Notes to: Only the Free World Can Stand Up to Microsoft

["tom hull" <thull@netway.com>]

  This is the supplementary notes to the document "Only the Free World Can
  Stand Up to Microsoft", which I previously posted. This file (and presumably
  future updates to it) will be available under the Ftwalk web pages:
  
      http://www.contex.com/ftwalk
  
  ----------
  
  This file contains supplemental notes to the manifesto "Only the Free
  World Can Stand Up to Microsoft", currently published at:
      http://www.contex.com/ftwalk/FreeWorld
      http://www.contex.com/ftwalk/FreeWorld.html
  The latest version of this file is at:
      http://www.contex.com/ftwalk/FreeWorldNotes
      http://www.contex.com/ftwalk/FreeWorldNotes.html
  You may write the author, Tom Hull, at ftwalk@contex.com. Hull is also
  the author of the Ftwalk programming language, a script programming
  language which is free software available for UNIX systems.
  In general, this critique reflects a more general line of thought,
  which is based on the recognition that the inefficiencies and ulterior
  motives in our current modes of production require much unnecessary
  work to produce products and services of often dubious merit for
  grossly inflated prices, effects which diminish the quality of our
  lives and the worth of our work. Nonetheless, my proposal here is not
  especially radical: it does not challenge the precepts of intellectual
  property; it requires no political action (not even the application of
  antitrust law); it can be initiated by a small group of people, and to
  some extent simply builds on work already done by various individuals
  and groups.
  Some paragraph notes:
   1. Commercial software companies typically divide their costs into
      several sectors: development; manufacturing; marketing/sales;
      service; general and administrative. Development costs are usually
      less than 20% of revenues. By far the largest cost is marketing/
      sales, so most of what the customer is actually paying for is the
      persuasion to convince the customer to pay so much for something
      that costs so little to develop, and practically nothing to
      reproduce and deliver.
   2. More expensive software often includes after-the-sale service,
      which should be considered a marketing/sales cost, since it props
      up an extravagant price structure. Service should be considered a
      separate cost, independent of development. Free software is always
      delivered with no service, and customers who need service can
      obtain help independently, since the inner workings of the software
      are public knowledge.
   3. Media companies have comparable cash flows, but necessarily work
      within the technical standards of their media. Consuming their
      products does not in any way prevent or even disincline one from
      consuming competitive products.
   4. Microsoft likes to expand its operating system to eliminate the
      market for add-on software, such as for disk compression and
      networking. Microsoft's claim that IE is part of the operating
      system is spectacularly spurious.
   5. Microsoft's dominance is at least partly due to the lack of any
      significant challengers. Apple and IBM used their operating systems
      to lock customers into their hardware, and would at any rate have
      been rejected by the rest of the PC industry, which at least with
      Microsoft got access to the same product. UNIX vendors have stuck
      steadfastly to higher priced markets, avoiding direct competition,
      even though NT is aimed directly at destroying UNIX. The longer
      Microsoft goes without serious competition, the harder it gets to
      mount any such competition.
   6. The last sentence is a slight exaggeration. Many capitalists do in
      fact realize that they will never be in the position to wield the
      sort of power that Microsoft commands, and as such have no use for
      the megalomania that goes with such power.
      The main point, however, is that under current circumstances no
      sane investor will directly challenge Microsoft. The cases in
      other industries where challenges are made to dominant companies
      depend on the discovery of some significant cost advantage (e.g.,
      MCI's challenge to AT&T), but cost advantages are essentially
      impossible in software, unless you're willing to forego all your
      margin, a position no investor will take.
   7. Antitrust laws work more for the protection of other businesses
      than to protect consumer interests, although consumers generally
      do benefit from increased, more even handed competition, at least
      in the long run. In the short run consumers may benefit more from
      crippling price competition. Netscape, for example, having gained
      a dominant market share in its niche, still cannot raise its prices
      because of Microsoft's competition, which is a windfall of sorts
      for customers.
   8. We talk much about the advantages of "letting the market decide,"
      but most business activity is oriented toward rigging the market.
      Look at any business plan and the key section will be something
      like "Barriers to Competition," because competition kills profits,
      and successful companies are the ones that avoid competition, or at
      least are able to dictate its terms.
   9. The key thing here is that the free software must have at least the
      same level of quality and utility as the commercial software that
      it challenges, which means that it must be professionally designed
      and developed, tested and supported. Which means that free software
      must move well beyond its current niche as an academic hobby, to a
      point where it is supported by well-financed organizations that can
      attract and support quality workers.
      Of course, Microsoft (and all other commercial software companies
      so threatened) will do their best to compete with free software,
      and can be expected to do so as desperately as they compete with
      everything else. There will be many arguments floated as to why
      commercial software is better than free software. Many of these
      arguments are variations on the master salesman's boast that he can
      sell more $10 bills for $20 than a less convincing huckster can
      give away. Such arguments can be defeated by establishing that free
      software is quality software and makes sound economic sense. Some
      arguments are more substantial: commercial software companies have
      a huge head start; some such companies have convinced many users to
      trust their brands; the true costs of software include the time
      that it takes to learn and use, so no software is really cost-free;
      the investment that users and companies have in commercial software
      can make switching painful; many people still regard commercial
      software as something of a bargain.
      One issue that needs to be recognized and understood is the notion
      that free software, openly published in source form and freely
      inspected by anyone who has an interest or desire to do so, is
      worthy of far greater trust than closed, proprietary, secretive
      software. I for one found the installation of Microsoft's Internet
      Explorer to be a very scary experience: the computer running
      totally out of my control, recongifuring itself, plugging into
      Microsoft's own web sites, setting up preferences and defaults
      according to Microsoft's business machinations.
      Sometimes I wonder whether Microsoft's underlying goal isn't simply
      to make the world safe for computer viruses. I'm not an especially
      paranoid person, but how can you ever know?
  10. Consumers nowadays are so often (and so effectively) fleeced that
      there is much resistance to paying for something you can get away
      with not paying for, so this will be an uphill educational battle.
      There is a game theory problem here: Who should I commit to paying
      for a development which I can get for nothing if only I wait for
      someone else to pay for it? But if everyone waits, no one benefits.
      There are other ways to handle this level of funding, such as
      imposing taxes on computer hardware (sort of like the gas tax is
      used to build roads) or even on commercial software (sort of like
      using cigarette taxes for public health). Developing countries, in
      particular, should support free software development, since the
      notion of intellectual property must appear to them as one more
      form of tribute to the rich. These approaches require political
      efforts that are sure to be contested and hamstrung. I'm inclined
      to start small, start voluntarily, and see how far reason and
      civility takes us.
      It should also be emphasized that there is at present a substantial
      amount of free software already written and available, and that
      there are many organizations and individuals that have contributed
      to the development and dissemination and support of free software.
      What is missing is a systematic approach to funding development,
      and a strong and consistent system for user feedback and direction.
  11. I would estimate that free software can be developed to quality
      standards that meet/exceed commercial software for less than 25% of
      the price of equivalent commercial software. This estimate is based
      on common R&D expenditure levels plus a generous amount for those
      organizations which coordinate development and promote use. Given
      that free software is not compelled to become obsolescent (it can
      continue to be used as long as it is useful, whereas commercial
      software must obsolete old product to promote the sales of new),
      the costs for free software will decline over time, sharply except
      for the cases where new needs arise.
  12. Much of this work is already being done. What's missing is not so
      much the people or even the organization as a coherent sense of the
      economic imperatives. To date, free software has largely been
      driven by political sensibilities and the traditions of academic
      freedom, which have led it into a hodge podge of areas, many of
      which have very little impact on common needs and usages. (Some,
      such as the Web, have had major impact, and as such have attracted
      enormous commercial attention.) However, the driving force behind
      free software must be economics: why do we spend so much money
      propping up empires when all we really want are clean, simple
      programs that do our work? And why do software professions have to
      work for commercial companies when their skills and work are more
      immediately needed by users?
      The argument that large companies (government, any organization
      that spends serious money on software) should routinely support
      free software development is strong and well focused. Even if such
      an organization never directly used free software, its existence
      would provide a damper on prices and a strong bargaining point with
      commercial software vendors. It is a win/win bet: free software,
      cheaper software, more options, more competition.
      It is completely obvious that free software organizations must be
      international in scope. It seems likely that most of the support
      for free software will come from outside the US, perhaps by an
      overwhelming margin.
      This proposal does not dispute the rights of intellectual property
      owners. Under this proposal it should be possible to buy or license
      technology where appropriate, and inventors should consider the
      possibility of selling their inventions to the free world. Whether
      intellectual property rights in fact encourage innovation in any
      useful way can be debated separately.
      Another aspect of this proposal is that it does not try to kill off
      the profit motive in software development. As I envision it, most
      of the free software work would be done by small companies bidding
      on contract proposals, presumably with the intent of making a
      profit. (The companies are likely to be small because they won't
      need to float a large marketing/sales organization, which is the
      main advantage big software companies have over small ones. Also
      because the free software networking organizations should work for
      providing sharable resources, such as capital and services, saving
      small companies from having to overextend themselves.)
      My proposal is that free software will start out aiming to produce
      the most basic and most broadly used software: it will in effect
      harvest the "cash cows" of the commercial software industry, rather
      than attempt to innovate at the fringes of development. (Of course,
      innovators are more than welcome to contribute.) Beyond free
      software there will still be shareware and commercial products,
      which will to some extent compete with free software and to a
      larger extent open up new niches where free software is not yet
      available. The free software industry will provide a damper on the
      sort of prices that can be charged. It will also help lower the
      costs of all software development, and may eventually provide a
      salvage market for discontinued commercial software. Shareware may
      be a fruitful ground for speculative software development, with the
      goal being to develop and popularize a new product that can be sold
      off to the free market.
      Finally, I believe that no restrictions should be placed on the use
      of free software: that it can be repackaged, sold, incorporated
      into commercial products. Free software will reduce the development
      costs of commercial software, which will help make commercial
      software cheaper, better, more competitive: all good things. The
      goal after all is better, cheaper, more usable and useful software:
      victory is not measured in bankruptcies. The impulse to segregate
      free software from commercial software is doomed, as is the impulse
      to isolate free software from commerce. We live in a jungle of
      commerce, which no one can truly flee from, regardless of how
      offensive it may seem. The proposal here is to start to take short,
      deliberate, sensible steps toward reclaiming parts of that jungle
      for everyone's use and betterment.
  13. This implies, of course, that (following the Reagan demonology)
      Microsoft et al. are "The Evil Empire." That's a joke, of course,
      but if it didn't harbor a shred of truth it wouldn't be funny.