least $10 billion.
</p>
Open Source for Educationhttp://raid6.com.au/~onlyjob/posts/cybersource-Open_Source_for_Education/2012-03-16T06:04:16Z2005-04-04T14:00:00Z
<p align="right"><small>Here published with kind permission by <a href="http://cyber.com.au">Cybersource Pty. Ltd.</a></small></p>
<p>Australia -- 5th April, 2005</p>
<p>Cybersource today launches a free information referral service which we
believe can help the state Departments of Education and the independent
schools save millions in software licence fees. We achieve this by providing
educators with the bargaining leverage that's needed to dramatically reduce
the prices paid for proprietary software.</p>
<p>"Educational software users are always short on budgets for IT," stated
Cybersource CEO, Con Zymaris. "Software licence costs are eating into an
increasing portion of those budgets. However, what many education
Departments don't realise is that they have substantial leverage when it
next comes time to negotiate with proprietary software vendors.'</p>
<p>The Cybersource Open Source in Education referral service consists of a
strategic analysis of the Department's existing platforms and applications
and a plan showing how open source software can cut the Department's
software licence expenses. We want to help each Department visualise how
they can use open source software to their benefit in negotiations with
vendors.</p>
<p>Our suggestion to Australia's education Departments is a simple one: you
control what software is placed in front of hundreds of thousands of
students and teachers. This gives you immense leverage when it comes to
negotiating with vendors - if you know how to use it.</p>
<p>"And Cybersource will show you how to use that leverage to full effect,"
continued Zymaris. "In many instances, it's not educators who should be
paying the vendors for selecting proprietary software - vendors should be
paying you for the privilege of indoctrinating your students with their
wares. And make no mistake about it, when prodded in the right way, vendors
will pay."</p>
<p>"Can you imagine how, as just one example, Microsoft would react if they
were told that 5 million students in various states, would now be learning
Linux and OpenOffice.org? If you were Microsoft, wouldn't you pay to ensure
that your products were preferentially placed in front of those students?
I'm sure they would. They know what damage to their mindshare would be
caused by millions of students entering industry with a comfortable
knowledge of Linux and other open source alternatives."</p>
<p>Zymaris went on to add, "Even if Microsoft demonstrates a willingness to
abandon their established mindshare any Department of Education that
utilises Cybersource's referral service is in a no-lose position; at any
point in the process they will have the option between two viable offerings:
OpenOffice.org and Linux on one hand and the offering from Microsoft."</p>
<p>"And as a number of large education Department licencing deals are coming up
for renewal, now is the time for Departments to start sharpening their
pencils, and Cybersource has just the sharpener for them," concluded
Zymaris.</p>